We received a few frantic calls and emails in the past month from clients who opened their mail to find a penalty notice from the IRS for their 2022 Form 8955-SSA — some for tens of thousands of dollars.

As background, Form 8955-SSA, also known as the “Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits,” is an report that retirement plan sponsors (the entity that established the plan for a company and its employees — usually the employer itself, or a union) must file with the IRS to report information about certain participants (typically former employees) who have vested benefits that have been deferred according to the plan. It’s a required annual filing with the IRS for those who file Form 5500 and has the same filing deadline (July 31, 2023 for 2022 plans — October 15, 2023 on extension).

But most businesses contract this work out to a plan administrator, a service provider that has expertise in managing 401k plans. So you can only imagine how terrifying it must have been for a bunch of business owners to get these notices — meaning that presumably, their trusted outsourcing agency was not doing their job. (Or… let’s be honest — more likely, very few of the small businesses had any clue what the notice was for, apart from the fact that a-it was from the IRS, b-said they’d done something wrong, and c-they owed money. Scary stuff.)

Thankfully, it turns out that these notices were the result of an IRS glitch in the program that receives and processes these forms. The IRS acknowledged the error, fixed the issue, and updated its records to “reflect the accurate filing status of the affected plan sponsors”.

The IRS believes the problem originated with organizations using the Department of Labor’s EFAST2 system to file their Form 8500 Annual Return/Report of Employee Benefit Plan before the July 31 deadline, rather than electronically through the IRS’s Filing Information Returns Electronically (FIRE) system.

If you received a CP 283-C penalty notice dated before September 1, 2023, and you are sure that you filed your 2022 Form 8955-SSA on time and completely, you do not need to take any action. You can ignore the notice and rest assured that your filing is in good order. The IRS will not impose any penalties or interest on your account.

However, if you want to verify your filing status, you have a couple options.
1) First off, contact your plan administrator or service provider for confirmation of your filing.
2) You can also request a transcript of your filing from the IRS to double-check the assurance of your provider.

The IRS released a bulletin addressing the mistake and asked readers to contact them at 877-829-5500 with any questions.

At retirement age, the Social Security Administration informs affected individuals that they may be eligible for benefits under previous employers’ retirement plans based on information reported to the IRS on Form 8955-A, explained Allison Wielobob, Chief Legal Officer of the American Retirement Association, so it’s essential that this information is filed accurately and timely.

Take a deep breath. We all make mistakes. Even the IRS.

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