Summary Annual Report (“SAR”) due December 15th for Calendar Year Plans with Form 5558 Extensions

Employers who are required to submit a Form 5500 for their employee benefit plans also have an obligation to distribute a summary annual report (“SAR”) to those participating in the plan. Essentially, the SAR provides a condensed version of the details contained within the Form 5500.

For calendar year plans, typically the SAR is provided by September 30th – this is two months after the filing deadline of a calendar year 5500 (July 31st). However, if the employer received an extension of time to file its Form 5500 (which would be from July 31st to October 15th), the deadline for providing the SAR to plan participants is December 15, 2024.

The Department of Labor (“DOL”) has issued a template Summary Annual Report (“SAR”) relevant to welfare plans for those plan years commencing in 2023 and beyond. The SAR can be delivered via U.S. mail, personal delivery, or electronically, provided specific criteria are met.

Employer Action Item

• If you have a calendar year plan that received an extension in its Form 5500 reporting (via the Form 5558), you must distribute the SAR to plan participants by December 15th subject to a limited exception.

Summary

Each year, employers that are subject to ERISA are required to submit an annual report (“Form 5500”) to the DOL regarding their employee benefit plans, unless an exception to the reporting requirement exists. Employers are also obligated to provide participants a summary of the Form 5500, known as the SAR, on an annual basis, free of charge. If a plan is excluded from Form 5500 annual report filings, it is also exempted from the SAR provisions.

Larger unfunded welfare plans (with 100 or more participants) must fulfill the Form 5500 obligations, but they are not required to provide a SAR if they have no fully insured benefits (this is a rare exemption). An unfunded welfare plan is one where the benefits are paid directly from the general assets of the employer that sponsors the plan. If a plan utilizes a trust or a separate fund to store plan assets or cover benefits, it is not considered unfunded.

Required Content

DOL regulations require that certain categories of information be covered in the SAR. If information is not found in the plan’s 5500, it need not be included in the SAR. The SAR should include the categories of information listed below. Sample SAR language can be found on the attached document [EDIT Note: provided below].

• Funding and Insurance Information—If a plan is uninsured, then the SAR must state the types of claims the plan sponsor is committed to pay. If insured, the SAR must state the type of claims the plan has contracts with insurance carriers to pay, along with the names of the insurers and the annual premium paid.
• Basic Financial Information—If plan assets are held in trust or a separately maintained fund, the SAR should include the value of the plan assets at the beginning and end of the plan year, as well as the amount of increase or decrease in net assets. The SAR should also include the amount of total income during the plan year and plan expenses.
• Rights to Additional Information—The SAR should include a statement that the individual receiving the report has the right to request a copy of the full annual report or any part of it.
• Offer of Assistance in Non-English Language—Large plans (covering more than 100 participants) which have the lesser of 10% or 500 or more covered participants literate only in the same language, and small plans (covering fewer than 100 participants) if 25% or more of the participants are literate in only the same language, must be given an offer of assistance in writing in the non-English language.

Who Should Receive a Copy of the SAR and How They Should Receive It

SARs must be given within nine months of the end of the plan year. If a 5500 extension was granted, the SAR is due within two months after the close of the period for which the extension was granted. Further, SARs should be provided to participants covered under the plan and to those who receive a summary plan description (“SPD”).

SARs may be distributed by any method that is permissible for summary plan descriptions. These methods include:

• Hand delivery to employees at their worksite;
• U.S. mail; or
• Electronic delivery (if certain requirements are satisfied).

DOL Regulations offer a safe harbor provision allowing employers to use electronic means to deliver certain documents required by ERISA, such as the SAR. The safe harbor provision permits ERISA disclosures to be distributed to:

1. Employees who have access to workplace computers, and
2. Other plan participants and beneficiaries who agree to receive electronic disclosures.

Furthermore, under the safe harbor regulations, each time an electronic disclosure is made, employers must notify plan participants as well as take measures to ensure that electronic delivery leads to actual receipt.

Penalties for Non-Compliance

Compliance with SAR distribution requirements is crucial as penalties for willful noncompliance can be severe. The penalty could be a fine as steep as $100,000 to $500,000 and imprisonment for up to 10 years. Plan administrators who do not provide a response to a request for a copy of an SAR may be liable for $110 per day in penalties. Participants and beneficiaries can also bring lawsuits to enforce provisions of ERISA.

Additional Resources:

• Code of Federal Regulations for SARs https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104b-10  
• SAMPLE Form for Summary Annual Report Relating to Welfare Plans View here.