(b)lines Ask the Experts – Who Gets a Summary Annual Report?

October 23, 2012 (PLANSPONSOR (b)lines) – “We have several employees here who do not elect to participate in our retirement plan even though they are eligible. Since our employer contribution is a match, they do not have an account balance.

“Must the Summary Annual Report (SAR) be distributed to all plan participants, or only those with account balances? If we were to distribute to all participants in our plan (all employees, since we allow all employees to make elective deferrals), this would be a significant administrative burden, since we are an organization that employs many individuals who may work only a few days/weeks out of the year.”  

Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:  

The SAR, which must be delivered within two months of the deadline for filing of your 5500 (by 12/15 for calendar year plans who filed on 10/15), must be delivered to ALL 403(b) plan participants and beneficiaries receiving benefits. This would include anyone who is eligible to contribute to the plan, but fails to do so, regardless of whether or not they have an account balance. Former employees with account balances must receive the SAR as well.  

In your case, if a substantial portion of your workforce consists of employees who may only work a limited period each year, you may wish to take advantage of the exclusion provided in the final 403(b) regulations from the right to make elective deferrals for those who normally work fewer than 20 hours per week. Although the exclusion is generally cumbersome to administer, it may be worth the burden in your case if it results in not having to send SARs (and other documentation that must be provided to plan participants) to a significant portion of your workforce. You can take advantage of this exclusion by amending your 403(b) plan accordingly.  


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.