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Summary Annual Reports – Outdated and Redundant?

summary annual reports

Summary Annual Reports – Outdated and Redundant? Friday, September 30 is the deadline to send the summary annual report for defined contribution (DC) plans. However, some employers are questioning its value and advocating doing away with this antiquated requirement, calling the notice “ineffective,” according to an article that appeared recently in Bloomberg BNA.

The summary annual report’s purpose is to provide participants with data on the plan’s financial status. It also highlights information from the Form 5500, which employers use to report data on retirement and health benefits plans to the government. Since most of this information is now available online, it may not make sense to continue to send the notifications in the mail.

There are 640,000 defined contribution plans in the U.S. with 94 million participants, according to the Department of Labor. Under current regulations, all of them must receive a summary annual report disclosure.

The summary annual report details plan-level information, which may not be all that relevant to participants. What’s more, it duplicates other disclosures that contain information participants actually want, such as the annual funding notice for pension plans and investment fee disclosures.

Of most interest to participants may be information about the performance of the funds in the plan, which most receive in their quarterly statements.

The ERISA Advisory Council is currently reviewing mandatory disclosure requirements for retirement and health plans, including the summary annual report, to explore ways to potentially streamline them for plan sponsors and participants.

Participant advocates say the summary annual report could be of value because it could reveal potential plan mismanagement — information that could also be gleaned from the annual funding notice. The summary annual report may still be useful for employee stock ownership plan (ESOP) participants, however.

While these notices are still mandatory for now, it is encouraging that the industry is questioning their value and reviewing their relevance. “We’ve always done it that way” isn’t typically the best reason to perpetuate a potentially outdated and irrelevant practice. In addition, employees today are constantly barraged with information, and any steps we can take to simplify the deluge of data — even if it’s eliminating a single disclosure document — may help to ensure that higher-priority messages about the importance of saving and preparing for retirement reach them through the noise.

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek
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