Summary Plan Description

What Is a Summary Plan Description?

A summary plan description (SPD) is a document an employer gives to their employees who are participating in retirement or health benefits plans covered under the U.S. Department of Labor’s Employee Retirement Income Security Act of 1974 (ERISA).

Examples of the retirement and health benefits plans that require a summary of description include:

• Group health, life, dental, vision, and disability insurance plans
• Flexible spending accounts (FSAs)
• Health reimbursement arrangements (HRAs)
• Employee assistance plans
• Other fringe benefit plans with employer contributions

A summary plan description contains important information regarding the provided retirement or health benefits plans, including:

• Summary and detailed description of benefits
• Minimum standards for participation
• Features
• Funding
• Vesting
• Benefit contributions and accrual
• Claims procedures
• Fiduciary responsibilities for the managers of plan assets
• The grievance and appeals process
• The right to sue due to a breach of fiduciary duty
• Guarantee of payment of certain benefits should the plan be terminated

In addition to informing employees on this important information, SPDs are also used to protect employers from potential legal action. For this purpose, the document should be reviewed by an attorney with SPD legal expertise.

Are Employers Required to Provide Summary Plan Descriptions?

Yes, employers are required by law to provide summary plan descriptions, regardless of the number of employees or plan participants. However, there are some exceptions. Generally, SPDs are not required for plans that are established or maintained:

• By government entities
• By churches
• Solely for complying with workers compensation, unemployment, or disability laws
• Outside the U.S. for the “benefit of nonresident aliens or unfunded excess benefit plans”

The employer alone is responsible for preparing, filing, and distributing SPDs. It is not the insurance company’s responsibility, nor does a Certificate of Insurance count as a summary plan description (a common misconception).

If an employer fails to provide, free of charge, a summary plan description to its employees who are participating in a covered retirement or health benefits plan, they may be issued costly fines.

What Does a Summary Plan Description Look Like?

A summary plan description should look professional, as it’s a legal document from an employer to its employees.

First, include the employer’s name and address, the plan administrator’s name and contact info, the plan name and year, and the employer tax identification number. Second, include the important information regarding the retirement and health benefits plans, such as a summary of benefits, the plan features, employee rights, employer/plan provider guarantees, etc. (see above).

Here are a few guidelines to follow when writing up a summary plan description:

• Understand the federal and state laws and their impacts on the employer/employee.
• Evaluate the plan’s financial impact.
• Use the correct legal language.
• Write the document in a way that is easy to understand, using everyday language.
• Make the intentions clear, so there is no room for misunderstanding, misinterpretation, or misconstruing.
• Establish who and what is/isn’t covered.
• Don’t overstep your authority, try to influence employee behavior, or violate employee confidentiality.
• Get it peer reviewed.
• Have an attorney review it.
• Make it easy to find and navigate on the company intranet.
• Package it in a way that creates interest and promotes learning.

Note that if 10% or more of your employees don’t speak English, you must provide an SPD in the other languages.

How Often Do Summary Plan Descriptions Need To Be Distributed?

Summary plan descriptions need to be distributed by an employer to plan participants within 120 days of a newly established program, or within 90 days after coverage begins. The delivery method should be reasonable and in a way that ensures receipt, whether via hand delivery, first-class mail, or electronically. Posting the SPD on a wall or on the employer’s intranet does not necessarily count as “likely to result in full distribution.”

An SPD must be updated and distributed every five years if any changes are made to it and every ten years if there are no changes. In the interim, SPD updates can be provided with a summary of material modifications (SMM) document.

What Is the Difference Between a Plan Document and a Summary Plan Description?

The difference between a plan document and a summary plan description is below:

• Plan document: A document informing employee participants of the benefits available to them and the guidelines used to determine the employer’s/plan administrator’s plan operations. This is not usually distributed to plan participants.
• Summary Plan Description: A written document required to be distributed to plan participants regarding information about the benefits plan. This document covers items such as plan features and benefits, rules, and claims procedures (see above).