If you’re like most business owners, your company’s annual report isn’t the most exciting part of your job. Thankfully, the Summary Annual Report (SAR) makes things easier on this front.
You may already be familiar with annual reports your business submits to the Secretary of State in each state in which it is registered to do business. The SAR is a bit different from those and is required on the federal level.
This type of annual report is a streamlined, reader-friendly version that actually gives your employees the key information regarding their benefits. A well-crafted SAR is an essential tool for the modern business owner, and it’s definitely more exciting than the prospect of hefty fines and penalties.
Find out all you need to know about the Summary Annual Report in our deep-dive guide to ensure you meet the deadlines and requirements without issue.
What Is a Summary Annual Report?
Let’s break it down. The Summary Annual Report is essentially a condensed version of the much larger (and much less digestible) Form 5500. Think of Form 5500 as an in-depth financial report on your company’s employee benefits and the SAR as key takeaways for your employees.
Why bother with it at all? This is where ERISA comes in — the Employee Retirement Income Security Act of 1974 is designed to protect employee retirement plans. Part of that protection involves keeping employees informed, and the SAR is a key tool for achieving that transparency.
A SAR is important for a few key reasons:
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Clarity: It cuts through the jargon and provides a simple breakdown of the plan’s finances.
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Accessibility: It’s designed to be understood by everyone, not just accountants and lawyers.
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Compliance: It helps your company meet ERISA regulations and avoid costly penalties.
While the SAR might seem like just another piece of paperwork, it’s actually your key to informing your employees and keeping your business compliant.
What Is the Importance of a Timely and Accurate SAR?
Let’s talk about those penalties. Failing to distribute the SAR correctly can result in hefty fines from the Department of Labor and the IRS. We’re talking thousands of dollars, and that’s on top of potential civil penalties if an employee requests a copy of the SAR and doesn’t receive it promptly.
You could face serious financial consequences if you miss the deadline or distribute an inaccurate Summary Annual Report.
For instance:
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Late or Missing SAR: The DOL and IRS can impose fines of up to $5,000 for individuals and up to $100,000 for companies. Let’s not forget those penalties could even lead to imprisonment.
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Failure to Provide SAR Upon Request: Employees have the right to request a copy of the SAR. If they don’t receive it within 30 days, you could be liable for fines of up to $110 per day until they do. That adds up fast.
The SAR functions like an annual checkup for your retirement plan. You definitely don’t want to skimp on the health of your company’s benefits. However, beyond avoiding penalties, the SAR is important in keeping your employees in the loop about their retirement savings.
It lets them see how their plan is performing, what their contributions are doing, and understand their overall retirement picture. Remember, informed employees are more likely to be engaged employees.
That’s a win for any business in the long run. With the SAR, you can focus on transparency, financial responsibility, and taking care of your employees’ futures.
What Are the SAR Distribution Deadlines and Requirements?
For most companies, the standard deadline is nine months after the close of the plan year. So if your plan year runs on a standard calendar year, that means your SAR is due by September 30th. However, if you filed an extension for your Form 5500, you also get a two-month extension for the SAR.
Now, let’s talk about the person in charge of getting the SAR into the right hands — the plan administrator. This could be someone within your company or an external provider.
Their primary responsibility is to ensure that the Summary Annual Report is distributed on time and that all the rules are followed. The SAR can be distributed using paper copies or electronically, but it’s important to note that even with electronic delivery, employees still have the right to request a paper copy at any time. If they ask, you have 30 days to deliver, or daily fines can start piling up.
The Summary Annual Report distribution process isn’t overly complicated, but staying on top of deadlines and following the right procedures is important.
What Information Is Required in the SAR?
The Summary Annual Report exists to give your employees the most important takeaways without drowning them in financial jargon.
Here’s the mandatory information for every SAR:
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Financial Breakdown: Get a quick snapshot of how your plan is doing financially. This covers basic figures like total income and expenses.
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Fees: The SAR sheds light on administrative fees and other plan expenses.
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Retirement Potential: The SAR shows how much the plan’s assets are currently worth — it’s a good way for employees to track the growth of their retirement savings.
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Contributions: This section breaks down the total amount contributed to the plan, both by the company and employees.
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Your Rights: The SAR reminds employees that they have certain rights under ERISA, including the right to more detailed information and the right to sue if those rights are being violated.
To be clear, the SAR doesn’t include every detail in Form 5500. It’s designed to hit the key points employees actually care about. If your employees want to do a deep dive into the plan’s investments or get a super granular breakdown of fees, they can always request a full copy of Form 5500.
Here’s why this simplified information matters:
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Transparency: The Summary Annual Report helps take some of the mystery out of retirement plans. It promotes trust by giving employees a clear understanding of where their money is going.
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Engagement: When employees feel in the loop about their benefits, they’re more likely to see the value in them and appreciate their company’s investment in their future.
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Avoiding Misunderstandings: The SAR can prevent misunderstandings about how the plan works and the rights employees have. This can head off potential disputes down the road.
Essentially, the Summary Annual Report is designed to be easily understood in a short amount of time, giving your employees the information they need to feel informed and empowered.
Mosey Is Your Source for Compliance Management
The SAR is your key to keeping both your employees and the regulatory agencies happy. It breaks down the need-to-know details about your company’s retirement plan into a format everyone can understand.
While the SAR itself isn’t overly complicated, staying on top of deadlines and the fine details of compliance is where things can get tricky. Remember, missed deadlines and inaccurate information can translate into some serious fines and penalties. That’s definitely not a headache any business needs.
So, if you want to make sure your compliance process runs like clockwork, consider letting Mosey take some of that load off your shoulders. Our compliance management platform can help you stay on track and avoid paying fines.
Discover for yourself what Mosey can do for you and your business. We invite you to book a demo with one of our experts today and discover how easy staying compliant can be.
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