By Jenny Kiffmeyer, J.D – The Retirement Learning Center

Deadline for Summary Annual Reports

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. The advisor asked: “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?”

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 appropriate Form 5500 is generally due seven months after the end of the plan year (i.e., July 31^st 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 30^th 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 15^th 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.