Tag Archive for: SAR

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Too Late for a SAR?

“My client has not distributed the summary annual report (SAR) for his 401(k) plan for 2021.  Is he past the deadline to provide the SAR to participants?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor in Florida relates to the timing of a plan’s summary annual report.

Highlights of Discussion

The date a plan sponsor must deliver a SAR to plan participants and beneficiaries is tied to the end of the plan year—unless the individual has an extension to file the plan’s Form 5500. (The SAR is a summary of Form 5500 information.) If your client had an extension to file the plan’s Form 5500 for the 2021 plan year, he may still have time to timely distribute a SAR.

The regulations require distribution of the SAR within nine months after the close of the plan year (or two months after the Form 5500 filing). The Form 5500 for a plan is generally due seven months after the end of the plan year (i.e., July 31st for a calendar year plan). So, generally, a calendar year plan has a SAR distribution deadline of September 30th following the end of the plan year.

However, if the plan sponsor has an extension to file Form 5500 for the year, the sponsor also has additional time to provide the SAR (i.e., two months after the close of the filing extension [DOL Reg. § 2520.104b-10(c)]. For example, if a calendar year plan has an extension to file Form 5500 until October 15th of the following year, the plan sponsor must distribute the SAR for the plan by December 15th.

Example:

Toy Time Inc., as a calendar year 401(k) plan that had an extension to file its Form 5500 for the 2021 plan year until October 15, 2022. That means, the SAR for Toy Time’s 401(k) plan is due to participants and beneficiaries by December 15, 2022.

Conclusion

A SAR is a summary of Form 5500 information that must be given to plan participants and beneficiaries annually and upon request. The regulations require distribution of the SAR within nine months after the close of the plan year or, if there is a filing extension for Form 5500, within two months after the close of the filing extension.

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Deadline for Summary Annual Reports

I have a client who failed to deliver the 2020 Summary Annual Report (SAR) on time for the business’s 401(k) plan. What are the consequences?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with an advisor in California is representative of a common question related to required plan reports.

Highlights of Discussion

  • Let’s start with the due date of the SAR. The date a plan sponsor must deliver a SAR to plan participants and beneficiaries is tied to the due date for filing the Form 5500 series report for the plan. The SAR is a summary of Form 5500 information. The appropriate Form 5500 is generally due seven months after the end of the plan year (i.e., July 31st for a calendar year plan). The regulations require distribution of the SAR within nine months after the close of the plan year. So, a calendar year plan has a SAR distribution deadline of September 30th following the end of the plan year.
  • If the plan sponsor has an extension to file Form 5500 for the year, the sponsor also has additional time to provide the SAR (i.e., two months after the close of filing extension [DOL Reg. § 2520.104b-10(c)]. For example, if a calendar year plan has an extension to file Form 5500 until October 15th of the following year, the plan sponsor must distribute the SAR for the plan by December 15th.
  • If a plan fails to provide the annual SAR, there is no stated penalty per se. However, plan sponsors have a fiduciary duty to ensure compliance with all plan reporting and notice rules. The error could result in DOL fines or criminal action upon discovery. The best course of action is to distribute a current SAR as quickly as possible and document how this failure will be avoided in the future.
  • There is a potential penalty if a plan participant or beneficiary requests a SAR and the sponsor fails to provide one in a timely manner. Failure to provide a SAR within 30 days of receiving a request from a plan participant or beneficiary could result in a penalty of $110 per day per participant [ERISA § 502(c)(1)].

Conclusion

When applicable, plan sponsors have a fiduciary duty to distribute SARs each year to participants and beneficiaries. They also have a responsibility to timely provide them upon request.

© Copyright 2024 Retirement Learning Center, all rights reserved