Summary Plan Description (SPD)

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 11, 2023

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What Is a Summary Plan Description (SPD)?

A Summary Plan Description is a document that provides a comprehensive overview of an employee benefit plan, such as a retirement or health plan, governed by the Employee Retirement Income Security Act (ERISA).

The SPD serves as a primary communication tool between plan sponsors or administrators and plan participants, outlining essential plan information in a clear and concise manner.

The SPD aims to inform plan participants and beneficiaries about the key features of their benefit plans, including eligibility, benefits, contributions, and rights under the plan.

By providing this information in a user-friendly format, the SPD helps participants make informed decisions about their benefits and financial planning.

ERISA regulates employee benefit plans in the United States and mandates the creation and distribution of SPDs to ensure that participants have access to accurate and up-to-date information about their plans.

Components of Summary Plan Description

Identification of the Plan

Plan Name

The SPD should clearly indicate the name of the employee benefit plan being described.

Plan Number

Include the plan number as assigned by the plan sponsor or administrator for easy reference.

Plan Sponsor or Administrator

Identify the plan sponsor or administrator responsible for overseeing the plan and providing the benefits described in the SPD.

Plan Eligibility and Participation

Eligibility Requirements

Outline the criteria that employees must meet to become eligible for participation in the plan, such as age, service, or employment status requirements.

Enrollment Process

Describe the process for enrolling in the plan, including any required forms, documentation, or deadlines.

Participation Commencement

Explain when an eligible employee's participation in the plan will begin and any conditions that must be met.

Plan Benefits

Types of Benefits Offered

List the various benefits provided under the plan, such as retirement savings, health coverage, or disability insurance.

Benefit Calculations

Detail the methods used to calculate the amount of benefits that participants will receive, including any applicable formulas or factors.

Benefit Payment Options

Explain the different options available for receiving benefit payments, such as lump-sum distributions, annuities, or periodic payments.

Contributions

Employee Contributions

Describe the rules governing employee contributions to the plan, including any required or voluntary contributions, contribution limits, and available investment options.

Employer Contributions

Outline the employer's obligations for contributing to the plan, such as matching contributions, profit-sharing contributions, or other forms of employer support.

Contribution Limits

Specify any limits on the amount of contributions that can be made by employees or employers, in accordance with applicable laws and regulations.

Vesting and Forfeiture

Vesting Schedules

Explain the vesting schedules that determine when participants gain full ownership of employer-contributed assets, including any cliff or graded vesting provisions.

Forfeiture Provisions

Describe the circumstances under which participants may forfeit their rights to employer-contributed assets, such as termination of employment or failure to meet vesting requirements.

Plan Loans and Distributions

Loan Provisions

Detail the rules governing loans from the plan, including eligibility criteria, loan amounts, repayment terms, and interest rates.

Distribution Options and Conditions

Explain the various options for receiving distributions from the plan, as well as any conditions or restrictions that may apply, such as age requirements or triggering events.

Tax Implications

Describe the potential tax consequences associated with plan loans, distributions, and contributions, including any penalties for early withdrawals or excess contributions.

Claims and Appeals Process

Filing Claims for Benefits

Outline the process for filing claims to receive benefits under the plan, including required forms, supporting documentation, and submission deadlines.

Appeal Procedures

Explain the procedures for appealing denied claims, including the steps that participants must follow, the timeframes for submitting appeals, and the rights and responsibilities of both participants and plan administrators during the appeal process.

Timeframes for Claims and Appeals

Specify the timeframes within which participants must file claims and appeals, as well as the timeframes for plan administrators to review and respond to these submissions.

Plan Amendments and Termination

Procedures for Amending the Plan

Describe the processes and conditions under which the plan sponsor or administrator may amend the plan, including any notice requirements or restrictions on amendments.

Termination Provisions

Detail the provisions governing the termination of the plan, including the rights and responsibilities of participants, plan sponsors, and plan administrators upon termination.

Components of a Summary Plan Description (SPD)

SPD Delivery and Timing

Delivery Methods

Mailed Hard Copies

Plan administrators may distribute SPDs as hard copies mailed directly to participants' homes.

Electronic Distribution

SPDs can also be delivered electronically via email or other secure electronic means, provided that participants have given their consent to receive electronic communications.

Plan Website or Portal

SPDs may be made available on the plan's website or online portal, as long as participants are notified of the updates and can access the information easily.

Timing Requirements

Initial Distribution to New Participants

ERISA requires that SPDs be provided to new participants within 90 days of their enrollment in the plan.

Updated SPD Distribution

Plan administrators must distribute updated SPDs to participants whenever material modifications are made to the plan, typically within 210 days following the end of the plan year in which the changes were adopted.

Periodic Distribution

Every five years, plan administrators must distribute updated SPDs to participants, even if no changes have been made. If significant changes have occurred, the SPD must be updated and distributed within 120 days after the end of the plan year in which the changes were adopted.

Penalties for Non-compliance

Failure to provide SPDs within the specified time frame can result in penalties or fines imposed by the Department of Labor (DOL) and may expose plan administrators to potential legal action by participants.

Best Practices for Creating and Distributing SPDs

Clear and Concise Language

Ensure that the SPD uses plain language that is easily understood by plan participants. Avoid technical jargon or complex terminology that may be confusing.

Comprehensive, Yet Focused Content

Provide a thorough explanation of the plan's features without overwhelming participants with excessive detail. Focus on the most important aspects and their potential impact on participants and beneficiaries.

Consistent Formatting and Design

Maintain a consistent format and design throughout the SPD to make it visually appealing and easy to read. This includes the use of headings, subheadings, bullet points, and font styles.

Regular Updates and Reviews

Periodically review and update the SPD as needed to ensure that it accurately reflects the current status of the plan and any recent modifications.

Collaboration With Legal and Compliance Teams

Work closely with legal and compliance professionals to ensure that the SPD complies with all applicable laws, regulations, and best practices.

Best Practices for Creating and Distributing Summary Plan Descriptions (SPDs)

Conclusion

SPDs play a critical role in maintaining transparency and ensuring compliance with ERISA requirements for employee benefit plans. By providing participants with comprehensive information about their plans, SPDs help promote trust, engagement, and informed decision-making.

SPDs enable participants to understand the key features of their benefit plans and make informed decisions regarding their contributions, investments, and overall financial planning.

Plan sponsors, administrators, and participants must continue to prioritize education and awareness about SPD requirements to ensure that all parties remain informed and compliant with ERISA regulations.

This will help maintain the integrity of employee benefit plans and support the financial well-being of plan participants.

Summary Plan Description (SPD) FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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