Summary annual report (SAR)

A Summary Annual Report (SAR) is a one-page summary document sent annually by 401(k) plans to eligible participants, including those terminated with a balance. The SAR includes a summary of the plan’s Form 5500, which details the plan's financial information, such as assets, expenses, and contributions. This report serves as a transparent overview of the plan’s financial status, ensuring that employees are well-informed about how their retirement plan is managed.

You can expect to receive the SAR within 9 to 11.5 months after the plan year ends.

Importance of Summary Annual Report

The SAR is significant for several reasons:

• Transparency: It provides transparency about the plan’s financial health, helping employees understand how their retirement plan is performing.

• Key financial information: The SAR includes critical financial aspects such as assets, expenses, and contributions.

• Informed decisions: By reviewing the SAR, employees can stay informed about the management and performance of their retirement plan, aiding them in making better-informed decisions regarding their retirement savings.

Understanding the Contents of the Summary Annual Report

The SAR contains specific information, including:

• Total plan assets: Details of the total plan assets at the beginning and end of the year.

• Plan expenses: Information on the plan’s expenses, which helps in understanding the costs associated with managing the plan.

• Contributions: Breakdown of employer and employee contributions, providing a clear view of the inflows into the plan.

Additionally, the SAR may include pertinent information such as details on insurance information and rights under the Employee Retirement Income Security Act (ERISA), offering a comprehensive overview of the plan’s financial and regulatory status.

How to read the Summary Annual Report

Reading and interpreting the SAR effectively involves understanding key sections and what to look for:

• Total plan assets: Compare the assets at the beginning and end of the year to assess the growth or decline in the plan’s value.

• Contributions: Check the contributions to see the level of participation from both the employer and employees.

Employees should look for important financial indicators, such as significant changes in assets or expenses, which could affect their retirement savings. Understanding these sections helps in gauging the overall health and performance of the retirement plan.

Benefits of reviewing the Summary Annual Report (SAR)

Regularly reviewing the SAR offers several benefits:

• Better understanding of plan performance: It helps employees gain a clearer understanding of the plan’s financial performance.

• Increased financial literacy: Reviewing the SAR enhances financial literacy, enabling employees to make more informed decisions regarding their retirement savings.

• Addressing concerns: Employees can identify any concerns or discrepancies in the report and address them with plan administrators, ensuring their interests are safeguarded.