Summary Annual Report Distribution 101

What Every Plan Sponsor Needs to Know

When it comes to managing a company’s retirement plan, most plan sponsors are familiar with the annual Form 5500 filing as required under ERISA. But far fewer pay attention to its “companion” document: the Summary Annual Report (SAR). Overlooking this requirement may seem minor, but it could expose your organization to compliance risks and even Department of Labor (DOL) penalties.

Let’s walk through the essentials of SAR distribution, why it matters, and how to ensure your company stays compliant.

What Is a Summary Annual Report?

A Summary Annual Report (SAR) is just what the name implies: a simplified, participant-friendly version of the Form 5500 that plan sponsors file each year with the IRS.

While the Form 5500 is a detailed, numbers-heavy document showing assets, contributions, and plan operations, the SAR provides plan participants with a “30,000-foot view” of that filing. It summarizes contributions, balances, and other key disclosures in plain language. Or, at least, it should.

By law, ERISA requires plan sponsors to distribute SARs to all participants, beneficiaries, and anyone with an interest in the plan during the plan year.

Key Deadlines You Need to Note

• Form 5500 deadline: Due at the end of the seventh month after the plan year ends (e.g., July 31 for calendar-year plans). With an extension, the deadline moves two and a half months later (e.g., October 15, in this instance).
• ‍SAR deadline: Due at the end of the ninth month after the plan year ends (e.g., September 30). With an extension, the SAR is due two months after that (e.g., December 15, in this case).

Importantly, SARs are not filed with the IRS or DOL; they are distributed directly to plan participants, usually via “snail-mail” letter or via email.

Why SARs Get Overlooked…and Why That’s a Problem

Many plan sponsors stay on top of their Form 5500 filings, but the SAR often slips through the cracks. Because it’s not filed with a government agency, it may not feel as urgent as other compliance tasks. And it may get overlooked altogether.

The risks of overlooking SAR distribution include:

• DOL penalties: Failure to distribute SARs can trigger fines of up to $110 per day, per plan participant.
• ‍Audit issues: Random DOL audits do occur once a 5500 is filed, and missing SARs can raise red flags.
• ‍Employee disputes: It is not out of the realm of possibility that a disgruntled employee or former participant may cite non-receipt of an SAR in complaints or legal disputes or just to make things difficult on a former employer.

Simply put, ignoring SAR requirements can create unnecessary financial and reputational risks.

Best Practices for Compliance

The good news: staying compliant with SAR requirements is very manageable, if you have the right processes in place.

• Leverage your recordkeeper: Most recordkeepers prepare the SAR on behalf of the plan. This relieves the plan sponsor of much of the administrative work, but in many cases, they must be prompted to take this action. ‍
• Coordinate with your consultant: A proactive 401(k) consultant should act as the “quarterback,” ensuring the recordkeeper prepares the SAR on the employer’s behalf, and to make certain that the plan sponsor distributes it on time to all interested parties.
• ‍Track deadlines: Build SAR distribution into your compliance calendar, alongside Form 5500 filing deadlines. That way the two remained “joined at the hip,” thereby minimizing the chance that SAR filings get overlooked.
• ‍Choose the right distribution method: It is customary to mail to the last known addresses for participants, or to distribute them electronically, if you have proper protocols in place.  

Remove the Stress; Reduce the Margin for Error

Distributing SARs is one of those compliance items that doesn’t get much attention—until it’s missed. But with a clear process and the right consultant guiding the effort, it doesn’t have to be stressful.

At LoVasco, we help plan sponsors stay on top of all aspects of retirement plan compliance, including SAR distribution. Our goal is to make sure deadlines are met, risks are minimized, and there are no last-minute scrambles.

If you still have questions, or want to ensure your plan is fully compliant, contact me directly. I’d be glad to help.