Quick Overview: Key Considerations for US Summary Plan Descriptions  

Key Highlights: 

1. Summary plan documents tell employees and plan participants what their benefits are, what they need to do in order to get a benefit, and how those benefits are going to be paid to them. 
2. If the plan is brand new, an SPD must be provided within 120 days after the plan is established or within 90 days after an employee becomes covered under the plan.  Then, every five years, the SPD should be updated and restated if there are changes to the plan in the interim. 
3. The DOL allows the distribution of SPDs electronically, but the employer will need to be able to prove that the employee or participant actually received the SPD, so plan administrators should retain proof of distribution and receipt. 
4. Litigation is not uncommon when there are conflicts between an SPD and a plan document. Therefore, it is important to try to make the SPD accurately reflect the terms of the plan. 
   

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Summary Plan Descriptions (SPDs) are an essential mechanism for employers to use when informing employees and participants of benefits offered under their plans. SPDs tell employees and plan participants what the plan documents say, including what their benefits are, what they need to do in order to get a benefit, and how those benefits are going to be paid to them. Therefore, it is important that SPDs are correct and accurate and sent to everybody who needs to get them. 

This article discusses some of the key do’s and don’ts with respect to SPDs.  
 

Which plans are subject to the SPD requirement? 

Plans that are subject to ERISA are required to send out SPDs. These include: 

• 401(k) plans  
• Profit sharing plans 
• Tax qualified plans 
• 403(b) plans 
• Pension plans  
• Health and welfare plans 

Note:  Health and welfare plan SPDs can look different from retirement plan SPDs. These SPDs include, for example, insurance contracts that spell out all of the terms of those benefits.  So sometimes an employer will have a combined plan document and summary plan description where those insurance contracts are “wrapped into” or become part of the SPD/plan document.  

Plans that are not required to send out SPDs include: 

• Plans that are sponsored by governmental entities or churches. 
• Plans that are providing benefits primarily for a select group of management or highly compensated employees, called “Top Hat” plans. 
   

What kind of information is required to be in an SPD? 

The required provisions of the SPD are set forth in a Department of Labor (DOL) regulation 29 CFR 2520.102-3. The regulation contains an exhaustive list of pertinent plan information, such as the name of the plan sponsor, the plan administrator and its address, telephone number, plan name, eligibility, vesting, benefits and contribution information, and much more.  Creating a thorough checklist is helpful so that the SPD does not fail to include one of the required provisions. 
 

Is there other language that is not required by the regulation, but should be considered? 

This is not an exhaustive list, but some popular and helpful inclusions, are: 

• The right of the plan sponsor to amend the plan. 
• The plan sponsor’s hometown jurisdiction where lawsuits about the plan need to be brought and which law governs, to the extent the claims are not preempted by ERISA. 
• A warning to participants to safeguard their account balance information and their password. 
• Language that the plan administrator has discretionary authority to interpret the terms of the plan, which gives a deferential standard of judicial review, should the employer ever end up in court about the plan. 
• A reasonable claims limitation period, such as a year after the participant either knew or should have known about a claim, so that a participant is prohibited from raising claims  many years later. 

How often are SPDs to be distributed? 

If the plan is brand new, an SPD must be provided within 120 days after the plan is established or within 90 days after an employee becomes covered under the plan.  29 CFR §2520.104b-2.  This is oftentimes in an employee enrollment kit. It can also be provided as an attachment to an email or the employee can be sent a letter stating where to access the SPD. Then, every five years, the SPD should be updated and restated if there are changes to the plan in the interim.  If the SPD is not changed within 10 years, the employer has to do a restated SPD, even though there are no changes made to a plan.  ERISA § 104(b)(1).  In between these dates, if an SPD needs updating, the plan sponsor can issue a summary of material modifications (“SMM”) rather than re-do the entire SPD. 

Is it easier to continuously update the actual SPD rather than create modifications?   

Sometimes it is easier to track one document versus an SPD with SMM that also have to be tracked. SMMs act like amendments to the SPD. If the plan sponsor decides to go the route of a SMM to communicate changes to the SPD, the SMM must be distributed at least 210 days after the close of the plan year in which that change was adopted. ERISA § 104(b)(1). 

Are there situations where a single plan will have more than one Summary Plan Description? 

It is possible to have two very different populations of employees, for example, a union population and a non-union population, and each population could have very different contribution or vesting terms.  It could be confusing to send one SPD to both populations. To address this, two different versions of an SPD can be created for one plan.  Each SPD must be very specific about the population being addressed and that there are other versions of the SPD available. 29 CFR §2520.102-4 

How are Summary Plan Descriptions distributed? 

Historically, the DOL required distribution of SPDs by mail or by hand.  Today, many people are not  working in the office, but have access to computers, so the DOL allows the distribution of SPDs electronically.  This is especially easy if the participants are current employees and use a computer for their work duties.  The plan administrator can send the participants an email explaining what the document is and the importance of it, with the SPD attached or with a link to it on their website. Also the administrator must state that the participant can get a hard copy of the SPD for free. The employer will need to be able to prove that the participant actually received the SPD, so plan administrators should retain proof of distribution and receipt.  

If the participant is not a current employee or does not use a computer for their work duties, then under the historical DOL rules, the employer will have to get consent to send the SPD electronically from those former employees or participants without a computer. 29 CFR §2520.104b-1. 

There is more recent guidance from the DOL that only applies to retirement plan SPDs. It allows the employer to send SPDs electronically if it  first sends out a paper notice letting the participant know that they are going to be sending these types of documents electronically, either by email or posted on an intranet, for example.  The participant can opt out of this type of communication. 29 C.F.R. § 2520.104b-31. 

Who typically drafts the SPD? 

If it is an individually designed plan, most likely an attorney will draft the SPD. More and more employers are using pre-approved, volume submitter plans. In the package that an employer will get when going through a third party administrator who sponsors a volume submitter plan, there is an SPD that can be created electronically.  This SPD will show each and every provision of the adoption agreement that the employer has chosen, but sometimes this means that the SPDs can cause confusion.    This is because sometimes they include provisions that are repetitious, are not applicable to the plan, or are unnecessary to put into the SPD. So, it is important to review the pre-approved SPD document just to make sure that it is participant friendly and includes only those provisions that are required and helpful.  

What happens if the SPD is not consistent with the plan document? 

It is every lawyer’s nightmare to have two legal documents that are supposed to be the same, but provide different information. Litigation is not uncommon when there are conflicts between an SPD and a plan document. Therefore, it is important to try to make the SPD accurately reflect the terms of the plan - but trying to explain all of the plan provisions and the tax qualification requirements in a simple, understandable way can be challenging. There is a fine line between making sure that the plan document and the SPD are the same, while deciding what information is unnecessary or confusing to include.  

The above is not an exhaustive list of steps to be taken to take to comply with the Department of Labor’s SPD rules. 

ADDITIONAL RESOURCES 

The Employee Retirement Income Security Act (ERISA) Plan Information 

IRS: 401(k) Resource Guide - Plan Participants - Summary Plan Description 

Seyfarth Webinar Recording: ERISA Litigation - 2022 Mid-Year Update