Who is Required to Produce a Summary Annual Report (SAR)?

A Summary Annual Report (SAR) is a critical document in the management of employee benefit plans governed by the Employee Retirement Income Security Act (ERISA). The SAR provides plan participants and beneficiaries with a simplified summary of the plan’s annual financial status, which is derived from the more detailed Form 5500 that plan administrators file with the Department of Labor (DOL) each year. But who exactly is responsible for producing this document, and under what circumstances is it required?

ERISA-Covered Plans and SAR Obligations
The primary requirement for producing a SAR falls on the shoulders of employers who sponsor ERISA-covered employee benefit plans. These include both health and retirement plans such as 401(k) plans, pension plans, and group health plans. The SAR serves as an essential transparency tool, ensuring that plan participants and beneficiaries are informed about the plan’s financial health and the nature of the benefits provided.

Form 5500 and SAR Requirement
The obligation to produce a SAR is tied to the requirement to file Form 5500 with the DOL. Form 5500 is a comprehensive annual report that contains detailed information about the plan's financial condition, investments, and operations. The SAR is essentially a condensed version of this report, which must be distributed to plan participants and beneficiaries within nine months after the end of the plan year. If an extension is granted for filing Form 5500, the deadline for distributing the SAR is extended accordingly [1].

Exceptions to the Requirement
There are exceptions to the requirement to produce a SAR. For instance, plans that are exempt from filing Form 5500, such as unfunded welfare plans with fewer than 100 participants, are not required to produce a SAR. Additionally, large pension plans that provide participants with an audited financial statement as part of the annual report do not need to distribute a SAR, as the audited financial statement serves a similar purpose [2].

Penalties for Non-Compliance
Failing to produce or distribute a SAR when required can result in penalties from the DOL. Employers need to ensure that they are compliant with ERISA’s reporting and disclosure requirements to avoid these penalties and maintain the trust of their employees. The SAR is not just a regulatory obligation; it’s a key component of fiduciary responsibility, reinforcing the employer’s commitment to transparency and accountability in managing employee benefit plans.

Conclusion
In summary, the requirement to produce a SAR primarily applies to employers who sponsor ERISA-covered employee benefit plans and who are required to file Form 5500. Understanding and complying with this requirement is essential to fulfilling fiduciary duties and maintaining transparency with plan participants. Employers should review their specific plan circumstances to determine whether they are obligated to produce a SAR and ensure they meet all applicable deadlines.

References:

[1] Department of Labor. (2023). Form 5500 Series FAQs. Retrieved from https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/form-5500-series

[2] Internal Revenue Service. (2022). Instructions for Form 5500 Annual Return/Report of Employee Benefit Plan. Retrieved from https://www.irs.gov/forms-pubs/about-form-5500 

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