How To Read Your 401(k) Plan Reports

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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.

Key Takeaways

• If you participate in a 401(k) plan, your employer is required to provide you with a summary annual report (SAR) free of charge every year.
• The SAR offers concise information on your plan and its funding.
• If you want more detailed information, your employer or plan administrator should provide it on request.

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.

If your employer decides to terminate its 401(k) plan, all of the money in your account (including any employer contributions) will become fully vested as of that date.

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
  

What Is a Summary Plan Description?

The summary plan description (SPD) is a document that your employer should give you within 90 days of becoming covered by their 401(k) plan. It describes how your plan works, how benefits accrue, and how to claim them when the time comes. If the SPD is modified in a significant way, you should either receive a revised SPD or a summary of material modification (SMM).

What Information Should Be in a 401(k) Individual Account Statement?

Your individual account statement for your 401(k) should show the value of your account and what portion of it is vested, how much you and your employer have contributed to it, your years of service with that employer (which is relevant for vesting), and the beneficiaries you have named, among other information.

You should receive an account statement at least every quarter if you play a role in choosing your account's investments (otherwise you may just get one annually). Some employers issue them monthly, and you may also be able to access your account whenever you wish
online. If you find any errors or information you question, contact your plan administrator to straighten it out.

Are 401(k) Plans Covered by Federal Insurance?

No. Unlike many traditional pensions or defined-benefit plans, which are insured by the Pension Benefit Guaranty Corporation (PBGC), 401(k)s and other defined-contribution plans are not federally insured.

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.

1. Internal Revenue Service. "401(k) Resource Guide - Plan Participants - Summary Plan Description."
2. U.S. Department of Labor. "Reporting and Disclosure Guide for Employee Benefit Plans." Page 2.
3. U.S. Department of Labor. "Form 5500: Annual Return/Report of Employee Benefit Plan."
4. U.S. Department of Labor. "Plan Information."
5. Govinfo. "Code of Federal Regulations: § 2520.104b-10 Summary Annual Report."
6. Internal Revenue Service. "401(k) Plan Termination."
7. Employee Benefits Security Administration. "Ask EBSA."
8. U.S. Department of Labor. "FAQs About Retirement Plans and ERISA." Page 6.
9. Internal Revenue Service. "Retirement Topics – Notices."
10. Federal Deposit Insurance Corporation. "Deposit Insurance at a Glance."

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A 401(k) plan is a tax-advantaged retirement account offered by many employers. There are two basic types—traditional and Roth. Here’s how they work.

Vesting is a legal term common to employer-provided benefits that means to give or earn a right to a present or future payment, asset, or benefit.

A Roth 401(k) is an employer-sponsored retirement savings account that is funded with after-tax money. As long as certain conditions are met, withdrawals in retirement are tax-free.

A tax-sheltered annuity allows an employee to make pretax contributions from their income into a retirement plan.

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