AUGUST 2010 Pension Plan tip of the month….

2009 5500 Form SSA Update and Forfeiture Account Guidance

Form SSA Update

The Form SSA, as you may recall, is a listing of any former, terminated participants with account balances remaining in the Plan. As we informed you in March, the IRS had not yet issued a Schedule SSA for 2009. We have now received an update on this Schedule which we would like to pass along to you. The Schedule SSA will be replaced with Form 8955-SSA, and it must be filed on paper with the IRS rather than through the EFAST2 online system. Please be aware that the IRS has not yet released the Form 8955-SSA and is not expected to until sometime during 2011. At that time, we expect to receive instructions on the filing of Form 8955-SSA for the 2009 plan year and a reasonable due date. As further guidance is issued, we will continue to keep you up-to-date on the filing of Form 8955-SSA.

Forfeiture Suspense Accounts

When a Plan funds an employer contribution that follows a vesting schedule, and a participant terminates prior to meeting the required amount of service for full vesting, a forfeiture is created. The funds are typically placed into a Forfeiture Suspense Account until a determination can be made on how to use the forfeited funds. Recently, upon audit, the Internal Revenue Service has been reviewing these suspense accounts. The Internal Revenue Code states that forfeitures must be used or allocated within a plan year and cannot accumulate over several years.

Forfeitures can be used to pay administrative expenses, to reduce employer contributions, or allocated directly to the participants as additional employer contributions.

Section 33 of The Paragon Alliance Group, LLC (Paragon) Adoption Agreement specifies how forfeiture funds are to be used. Also, Article III of your Summary Plan Description will indicate how these funds should be used. Any error in the handling of these assets can be corrected with the IRS’ Employee Plans Compliance Resolution System (EPCRS).

Each year, your Retirement Plan Consultant at Paragon will indicate the amount of any un-invested cash in the year end letter that accompanies your compliance binder CD. The letter also provides your options on how to utilize these funds in the coming year.

Please call us with any questions or concerns about the proper allocation of forfeiture monies.