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Summary Annual Report


Guest benefitsanalyst

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Guest benefitsanalyst

What are the requirements for distributing an SAR for a 401(k) plan? Who must receive it? i.e. for PYE 12/31/03.

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You usually have 9 months after the close of the plan year. If your plan is on extension, the deadline is two months after you file your 5500. You should provide it to all participants (including terminated w/ a balance and beneficiaries of deceased participants.)

/JPQ

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Guest benefitsanalyst

Thanks for your response. How about terminated employees with no balance? I don't think so but wanted to double check. Our recordkeeper is stating the SAR needs to go to all participants who had a balance on 12/31/03.

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29 CFR 2520.104b-10(a) states in part that "the administrator of any

employee benefit plan shall furnish annually to each participant of such

plan and to each beneficiary receiving benefits under such plan (other

than beneficiaries under a welfare plan) a summary annual report ".

It does not make a distinction as to what point during the plan year someone must be considered a participant, i.e. participant at the beginning, middle or end of the year. Perhaps this is clarified elsewhere, but in the absence of such I would distribute a summary annual report to anyone who had been a participant at any time during the plan year. Even if the participant was paid out.

...but then again, What Do I Know?

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A plan administrator isn't required to distribute the SAR to any individual who has no entitlement to current or future benefits under the plan as of the SAR due date.

Lori Friedman

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Lori, please consider the following:

A calendar year plan terminates and distributes all assets by 3/31/05. Based on your statement, no SAR would be required for either 2004 or 2005. I do not think that is the case.

I would be happy to change my opinion if you can point me to some official guidance you may be aware of.

...but then again, What Do I Know?

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Here's a helpful except from PPC's 5500 Deskbook:

The following plans do not have to furnish an SAR [ DOL Reg. 2520.104b-10(g) ]:

1. A totally unfunded welfare plan described in DOL Reg. 2520.104-44(b)(1)(i) .

2. A small (fewer than 100 participants at the beginning of the plan year), unfunded and/or insured welfare plan described in DOL Reg. 2520.104-20(b) .

3. An apprenticeship training plan described in DOL Reg. 2520.104-22 .

4. An unfunded pension benefit plan for selected employees that meets the requirements of DOL Reg. 2520.104-23 (i.e., a top-hat plan). Such a plan is exempt only if it has met the alternate disclosure and reporting requirements discussed in Key Issue 1G .

5. An unfunded and/or fully insured welfare plan for selected employees that meets the requirements of DOL Reg. 2520.104-24 .

6. A day care center described in DOL Reg. 2520.104-25 .

7. A dues-financed retirement or welfare plan described in DOL Regs. 2520.104-26 or 2520.104-27.

8. Simplified Employee Pension plans (SEPs) described under DOL Regs. 2520.104-48 and 2520.104-49; i.e., (a) a SEP created by use of IRS Form 5305-SEP or Form 5305A-SEP when the plan administrator complies with the requirements of the IRS form and DOL Reg. 2520.104-48 ; or (b) a SEP that does not use either of such IRS forms, but provides employees with the detailed information specified in DOL Reg. 2520.104-49, and the employer creating the SEP does not select, recommend, or influence the choice of IRA if the IRA would restrict the withdrawal of its funds.

9. Any plan exempt from ERISA Title I (e.g., excess benefit plans; government plans; church plans that did not make the IRC Sec. 410(d) election; plans covering only a sole proprietor (or a sole proprietor and a spouse), or only partners (or partners and their spouses); and 403(b) plans when contributions are derived solely from salary reductions and meeting other specified regulatory requirements, etc.).

10. A Savings Incentive Match Plan for Employees (SIMPLE) IRA described in IRC Sec. 408(p) [ERISA Sec. 101(g) ].

11. Plans with no participants or beneficiaries entitled to benefits as of the distribution due date of the SAR (e.g., terminated plans that have distributed all benefits by the SAR due date).

Item #11 answers your question. Interestingly, though, I looked at the actual DOL regulation and couldn't find any mention of this specific matter.

Lori Friedman

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I still have the following concerns:

1) As Lori pointed out, the actual DOL regulation does not mention this specific matter.

2) A post by MGB referred to a 1978 DOL opinion letter and indicated that the SAR was required in conjunction with the final filing.

3) Even if the PPC deskbook is correct, item #11 only refers to exempting from the disclosure requirement plans with no participants. It does not indicate that a participant that was paid out during the year from an ongoing plan is not entitled to the SAR.

...but then again, What Do I Know?

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WDIK, Actually, the PPC 5500 Deskbook does say that a plan isn't required to provide an SAR to paid-out participants. In my previous message, I cut-and-pasted a rather long excerpt, to conserve space on this message board. Here's the full text of Item #11:

The following plans do not have to furnish an SAR [ DOL Reg. 2520.104b-10(g) ]:

[…]

11. Plans with no participants or beneficiaries entitled to benefits as of the distribution due date of the SAR (e.g., terminated plans that have distributed all benefits by the SAR due date). A plan need not distribute as of the SAR due date a SAR to any individual who ceases to have any entitlement to a current or future benefit under the plan (e.g., a deferred vested participant whose benefit entitlement was completely settled before the SAR due date). 

You're right, of course, that a PPC Deskbook is a helpful guide but not substantial authority.

Lori Friedman

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