The last quarter of the year means it’s time for retirement plan sponsors to see how they are doing against their annual compliance checklist. Wondering, “What have I missed?” Jump into action with these tips for your Summary Annual Report (SAR), and a checklist to help you avoid or curtail compliance gaffes in the last quarter of the year.
Sharing Plan Info With Participants
Communicating plan status is one of the fiduciary responsibilities of retirement plan sponsors, and even if you outsource reporting and other communication tasks, you’re still obligated to make sure required information is effectively shared with plan participants. One critical annual communication is the Summary Annual Report (SAR), as instructed by the Department of Labor: “A Summary Annual Report (SAR) outlines in narrative form the financial information in the plan’s annual return/report, the Form 5500, filed with the Federal Government (see Reporting to the Government for those plans required to file this report). The plan administrator must furnish it annually to participants in plans that are required to file the Form 5500.”
Most retirement plans must provide the Summary Annual Report for 2024 to participants, by the end of September 2025 (9 months after year end). People Keep offers these pointers about the SAR:
- The Summary Annual Report is a condensed version of the information provided on Form 5500….It includes details such as funding requirements, insurance information, basic financial statements, and participants’ rights to information.
- Employers must distribute the Summary Annual Report to all benefit participants and beneficiaries within nine months after the plan year ends, using various distribution methods such as hand delivery, mail, company-wide publication, or electronic delivery.
- Failing to distribute the Summary Annual Report is an ERISA violation. It can lead to financial and criminal penalties for individuals and companies.
- Not only does the SAR summarize each year’s Form 5500, but it also offers transparency by keeping individuals advised of their plan’s financial health annually and outlines their rights to certain information as a participant in the benefit.
- Under the Employee Retirement Income Security Act of 1974 (ERISA), employers offering specific health and retirement benefit plans must file Form 5500 and distribute the SAR or be subject to penalties.
Operating According To The Rules?
Dangerously, given the high standards of ERISA, many retirement plan sponsors fail to realize that they retain fiduciary obligations, even when outsourcing plan services. Though outsourcing can reduce some of the risks inherently associated with plan sponsorship, the risks associated with appropriately selecting and monitoring service providers remain with the plan sponsor, who can be held personally liable for shortcomings. That’s why ERISA experts at USI Consulting Group underscore: “Prudent retirement plan sponsors are proactive: they maintain up-to-date procedures and guidelines, and conduct regular operational compliance reviews, or self-audits. By doing this, they can mitigate potential risks, reduce future liabilities and avoid unnecessary costs.” One way plan sponsors can stay on top of key actions and deadlines is to adhere carefully to an annual compliance checklist. For example, USI Consulting Group offers this 2025 Compliance Checklist, featuring a month by month breakdown of oversight responsibilities requiring attention.
When reviewing your retirement plan for compliance, keep in mind that the Department of Labor offers a Voluntary Fiduciary Correction Program which may enable you to curtail problems and penalties. Noncompliance issues frequently caught by the DOL and IRS include:
- Plan document failures
- Plan eligibility
- Loans, in-service distributions
- Vesting
- Required minimum distributions
- Nondiscrimination and coverage testing
- Missing participants
- Late contributions
Summing up, remember: If you sponsor a retirement plan at your company, you are automatically a fiduciary under the high standards of ERISA. Being a fiduciary means you are personally responsible for ensuring that the plan consistently benefits participants. Failures, including errors and oversights, can result in fines and penalties, as well as lawsuits—-all of which put your personal assets at risk. Outsourcing plan services does not free you from your risks: as a sponsor, you choose the service providers and remain ultimately accountable for their performance. Specific examples of what you can be held personally accountable for as a fiduciary include:
- Decisions: Do you have the right advisor, and investment options?
- Cost control: Are the plan fees reasonable and services solid?
- Compliance: Do operations adhere to the plan document, and government regulations?
As a fiduciary, you can also be held accountable for failing to adequately mitigate cybersecurity threats to the plan, or to curtail the damage from a breach. You can even be held responsible for failure to monitor your chosen service providers for their adherence to cybersecurity protocols. If you face claims that you have failed in your responsibilities as a retirement plan sponsor, the only type of protection that shields you personally is Fiduciary Liability Insurance—-with it, you’ll be armed with coverage for defense and penalties. Without Fiduciary Liability Insurance, your personal assets are exposed.
Help For Retirement Plan Sponsors
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