QUESTION: Could you explain the SAR requirement, including when it must be provided? Our company maintains a 401(k) plan, a self-insured health plan, and a cafeteria plan under which employees contribute pre-tax dollars to pay their share of premiums for the self-insured health plan and a health FSA. We treat the self-insured health plan and the health FSA as separate plans for filing Form 5500. All of our plans cover more than 100 employees.
ANSWER: A SAR is a summary annual report, and its purpose is to summarize for employees the information that appears in an ERISA plan’s Form 5500. (The Form 5500 is known as the “annual report,” which explains the name “summary annual report.”) SARs are required each year for pension plans, including 401(k) plans, and for welfare plans unless an exemption applies. The plan administrator generally must furnish SARs within nine months after the end of the plan year (which is two months after the normal due date for Form 5500s). This means that for a calendar-year plan, the SAR must be provided by September 30. If the employer has an extension for filing the Form 5500, the SAR deadline is two months after the extended Form 5500 deadline. For calendar-year plans, the extended Form 5500 deadline is normally October 15, so the extended SAR deadline would be December 15.
The required content for SARs is set out in DOL regulations (see our Checkpoint Questions of the Week on SAR content for 401(k) plans and for welfare plans). For small ERISA pension plans (including 401(k) plans) that are taking advantage of the audit waiver provisions, DOL regulations provide model audit waiver language for the SAR (see our Checkpoint Question of the Week).
The following SAR requirements apply to the plans you describe:
401(k) Plan. Your 401(k) plan’s SAR must be provided to each participant covered by the plan and each beneficiary receiving benefits under the plan—these are the same individuals who must receive an automatic summary plan description (SPD) (see our Checkpoint Question of the Week). Employees who become participants covered under the plan are entitled to receive a SAR after they have satisfied the plan’s eligibility requirements, regardless of whether they elect to make deferrals, and former employees remain participants in the plan (and thus are entitled to receive an SAR) until they no longer have an account balance under the plan. An alternate payee receiving payments from the plan under a qualified domestic relations order (QDRO) is a beneficiary for this purpose.
Self-Insured Health Plan With Pre-Tax Premium Payment. A totally unfunded welfare plan (i.e., a plan that pays benefits solely from employer general assets and not through insurance, a trust, or other separate account) is not required to furnish SARs, regardless of its size. If, however, your self-insured plan is funded (even partially), then SARs must be provided to the same participants who must receive automatic SPDs—generally only participants covered under the plan, including individuals who have elected COBRA continuation coverage and those covered under a qualified medical child support order (QMCSO), but not beneficiaries such as spouses or children covered through an active employee (see our Checkpoint Question of the Week).
Cafeteria Plan. Your cafeteria plan is not an ERISA plan, so it is not subject to the SAR requirement, but SARs may be required for the component benefits offered under your cafeteria plan (i.e., your self-insured health plan and health flexible spending arrangement (health FSA)), unless an exemption applies.
Health FSA. Your health FSA is an ERISA plan, but it probably qualifies for the SAR exemption for totally unfunded welfare plans (described above). Generally, employee contributions made by salary reduction to a health FSA are treated as benefits paid solely from employer general assets (assuming that there is no other reason to treat the health FSA as funded).
For more information, see EBIA’s 401(k) Plans manual at Section XXXI.L (“Summary Annual Reports (SARs)”); EBIA’s ERISA Compliance manual at Sections XXIII.A (“What Is a SAR?”) and XXIII.C (“Who Must Be Furnished With SARs and When?”); EBIA’s Self-Insured Health Plans manual at Section XXVIII.D (“Summary Annual Report (SAR)”); and EBIA’s Cafeteria Plans manual at Sections XXXV.B (“Cafeteria Plans and Participant Disclosures”) and XXXV.C (“Health FSA Disclosure Requirements”).
Contributing Editors: EBIA Staff.