What should employers consider with respect to the Summary Annual Report (SAR)? To whom and how must it be distributed, and when is it due?

The SAR is an annual summary of the latest Form 5500 for a group health plan. So, a SAR is required only where the plan is subject to Form 5500 filing requirements. If a plan isn’t required to file a Form 5500, then a SAR is not required. Under the DOL SAR regulations, a totally unfunded welfare plan, regardless of size, need not provide SARs (even though large, unfunded welfare must file a Form 5500). In contrast, large insured plans are subject to the SAR requirement. Employers with self-insured plans should work with outside counsel in determining if they are funded because large funded self-insured plans are subject to the SAR requirements. Generally, an unfunded plan means that benefits are paid out of general assets and that no plan assets are maintained. Segregating participant contributions from an employer's general assets could result in plan assets and thus a funded plan.

For those subject to the SAR requirement, the plan administrator must distribute a SAR to all plan participants covered under the plan within nine months of the end of the plan year. The SAR is only required to be distributed to plan participants who are enrolled at the time of the SAR distribution. For this purpose, a participant is defined as an employee or former employee (e.g., retiree, COBRA beneficiary) who’s actually enrolled on the plan — not terminated employees who are no longer covered. Also, it doesn’t include the participant’s beneficiaries (spouses or dependents).

SARs must be distributed two months after the Form 5500 filing deadline. For calendar year plans with a July 31 Form 5500 deadline, the SAR must be distributed by Sept. 30, which is fast approaching. If an extension of time to file the Form 5500 was granted, then the SAR deadline is two months after the extension date.

As far as the distribution method, mail is always an acceptable form of delivery. Email is also generally acceptable, so long as the DOL safe harbor on electronic distribution is followed. Essentially, employees must have computer access (e.g., a work email or a work computer station) as an integral part of their job, or they must give permission to receive communications at a separate email address. The employee also needs to have the ability to receive a hard copy of the SAR without additional cost. Employers using email delivery should use return-receipt features to maintain proof of delivery.

Lastly, the SAR can’t simply be posted on a company internal website; the employer must also send an email explaining what the document is, the importance of the document, where it can be located on the internal website, and the right for the employee to request a paper copy (and how to make that request).