Hey Joel! Is it my responsibility to track this money down?

Welcome to Hey Joel! This forum answers plan sponsor questions from all over the country by our in-house former practicing ERISA attorney.

Hey Joel,

One of my current employees recently received a notice from Social Security saying that they might be entitled to a retirement benefit. Is it my responsibility to track this money down?

~ Investigating in Illinois

Dear Investigating,

Employers are required to file Form 8955-SSA with the IRS each year to report former participants with balances remaining in the plan. The information is provided to the Social Security Administration, which in turn notifies retirees of benefits.

While the form does allow employers to “un-report” these participants once they take distributions, it is common practice to only list newly terminated employees without ever removing those who have received their benefits.

I suspect that the employee in question here recently filed a claim for Social Security benefits and that the Social Security Administration (SSA) sent them a letter stating that they MAY be entitled to pension benefits under the plan. But, I also suspect that the plan paid the employee their account balance back when they terminated employment. But, without clear records showing that the employee already received their benefits, it may be difficult for the employer to convince the employee that the letter they received from the SSA is incorrect.

So, what is an employer to do? Here are my general thoughts:

1. Check and see if someone at the employer has kept Form 1099Rs for plan distributions.
2. Check with the prior recordkeepers and see if they still have any participant records for the plan that would show distributions.
3. I don’t think the Form SSA is available to look up online, and as noted earlier, most employers do not “un-report” participants after they have received their benefits. But, if the employer does have past Form SSAs they can access, it would not hurt to at least take a look and see if the form lists previously reported participants who have received their benefits.
4. If the employer cannot come up with any records that show the employee previously received their  benefits from the plan, the employer could advise the employee that a) the employer has no records showing that the employee is owed money from the plan, b) they may have been listed on a Form SSA way back in 2003 showing that they had an account balance under the plan, and c) the employee likely previously received their benefit from the plan sometime following termination of employment. The employer should include a copy of the plan’s SPD along with the following note:  “Attached is a copy of the plan’s Summary Plan Description, which includes a description of the plan’s claims procedure. The claims procedure outlines what the plan requires for you to file a claim and information on where to file, what to file, and who to contact if you have questions.”
5. Going forward, the employer should put in place a system to retain all participant distribution forms and Form 1099Rs.

Always Scrutinizing,

Detective, Joel Shapiro, JD, LLM

 About Joel Shapiro, JD, LLM

As a former practicing ERISA attorney Joel works to ensure that plan sponsors stay fully informed on all legislative and regulatory matters. Joel earned his Bachelor of Arts from Tufts University and his Juris Doctor from Washington College of Law at the American University.

ACR#319770 06/19