SAR for a Plan Merged In?

[austin3515]

Little Plan merges into Big Plan as of 9/30/2011. Question is, do we need to send the SAR to the participants of little Plan, who, as of 9/30/2011, have no money left in Little Plan (it was all transferred to Big Plan).

If Little Plan was TERMINATED, I typically would not send anyone an SAR, for the same reason that I would not send SAR to a participant who closed their account during the plan year. But in this situaiton, Little Plan sort of exists within Big Plan because Little Plan was MERGED INTO Big Plan. So for that reason I struggle not sending the SAR to the Little Plan Participants.

Please let me know what you think!

[chc93]

Back when MP plans merged into PS plans, we provided the MP plan SAR to participants who were in the MP plan, noting that the MP plan assets were transferred to the PS plan. Then the PS plan SAR would note that assets were increased by the transfer from the MP plan. I would think you'd do the same in your case.

[Andy the Actuary]

Little Plan Participants

[austin3515]

OMG, that's them!!!

[austin3515]

Long story short - an SAR is required in the final year. I was a toddler when this was released

DOL Advisory Opinion 79-64A

(July 19, 1979)

ERISA Sec. 502(a)(5)

Mr. L. A. Jarasz

The Wyatt Company

200 First National Building

Detroit, Michigan 48226

Re: Newspaper Drivers and Handlers’ Local 372 and Detroit Free Press, Inc.

Welfare Trust Fund

Dear Mr. Jarasz:

　This is in response to your inquiry whether section 104(b)(3) of the Employee Retirement Income Security Act of 1974 (ERISA) requires distribution of a summary annual report (SAR) for a terminated welfare plan. You ask whether failure to distribute an SAR for calendar year 1978 for the above-named plan (the Plan) would result in "non compliance" with ERISA. You also ask whether financial penalties could be levied against the Plan or its former trustees. Finally, you request information regarding an exemption under section 104(a)(3) in conjunction with the distribution of the SAR for calendar year 1978 for the Plan.

　In this regard, you represent the following:

1. The Plan terminated effective May 31, 1978.

　2. The only remaining asset of the Plan at that time was cash in the amount of $13,110.61, which was anticipated to be disbursed shortly in payment for auditor’s and administrative fees. Any excess funds were to go directly to Blue Cross/Blue Shield of Michigan in payment for insurance premiums for former participants of the Plan.

　3. A supplement to the summary plan description (SPD) has been distributed advising participants of the termination and related information.

　4. As of June 1, 1978, there were no participants or beneficiaries of the Plan.

　Section 104(b)(3) ERISA provides in part that, each year, plan administrators must furnish to participants and beneficiaries receiving benefits under a plan materials that fairly summarize the plan’s annual report for that year. Assuming that all assets of the Plan were distributed prior to the close of calendar year 1978, the Plan administrator would be required to file a "Final Return" for calendar year

1978 with the appropriate Internal Revenue Service Center (see General Instructions D and I of the 1978 Instructions to Forms 5500 and 5500-C).

Accordingly, it is the view of the Department of Labor (the Department) that section 104(b)(3) requires the preparation and distribution of a summary of such "Final Return", in accordance with the requirements of 29 CFR S2520.104b-10.

　You suggest that no SAR should be required for the final Plan year because the Plan would not have any participants and beneficiaries after the date of termination the Plan. We believe, however, that the relevant provisions of ERISA and regulations thereunder (see 29 CFR S2510.3-3(d)(2)(i)) should not be interpreted to provide automatic relief to a terminating plan from the requirement to furnish an SAR for the year in which the plan terminates. On the contrary, it is our view that furnishing an SAR, in the context of a terminating plan, serves a legitimate and important disclosure function, and, specifically, is consistent with the purpose of the SAR.

　The SAR is intended to fairly summarize the latest full annual report in order to protect the interests of plan participants and beneficiaries by providing them financial information with respect to the plan (see section

2(b) of ERISA). The SAR provides basic financial information about the plan and advises participants and beneficiaries of the specific types of information contained in the full annual report and their rights to examine or receive a copy of the full annual report (see 29 CFR S2520.104b-10©). We believe the foregoing provisions of ERISA and the regulations require SARs to be distributed in order to provide affected participants and beneficiaries financial information with respect to the distribution of the residual assets of the Plan.

　In order to grant an exemption or simplified disclosure method under section 104(a)(3) of ERISA, the Department must find that the disclosure method required by Title I is inappropriate as applied to the requesting welfare plan. Based on the foregoing, we are unable to conclude that the requirement to distribute copies of the SAR to participants and beneficiaries under the Plan is inappropriate. Distributing a supplemental SPD statement to participants and beneficiaries advising them that the Plan has terminated does not afford the same type or full form of disclosure as distributing to each participant and beneficiary receiving benefits a copy of the SAR containing the information specified by S2520.104b-10.

　Section 501 of ERISA states that any person who willfully violates any provision of Part 1, Subtitle 3, of Title I of ERISA, or any regulation or order issued under any such provision, shall upon conviction be fined not more than $5,000 or imprisoned not more than one year, or both; except that in the case of such violation by a person not an individual, the fine imposed upon such person shall be a fine not exceeding $100,000. Thus, willful failure to distribute the SAR for a plan for any year in violation of the provisions of section 104(b)(3) of ERISA and section 2520.104b-10 of the regulations, would be subject to the provisions of section 501.

Moreover, under section 502(a)(3) and (5), plan participants and beneficiaries, as well as the Department, may bring a civil action to enforce compliance with any provision of Title I of ERISA, including those related to the SAR.

　We are enclosing, for your information, a copy of 29 CFR S2520.104b-10, as revised (44 FR 19400, April 3, 1979). The revised regulation simplifies the preparation of the SAR by prescribing a form to be used as the SAR.

Plan administrators complete the form by inserting information in the appropriate blank spaces. Following the regulation is an appendix cross-referencing the SAR items to the line items of the annual report for

1978 (Forms 5500, 5500-C, 5500-K). Complete copies of the statements of assets and liabilities and of income and expenses and accompanying notes do not have to be attached to the SAR.

　We sincerely regret the delay in replying to your inquiry. If we may be of any further assistance, please contact us.

　Sincerely,

　

Ian D. Lanoff

Administrator of Pension and Welfare Benefit Programs

[Andy the Actuary]

Note, this DOL advisory opinion applies to a terminated welfare plan and not a DB or DC plan. The only valuable purposes the notice serves to provide additional fees to the preparer, revenue to the post office department, paper sales to the tree killers, and purposes to those who haul trash.

I would opt to provide it upon request, which would likely mean never.

It's lovely that the opinion was issued after the date an SAR would have been required to be delivered. Are we certain this opinion was never superseded?

[austin3515]

I got it from TAG. But would you not agree in light of this opinion, one should think twice before not sending the SAR? I mean, what's one more SAR?

[chc93]

Note, this DOL advisory opinion applies to a terminated welfare plan and not a DB or DC plan. The only valuable purposes the notice serves to provide additional fees to the preparer, revenue to the post office department, paper sales to the tree killers, and purposes to those who haul trash.

I would opt to provide it upon request, which would likely mean never.

It's lovely that the opinion was issued after the date an SAR would have been required to be delivered. Are we certain this opinion was never superseded?

For a terminated plan, we routinely provide the final SAR to the plan sponsor, and tell them to keep it in file so if a participant ever asks, he can give them a copy.

I think there was some discussion recently when the Annual Funding Notice for DB plans started, on who needs to get the AFN. If I recall correctly, a DOL representative mentioned that the requirement is for any participant who had a benefit in the plan at any time during the plan year must receive the AFN.