What is a Summary Annual Report (SAR)?
The Basics
The Summary Annual Report (SAR) is a requirement from the Employee Retirement Income Security Act of 1974 (ERISA) and enforced by the Department of Labor (DOL) that instructs a plan sponsor to annually furnish plan participants with a summary of the information reported in the Form 5500. This information should be furnished within 9 months of the close of the plan year or 11 ½ months if an extension is filed. It is important to note that if the plan sponsor has a plan that does not have a Form 5500 requirement, then they are exempt from having to provide an SAR for that plan. In addition, the regulations provide that totally unfunded welfare plans (where benefits are paid solely from the general assets of the employer or employer organization maintaining the plan) do not have to provide an SAR no matter the size.
The Content
The DOL regulations provide the model SAR language. There are categories of information that apply to specific types of plans. For example, a fully insured welfare plan would complete the insurance category paragraph but would not have to provide the paragraph for financial information which you would typically find in a large retirement plan. For additional information about Summary Annual Reports, click here to read a blog post from 5500 Tax Group.
Here is a link to the specific requirements:
For Retirement Plans, the initial paragraph shows the plan name and its general characteristics based on the codes provided on Form 5500. These codes will describe the plan as defined benefit, defined contribution, pooled employer, multi-employer, etc. as well as other specific characteristics such as a prototype plan, self-employed plan or even note that it is a frozen plan. The next paragraph will contain the basic financial information for the plan. If you have a defined benefit plan or a defined contribution plan with funding requirements, you will then also have a paragraph describing the minimum funding standards. Finally, you will include a paragraph that gives the participant their rights for additional information.
For Welfare Plans, they have a similar initial paragraph as the retirement plans which describes the plan name and its general characteristics based on the codes provided on Form 5500. These codes will describe the plan’s benefits. Then if the plan is self-insured it will provide a list of those type benefits in the next paragraph. If the plan is fully insured, it provides a paragraph listing each insurance carrier followed by all the fully insured benefits such as life, health, dental, etc. as well as the amount of premiums paid. Experience-rated insurance contracts will also require an additional paragraph describing premiums and claims paid. Some plans combine self-insured, fully insured and even experience-rated benefits. Those type of plans will provide all the paragraphs needed. Finally, welfare plans also include a paragraph that gives the participant their rights for additional information.
The Distribution
The SAR should be furnished to all who participated at any time during the plan year within 9 months of the close of the plan year or 11 ½ months if an extension is filed. If the plan has some non-English speaking participants be aware that the plan sponsor may need to issue them the SAR in their language. Please note the failure to issue the SAR to a plan participant within 30 days of a specific request can result in penalties of $110 per day payable to that participant. There are various acceptable ways to distribute the SAR. You can deliver by hand, by mail, and by electronic media if you can ensure that delivery is properly achieved. Note that posting the SAR on a company bulletin board would not meet the requirement since the plan sponsor cannot ensure every participant will see the information there.
Cathy Perka, CPA, RPA
Cathy is a Partner with the 5500Tax Group, Inc. She has over 20 years of experience working with qualified plans as well as welfare benefit plans. Prior to co-founding the 5500Tax Group, she was a Manager with the Ernst & Young Human Capital Practice.