Summary Plan Description

What is a Summary Plan Description?

A summary plan description (SPD) is a document that an employer must give to employees participating in retirement or health benefits plans. It describes their rights, responsibilities and benefits under the plan. SPDs are covered under the U.S. Department of Labor’s Employee Retirement Income Security Act of 1974 (ERISA).

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

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

A summary plan description must describe in plain language important information on retirement or health benefits plans. These include:

• A detailed description and summary 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
• Guarantee of payment of certain benefits should the plan be terminated
• The right to sue due to a breach of fiduciary duty

Aside from providing employees with important information, a summary plan description also helps protect employers from potential legal issues. For this purpose, the summary plan 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 for health and retirement benefits, regardless of the number of employees they have or plan participants in a program. However, there are some exceptions. SPDS are typically not required for plans that are provided or managed by:

• Government entities
• 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”

Employers are solely responsible for preparing, filing and distributing summary plan descriptions. This duty does not fall on the insurance company, nor does a Certificate of Insurance count as an SPD, which is a common misconception.

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

What Does a Summary Plan Description Look Like?

A summary plan description should look professional, as it is a legal document from an employer to its employees. First, include important details such as:

• The employer’s name and address
• The plan administrator’s name and contact info
• The plan name and year
• The employer’s tax identification number.

Next, provide essential information on the retirement and health benefits plans. This includes:

• Summary of benefits
• The plan features
• Employee rights
• Employer or plan provider guarantees.

Guidelines for Writing a Summary Plan Description

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

• Understand the federal and state laws and how they impact both employer and employee. For more information on this, contact the US Department of Labor.
• Evaluate the plan’s financial impact.
• Use the correct legal language.
• Write the document in a way that’s easy to understand, using plain language.
• Make the intentions clear, so there’s 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: If 10% or more of your task force doesn’t speak English, a summary plan description must be provided in other languages.

How Often Do Summary Plan Descriptions Need to Be Distributed?

Summary plan descriptions need to be distributed to plan participants within 120 days of a newly established program, or within 90 days after an employee is covered. The SPD should be delivered in a way that employees can reliably receive it, such as by hand, first-class mail, or electronically. Posting the SPD on a wall or the employer’s intranet doesn’t necessarily qualify as “likely to result in full distribution.”

A summary plan description must be updated and distributed every five years if there are any changes, and every ten years if no changes are made. In the meantime, any SPD updates can be shared through 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:

• A Plan document is a technical document explaining the benefits available to employees and the plan’s operating rules. This is generally not distributed to plan participants.
• A Summary Plan Description on the other hand, is a written document that is distributed to plan participants regarding information about the benefits plan. This document details the features, benefits, rules, and procedures to make claims.

Summary Plan Descriptions: Why Are They So Important?

A summary plan description (SPD) gives employees an in-depth overview of the benefits plans they’re enrolled in with their employer, including health insurance or retirement plans. Importantly, the summary plan description must be in understandable, plain language. The purpose is to help employees digest the complicated information about benefits plans and coverage provided in the plan document.