Blue Ridge ESOP Associates Industry News

Summary Plan Description – A Participant’s Right, Your Responsibility

Posted by Maren Noll

Sep 7, 2018 2:00:00 PM

SPD ParticipantsA Summary Plan Description (SPD), is a shortened version of the full Plan Document, written in a way to be easily understood by the average participant. It explains all the specific information on who is eligible to be a participant, when they can enter the plan, and how they will get contributions into their ESOP account. Additionally, it addresses the number one question participants usually have, which is how and when they can start receiving their benefits from the ESOP. Other items usually disclosed in the SPD are basic information about the plan sponsor, and action steps for questions or complaints about the ESOP.

It is required that participants receive a copy of the SPD within 90 days of becoming a participant, regardless of if they request it or not. For new plans, the SPD must be delivered to participants within 120 days after the plan is established. An updated SPD including any material amendments to the plan must be furnished every 5 years to participants.

There are several methods to deliver the SPD to your plan participants. These methods include: first-class mail, hand-delivery, and electronic distribution. Electronic distribution of the SPD is limited to two categories of participants:

  • Participants with work-related computer access. Work-related computer access means that these participants can access the documents from any location where they typically are expected to perform their duties. The computer access must be an integral part of their duties.
  • Participants without work-related computer access. These participants must affirmatively consent to receiving the SPD electronically.

(Further information regarding Electronic Disclosure Requirements is located in this link below:

As part of our ESOPConnection services, Blue Ridge ESOP Associates can help you obtain electronic consent for your plan participants to access the SPD online. Reach out to your plan administrator contact if you have questions or would like to know more about this.

So just how important is it for you to have an SPD drafted for participants? After all, many of them may not even read it. If you do not have an SPD available for participants, they can contact the Department of Labor to request a copy. But if the SPD does not even exist, and it cannot be furnished within 30 days, then you may face a daily, per-participant penalty from the Department of Labor. Additionally, failure to have an SPD may trigger a plan audit by the Department of Labor.

While the Summary Plan Description is the participant’s right, it is YOUR responsibility as Plan Administrator to ensure it is updated and distributed in a timely manner. If you have not already created an SPD, or your SPD is in need of updates, now is the time to do so to ensure your plan is compliant with the rules and regulations.