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Updated on December 20, 2023
A summary plan description, or SPD, is a document that employers who offer retirement or health benefit plans covered by the Employee Retirement Income Security Act (ERISA) are required to provide to participating employees and beneficiaries at no cost. It includes essential information about the plan, including what it entails and how it operates.
Employees participating in their employer’s retirement plan or group health insurance plan covered by ERISA should be aware of their rights and responsibilities under the plan. ERISA is the federal law that sets minimum standards for private-sector retirement and group health plans.
In addition, employees are entitled to other details about the plan, such as its operation and management. ERISA mandates that plan administrators provide this information in a written summary plan description.
The plan administrator — the individual or company managing the plan — is responsible for ensuring that the SPD’s language is easily understandable to the average participant. Often, employers engage a third-party administrator (TPA) to act as their plan administrator.
The summary plan description is a concise, simplified version of the plan document, which provides an extensive outline of the plan’s rules and procedures. While the plan document is drafted in compliance with ERISA regulations, it often contains complex legal terminology that may be challenging for the average participant or beneficiary to understand.
The SPD is created to provide a clear and straightforward summary of the plan, offering a birds-eye view of what it includes and how it operates, making it easy for anyone to understand.
ERISA typically mandates that employers maintain both a plan document and an SPD. However, in certain cases, employers are allowed to integrate these into a single document. When combined, this document must meet ERISA’s requirements for both the plan document and the SPD.
This can vary significantly by plan, as employers often set different terms and conditions for offering benefits. Moreover, it depends on the type of benefit, whether it’s a retirement plan or a group health plan.
The SPD typically includes the following information:
According to the US Department of Labor (which oversees ERISA), the SPD must be comprehensive enough to inform covered individuals about their benefits, rights, and responsibilities under the plan.
Employers are required to distribute the SPD, free of charge, to plan participants and beneficiaries, including:
The timeline for employers to furnish the SPD to participants and beneficiaries is as follows:
In addition, participants and qualified beneficiaries must receive a Summary of Material Modifications (SMM) if the plan undergoes significant changes. Employers are required to issue the SMM within 210 days after the end of the plan year in which the changes occurred.
ERISA’s Disclosure section specifies that “the plan administrator shall use measures reasonably calculated to ensure actual receipt of the material by plan participants, beneficiaries, and other specified individuals.” This means that employers should utilize the most effective delivery method(s) for distributing the full SPD.
Acceptable methods of delivery include:
It’s important to understand the unique requirements for different distribution methods. For instance, when distributing the SPD electronically, employers must adhere to ERISA’s specific guidelines, which vary depending on whether employees have work-related computer access.
Furthermore, employers must provide an electronic or paper notice when sending an electronic SPD. This notice should clarify the importance of the SPD plus inform the participant or beneficiary of their right to request a free paper copy.
Failure to comply with ERISA regulations can result in penalties. If an employer does not fulfill a participant’s or beneficiary’s request for an SPD within 30 days, they may face a penalty of up to $110 per day for each violation. In some cases, a lack of SPD provision could also prompt a DOL audit. Moreover, if the employer fails to provide the SPD to the DOL upon request, they could incur a daily penalty of $184, with a maximum of $1,846 per request.
“We aim to ensure that our health plan participants thoroughly understand how their benefits work, and the summary plan description is instrumental in achieving this. Besides educating employees, the SPD also helps us fulfill our obligations under ERISA.”
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