How To Read Your 401(k) Plan Reports

If you participate in a 401(k) plan at work, your employer is required to provide you with a summary annual report (SAR) each year. While perhaps not the most exciting reading, it contains important information about your plan and its financial condition. This article explains what to look for in the report.

What Is a Summary Annual Report (SAR)?

A summary annual report (SAR) is a document that employers must automatically supply to current 401(k) plan participants and anyone who is receiving benefits from the plan. The deadline for issuing the SAR is nine months after the end of the plan year or two months after the due date for the employer and plan administrator to file a Form 5500 with the government, including any extensions.

Form 5500, formally titled Annual Return/Report of Employee Benefit Plan, provides information to the Employee Benefits Security Administration (EBSA), Internal Revenue Service (IRS), and Pension Benefit Guaranty Corporation (PBGC) about the plan’s funding, its number of active and retired participants, and other matters.

The summary annual report summarizes the information in Form 5500 in an easy-to-read format prescribed by law. (Participants who want to see the full Form 5500 also have the right to request it from the plan administrator.)

How To Read a 401(k) Plan Summary Annual Report

In addition to some basic information about your plan at the beginning and a boilerplate Paperwork Reduction Act statement at the end, your plan’s Summary Annual Report will consist of three main sections:

• Basic financial statement
• Minimum funding standards
• Your rights to additional information

Here’s a look at each section and what you can glean from it:

Basic financial statement

Here you’ll find a summary of the plan’s expenses for the past year, including the money it paid out to participants and beneficiaries and how much it spent on administrative expenses.

The financial statement will also tell you how much money the plan has in total assets, after subtracting its current liabilities, and how that compares to its financial position at the beginning of the plan year. In addition, it will report on how much the fund received in employer contributions, employee contributions, and investment earnings.

If the plan holds insurance contracts, the premiums it pays for them should be listed as well.  

Minimum funding standards 

If your plan is subject to funding requirements set by the Employee Retirement Income Security Act (ERISA), this section will tell you one of two things. Either enough money was contributed to the plan during the year to meet the minimum funding standards or not enough money was contributed.

In the latter case, your report will state the amount of the deficit. If you want more details, such as the reason for the deficit and what your employer is doing to remedy it, your plan administrator should be able to provide them.  

If your plan isn’t subject to the ERISA funding requirements, the report will note that instead.

Your rights to additional information 

This final section lists information that was included in your plan’s Form 5500 that’s not in your summary annual report or not covered there in as much detail. You can request the entire report or just the parts that are of interest to you. The additional information may include, for example, an
accountant’s report, details on payments to service providers, a description of the plan’s investment assets, and other data.

In this case, your employer is allowed to charge you for photocopying and those charges will be listed here.    

How To Obtain a Summary Annual Report for Your 401(k)

As mentioned, your employer is required to provide you with a summary annual report automatically each year. The report is free of charge.

If, for some reason, you are unable to obtain it from your employer or plan administrator, you can also request a copy from the Employee Benefits Security Administration through its Ask EBSA webpage or by calling (866) 444-3272. The mailing address is U.S. Department of Labor, EBSA, Public Disclosure Room, Room N-1513, 200 Constitution Ave. NW, Washington, D.C. 20210. There may be a nominal copying charge, EBSA says.

Other Reports Your 401(k) Plan May Provide

The summary annual report is just one of a number of documents you may receive from your 401(k) plan. Others include: 

• Summary plan description (SPD), when you first sign up for the plan
• Summary of material modification (SMM) if the SPD is changed in a material way, but you might get an updated SPD instead
• Individual account statements, either quarterly or annually

The Bottom Line

The summary annual report you receive free of charge each year from your 401(k) plan contains basic data on your plan and its finances. If you would like more detailed information, your employer or plan administrator should supply it on request, sometimes for a nominal fee.