The Internal Revenue Service has proposed removing a small but irritating problem for many employee benefit plan sponsors, according to a recent Segal Compliance Alert.

The rule, published in the June 21, 2012, Federal Register, concerns the process for obtaining an automatic extension for filing deferred vested benefit information with the IRS and eliminates the requirement that the extension request be signed. Plans may follow the proposed rule for extension requests filed on and after June 21, 2012.

The IRS has clarified that extensions can be requested for no more than three plans on one Form 5558. In the past, some plan sponsors who sponsored more than three plans (including both retirement and health plans) would attach a list of all of their plans to a single Form 5558. The IRS has now clarified that these lists will no longer be processed.

Pension and savings plans subject to the vesting rules in Section 203 of the Employee Retirement Income Security Act (ERISA) are required to report information about terminated participants with deferred vested benefits to the IRS, on an annual basis. Through the 2008 plan year, this reporting was done as part of a plan’s annual report on the Schedule SSA to the Form 5500. Beginning with the 2009 plan year, however, Schedule SSA was discontinued, and the deferred vested participant information started to be filed separately with the IRS on a new form, the Form 8955-SSA named Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, Segal explains.

Although the Form 8955-SSA currently has no connection with the Form 5500, the two filings continue to follow the same timetable: both are due on the last day of the seventh month after the close of the plan year and both are permitted to request an automatic two and one-half month extension. For many plans, both continue to be prepared by the same service provider.

The proposed rule relates to the form that is used to request the automatic two and one-half month extension for the Form 5500 and now the Form 8955-SSA. That form is the Form 5558 named Application for Extension of Time to File Certain Employee Benefit Return. (It also is used to request an extension for filing the Form 5330, the form used to make certain excise tax payments.)

When the Form 5558 was revised to accommodate the Form 8955-SSA extension request, because of technicalities in the authorizing regulations, it required that the plan sponsor or administrator sign the request for the Form 8955-SSA extension, even though no signature is currently, or has ever been, required for a Form 5500 extension. This requirement complicates the extension request process, particularly for plans that use service providers to prepare their extension filings, because of the extra step – getting a signature – for the Form 8955-SSA extension, according to Segal.

After the revised Form 5558 was issued, the IRS received comments indicating that the signature requirement appeared to be unnecessary, was confusing, and could cause filing delays. The IRS agreed because, just in time for the 2011 plan year filing season, it issued the proposed rule which states that, as of June 21, 2012, a signature is no longer required for an automatic extension for Form 8955-SSA, the consulting firm states.

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