Summary Plan Description

What is the Definition of a Summary Plan Description?

A summary plan description is a document that employers must give to employees in retirement plans or health benefit plans covered by the Employee Retirement Income Security Act of 1974 (ERISA). 

A summary plan description may be required for the following types of retirement and health benefit plans:

• 401(k) and 403(b) plans 
• Pension plans 
• Profit sharing plans 
• Defined benefit plans 
• Employee stock ownership plans 
• Health savings accounts 
• Medical savings accounts 
• Health reimbursement arrangements 
• Flexible spending accounts 
• Health insurance plans

It contains important information regarding the provided retirement or health benefits plans, including: 

• The appeals process 
• Vesting 
• Grievance and 
• Funding 
• Minimum standards for participation
• Accrual 
• Right to sue due to a breach of fiduciary duty
• Claims procedures 
• Fiduciary responsibilities
• Features
• Summary and detailed description of benefits 
• Benefit contributions and 

Not only are summary plan descriptions a great way to keep employees informed about their retirement and health benefit plans, but they also safeguard employers from any potential legal issues.

To ensure the document is legally compliant and to safeguard employers from any potential legal troubles, an attorney with specialized knowledge in SPD law should do a review.

Are Summary Plan Descriptions Required by Employers?

Yes, companies are obligated by law to offer summary plan descriptions regardless of the number of employees or plan participants. There are a few exceptions, though.

SPDs are typically not needed for established or ongoing plans:

• The government entities
• By churches
• Solely for the purpose of abiding by regulations governing worker's compensation, unemployment, or disabilities
• For the benefit of nonresident aliens or underfunded excess benefit plans outside of the U.S.

The sole party in charge of creating, submitting, and dispersing SPDs is the employer. It is neither the obligation of the insurance carrier nor does a certificate of insurance constitute a summary plan description (a common misunderstanding).

Employers who do not give their employees who are enrolled in an eligible retirement or health benefits plan a short description of the plan without charging them risk incurring heavy penalties.

How Should a Summary Plan Description Be Written?

It is essential to draft a summary plan description (SPD) accurately and in compliance with the law, which mandates that it must contain vital data such as the employer's name, address, and tax ID number; the plan administrator's contact details; the year of the plan’s establishment; as well as important facts about retirement plans and health benefits.

The document must be easy to understand and should include a summary of benefits, plan features, employee rights, employer/plan provider guarantees, and more. 

Additionally, employers should follow certain guidelines when creating the document, such as:

• Recognize the effects of federal and state legislation on the employer and employee.
• Analyze the financial implications of the plan.
• Use the appropriate legal terminology.
• Use simple language and clear writing to make the paper understandable.
• Make the goals explicit to eliminate any possibility of miscommunication, misunderstanding, or misconstruing.
• Decide who is covered and what isn't.
• Don't abuse your power, try to change an employee's attitude, or compromise their privacy.
• Get it reviewed by peers.
• Have a lawyer look it over.
• On the corporate intranet, make it simple to locate and navigate.
• It should be presented in a way that sparks attention and encourages learning.

If 10% or more of your employees cannot read English, it is legally required to provide a summary plan description in the other languages they understand.

What is the Frequency of Distribution of Summary Plan Descriptions?

Summary plan descriptions must be distributed to new participants and beneficiaries within 90 days of their joining the plan and to all participants and beneficiaries within 120 days of the plan’s establishment. 

Additionally, updated SPDs must be provided to all participants and beneficiaries if the plan is significantly modified or the SPD has not been updated in the past five years.

Why is a Summary Plan Description Different From a Plan Document?

The plan document is the official document that informs participants of the benefits available and the rules used for the employer's/plan administrator's plan operations. It is typically not distributed to plan participants. 

On the other hand, the summary plan description (SPD) is a written document that must be distributed to participants and includes information about benefits, rules, and claim procedures. The SPD is a summary of the plan document, and it is meant to highlight the significant areas of the document and is generally less detailed.

Conclusion

A summary plan description is a legally mandated document for employers offering benefit plans. The document outlines the details and requirements of the plan and is used to communicate this information to plan participants. Moreover, any changes to the plan must be communicated within 60 days.