Business owners, human resources professionals, and benefit plan administrators work hard to stay on top of the mountain of compliance paperwork necessary to run their programs. Occasionally, benefits legal compliance documentation may fall through the cracks. In most cases, however, a failure to submit the required paperwork just means going back and correcting the mistake, paying a fine, and perhaps some basic interactions with the relevant government agency. When it comes to failure to submit a health and welfare plan summary annual report (SAR) for example, you can take steps to fix the mistake.
Summary Annual Report
Each year, a plan’s SAR provides plan participants, beneficiaries, and certain former employees with a summary of relevant plan information found on the plan’s Form 5500. While SAR failures are not penalized under ERISA, the Department of Labor, for example, may audit your procedures and find a missing SAR. Or, you may have a beneficiary who requests access to the documents. When SARs are not provided to plan participants upon request, this results in penalties up to $110 per day.
There is no formal mechanism under ERISA to remedy a SAR failure. However, companies discovering the error can take corrective actions to avoid issues with future requests or audits.
Potential Corrective Actions
If you prepared the SAR but failed to distribute it to some or all the plan participants and beneficiaries, then the current SAR should be promptly distributed. It may not make sense to distribute prior-year SARs, just the one for the current year. Distributing multiple years of SARs is likely to confuse participants. In addition to distributing current-year SARs, keep past year SARs on file so they are available if requested. Further, put into place processes to ensure that SARs are properly distributed going forward.
If, however, you failed to prepare a SAR for the current year, then once the problem is discovered, you should prepare and distribute the SAR as quickly as possible. If the failure was in a previous year, you should still go ahead and prepare the appropriate SAR for the previous year based on the information from that year’s Form 5500. You may choose not to distribute the SAR, but you will have it available in case of a DOL audit or a request from a participant or beneficiary. Further, if your business undergoes a merger or acquisition, then you will have the SAR available to complete the due diligence process.