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Summary Plan Descriptions: What You Need to Know

Summary Plan Descriptions: What You Need to Know

According to the Employee Retirement Income Security Act (ERISA), employers that offer qualified group health and retirement plans must establish and maintain a written instrument providing basic information about the plan. This written instrument is called a “plan document.”

Plan documents generally are written in legal terms, which the average participant may find difficult to comprehend. Consequently, employers must provide participants with a simplified version of the plan document—called the Summary Plan Description, or SPD. Material changes are communicated to participants through a separate document called a Summary of Material Modifications, or SMM.

Required Content

ERISA is specific about the content that must be stated in an SPD, which includes the following:

  • Plan name and type
  • Benefits offered under the plan
  • Eligibility requirements, such as who can contribute to the plan and when
  • Methods for calculating contributions to the plan
  • How and when benefits are paid
  • Vesting of benefits
  • Process for submitting a claim for benefits
  • Steps for disputing denied claims
  • Provisions regarding termination of the plan and modification or elimination of benefits
  • Statement of participants’ rights under ERISA

Style and Format

The SPD must be written in the style and format mandated by ERISA. For example, the document should be presented in language that the average plan participant can understand. This requires considering the comprehension and education level of participants and eliminating jargon and complex sentences. The SPD data should not be misleading and the document must inform participants of relevant information.

Delivery

The document must be delivered according to following requirements:

  • Within 30 days, if a participant or the Department of Labor submits a written request for the SPD, the employer must deliver the document.
  • Within 90 days, plan participants must receive an SPD of becoming covered by the plan.
  • Within 120 days, plan participants must receive an SPD when a new plan is established.
  • No later than 210 days after the end of the plan year in which material changes were made, an SMM must be delivered.
  • Every 5 years, if the plan undergoes material changes, an updated SPD must be provided to participants.
  • Every 10 years, even if no material changes are made to the plan, participants must receive an updated SPD.

Whenever changes are adopted, the plan administrator must determine whether an SPD or an SMM should be used to communicate the change. SPDs can be delivered by hand, sent via first-class mail, or transmitted electronically provided the Department of Labor’s regulations for electronic distributions of ERISA disclosures are met. An employer can face penalties for failing to deliver the SPD as requested.

The plan administrator is legally responsible for distributing the SPD to participants free of charge. This is true, even if an outsourced party assisted in the crafting of the SPD. Often, the employer that sponsors the plan is the plan administrator.

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This blog is for informational and educational purposes only. It does not constitute legal advice, and cannot constitute legal advice, because the authors are not licensed attorneys. Readers should not rely or act upon any information presented on this blog without seeking professional legal counsel. The views expressed in each post are those of the author, and the author alone; they are not the views of Ahola. The information provided in this blog is general, and based on information available as of the date of publishing. Information herein is provided on an “as is” or “as available” basis; we make no warranty of any kind to you regarding the information provided and disclaim any liability for damages from use of the blog or its content. Please consult an attorney to obtain advice with respect to any particular question or issue.