What is an SPD?
A Summary Plan Description (SPD) is simply a summary of the plan document. It is the document that informs your plan participants about how the plan operates and is managed. Therefore, it is required to be written using language that can be easily understood by your average plan participant. A well written SPD will be straightforward, use appropriate and clarifying examples, and avoid the use of technical jargon or legalese.
What needs to be in the SPD?
Section 102 of the Employee Retirement Income Security Act (ERISA) specifies what information should be disclosed in the SPD. Some of those items include:
- The name of the plan
- The name, address, and EIN of the plan sponsor
- The requirements to be eligible to participate in the plan
- The procedures for calculating service in the plan
- The source of the contributions to the plan and the methods used to calculate the amount of those contributions
- The procedures and timing for plan benefit payments
Who needs to receive a copy of the SPD?
Under ERISA, the SPD is required to be furnished to each participant who is eligible to participate in the plan and to each beneficiary who is receiving benefits under the plan. This also includes any terminated employees who have vested balances in the plan.
How often does the SPD need to be provided to participants?
An SPD should be provided to participants within 90 days after they become eligible to participate in the plan. Employers can satisfy this requirement by providing an SPD to employees as soon as they are hired. For a new plan that has just been established, an SPD must be provided within 120 days of the plan’s effective date. Additionally, a copy of the SPD must always be provided to participants and beneficiaries within 30 days of receiving a written request for one.
How often does the SPD need to be updated?
If the plan has been amended or revised within a 5-year period, a new and updated SPD must be distributed to participants. If there has been no change to the plan, the original SPD must be distributed to plan participants every 10 years.
In addition, for any material changes that are made to the provisions of the plan, a Summary of Material Modifications (SMM) must also be distributed to participants. This SMM must be provided to participants within 210 days after the end of the plan year in which those changes were made.
What are the consequences of not adhering to ERISA requirements surrounding SPDs?
The Department of Labor can assess a penalty of up to $147 per day, per request if a plan sponsor fails to provide participants a copy of the SPD in a timely manner, or within 30 days of a written request.
Also, any discrepancies between the provisions of the plan document and the provisions described in the SPD could cause administration errors or disputes that could ultimately lead to litigation.
Not having an SPD at all could even potentially trigger a plan audit by the Department of Labor, as well.
If you have questions about whether your plan’s SPD is in compliance with ERISA requirements, we recommend that you consult with your plan’s legal counsel who is experienced in ERISA matters and familiar with the details of your plan’s provisions.
