So many focus on e-filing the Form 5500 on time, that they overlook the mandate to distribute the Summary Annual Report (SAR) to the participants. The following are key points to know and apply to prevent compliance mishaps. Also provided are important attributes to keep in mind on electronic distribution for the SAR.
- The SAR fulfills the disclosure requirement of ERISA. (The 5500 fulfills the reporting requirement.)
- The SAR is to be distributed to plan participants enrolled in the employee welfare benefit plan including:
- Active employees
- Former employees enrolled via COBRA
- Former employees who were enrolled during the plan year who are not enrolled in COBRA
- The DOL provides a template to be used. The main attributes to convey are the name of the plan and plan sponsor, the benefits provided under the plan, the carrier names, basics on the financials, the participant’s rights, and how to obtain copies of the 5500.
- The SAR is not required for self-insured only plans like those for just the healthcare flexible spending account.
- If the SAR was not distributed on time or at all, the DOL expects the SAR to be distributed as soon as the plan sponsor realizes the oversite. [The SAR is required to be distributed within two months of the 5500’s due date].
- If the DOL requests a copy of the SAR to review during an audit and it is not available, the DOL can impose a penalty of $161 per day.
- The SAR does not have to be translated into a foreign language in its entirety. The SAR must include a paragraph offering assistance in the non-English language of the participants. The actual assistance in understanding the SAR may be provided orally or in-person and need not be written.
- In 2019, two additional paragraphs were mandated to be included in the SAR to outline the Paperwork Reduction Act.
- The rules for Electronic Distribution for the SAR are the same for the Summary Plan Description (SPD) of the plan document. A previous blog piece has been prepared on this subject. Here are the key highlights:
- DOL regulations require the plan sponsor to be prepared to prove that it furnished one in a way that was “reasonably calculated to ensure actual receipt,” using a method “likely to result in full distribution.”
- Plan sponsors may send through an email or posting on the plan sponsor’s website.
- Website Retention. Covered documents must remain on the intranet until superseded by a subsequent version, but in no event for less than one year.
- For participants with work-related computer access, electronic distribution can be used without the plan sponsor receiving prior consent to send via electronically.
- For participants without work-related computer access, Plan administrators can issue the SAR via first class mail or handing out in person. Electronic distribution is also an option if the participant affirmatively consents and provides an email address.
For any questions or the need for additional information, feel free to reach out to Ann McAdam at firstname.lastname@example.org.