Summary Plan Description

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Summary Plan Description (SPD)

The SPD is the primary vehicle for informing participants and beneficiaries about their plan and how it operates. Generally, every ERISA plan must provide its participants and beneficiaries with an SPD.

SPDs must be written for average participants and be sufficiently comprehensive to apprise covered persons of their benefits, rights, and obligations under the plan. SPDs must accurately reflect the plan's contents as of the date not earlier than 120 days prior to the date the SPD is disclosed.


Plans Required to Issue

Generally, all ERISA plans except top-hat plans must distribute a document to participants that meets the requirements of a SPD. Often, multiple SPDs for minor benefit plans are contained in a single handbook or booklet.

Welfare plans, such as medical plans, dental plans, disability plans, life insurance plans, and vacation leave plans, are not exempt from the SPD rules, even if fully insured.

Cafeteria plans are not ERISA plans, and so do not require SPDs. However, because components of a cafeteria plan often are ERISA welfare plans that require a SPD, many employers choose to create an SPD for their cafeteria plans.

A DCAP is only subject to SPD requirements if the employer sponsors a day-care center. Unfunded tuition aid plans and adoption assistance plans are not subject to SPD requirements.

Style and Format

Generally, employers have wide leeway in drafting and formatting a SPD, so long as the result is comprehensible to the average participant.

According to DOL regulations:

“The summary plan description shall be written in a manner calculated to be understood by the average plan participant and shall be sufficiently comprehensive to apprise the plan's participants and beneficiaries of their rights and obligations under the plan.

“In fulfilling these requirements, the plan administrator shall exercise considered judgment and discretion by taking into account such factors as the level of comprehension and education of typical participants in the plan and the complexity of the terms of the plan. Consideration of these factors will usually require the limitation or elimination of technical jargon and of long, complex sentences, the use of clarifying examples and illustrations, the use of clear cross references and a table of contents.

"The format of the summary plan description must not have the effect to misleading, misinforming or failing to inform participants and beneficiaries. Any description of exception, limitations, reductions, and other restrictions of plan benefits shall not be minimized, rendered obscure or otherwise made to appear unimportant. Such exceptions, limitations, reductions, or restrictions of plan benefits shall be described or summarized in a manner not less prominent than the style, captions, printing type, and prominence used to describe or summarize plan benefits. The advantages and disadvantages of the plan shall be presented without either exaggerating the benefits or minimizing the limitations. The description or summary of restrictive plan provisions need not be disclosed in the summary plan description in close conjunction with the description or summary of benefits, provided that adjacent to the benefit description the page on which the restrictions are described is noted."

See 29 CFR § 2520.102-2.

Content

According to DOL regulations, an SPD must contain:

  • The name of the plan;
  • The name and address of the plan sponsor;
  • The EIN of the plan sponsor and the plan number of the plan;
  • The type of pension or welfare plan;
  • The type of administration of the plan;
  • The name, business address and business telephone number of the plan administrator;
  • The name of the person designated as agent for service of legal process, and the address at which process may be served on such person, and in addition, a statement that service of legal process may be made upon a plan trustee or the plan administrator;
  • The name, title and address of the principal place of business of each trustee of the plan;
  • If a plan is maintained pursuant to one or more collective bargaining agreements, a statement that the plan is so maintained;
  • The plan's requirements respecting eligibility for participation and for benefits;
  • For employee pension benefit plans, a statement describing the plan's normal retirement age, and a statement describing any other conditions which must be met before a participant will be eligible to receive benefits;
  • For employee welfare benefit plans, a statement of the conditions pertaining to eligibility to receive benefits, and a description or summary of the benefits;
  • For employee welfare benefit plans that are group health plans, a description of:
    • any cost-sharing provisions, including premiums, deductibles, coinsurance, and copayment amounts for which the participant or beneficiary will be responsible;
    • any annual or lifetime caps or other limits on benefits under the plan;
    • the extent to which preventive services are covered under the plan;
    • whether, and under what circumstances, existing and new drugs are covered under the plan;
    • whether, and under what circumstances, coverage is provided for medical tests, devices and procedures;
    • provisions governing the use of network providers, the composition of the provider network, and whether, and under what circumstances, coverage is provided for out-of-network services;
    • any conditions or limits on the selection of primary care providers or providers of speciality medical care; any conditions or limits applicable to obtaining emergency medical care; and
    • any provisions requiring preauthorizations or utilization review as a condition to obtaining a benefit or service under the plan;
  • In the case of an employee pension benefit plan, a statement describing any joint and survivor benefits provided under the plan, including any requirement that an election be made as a condition to select or reject the joint and survivor annuity;
  • For both pension and welfare benefit plans, a statement clearly identifying circumstances which may result in disqualification, ineligibility, or denial, loss, forfeiture, suspension, offset, reduction, or recovery (e.g., by exercise of subrogation or reimbursement rights) of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide;
  • For an employee pension benefit plan with benefits that are not insured by the PBGC, a statement of this fact, and reason for the lack of insurance;
  • If the benefits of the plan are insured by the PBGC, a statement of this fact, a summary of the pension benefit guaranty provisions of title IV of ERISA, the address of the PBGC, and a statement indicating that further information on the provisions of title IV can be obtained from the plan administrator or the PBGC.

29 CFR 2520.102-3

ERISA Rights Statement

A boilerplate feature of a proper SPD is a statement of ERISA rights. Model statements can be found in the regulations .

Individuals Entitled to Receive an SPD

Participants covered under a plan and beneficiaries receiving benefits under a plan must be furnished an SPD.


Participant Covered Under A Plan

An individual becomes a participant covered under an employee welfare benefit plan on the earlier of—

  • The date designated by the plan as the date on which the individual begins participation in the plan;
  • The date on which the individual becomes eligible under the plan for a benefit subject only to occurrence of the contingency for which the benefit is provided; or
  • The date on which the individual makes a contribution to the plan, whether voluntary or mandatory.

An individual becomes a participant covered under an employee pension plan—

In the case of a plan which provides for employee contributions or defines participation to include employees who have not yet retired, on the earlier of—

  • The date on which the individual makes a contribution, whether voluntary or mandatory, or
  • The date designated by the plan as the date on which the individual has satisfied the plan's age and service requirements for participation, and

In the case of a plan which does not provide for employee contributions and does not define participation to include employees who have not yet retired, the date on which the individual completes the first year of employment which may be taken into account in determining—

  • Whether the individual is entitled to benefits under the plan, or
  • The amount of benefits to which the individual is entitled,

whichever results in earlier participation.


Timing of SPD Distribution

To New Participants

Generally, a participant (or a beneficiary entitled to a benefit) must be provided an SPD within 90 days of becoming a participant (or receiving a benefit, if a beneficiary). (If a plan is newly subject to ERISA’s SPD requirements, the plan has 120 days to distribute SPDs.)

Five-Year Updates

Five years after the issuance of an SPD, a plan which has undergone any changes must issue a complete, revised SPD to all participants no later than 210 days after the close the fifth plan year. (If a plan has undergone no changes, this requirement applies only every 10 years.)

SMMs

Whenever a plan undergoes any change that would affect the content of the SPD, the sponsor has two options: (1) it may issue a complete, revised SPD, or (2) it may issue a summary of material modifications (SMM).

An SMM is a notice (typically in the form of a letter or memorandum) that describes changes to a plan. It is a supplement to a SPD that should be drafted to the same standards as an SPD, and must be distributed (as with an SPD) to all participants and all beneficiaries receiving benefits under the plan.

Timing of SMM

An SMM must be distributed no later than 210 days after the plan year in which the change is adopted. Certain changes that cause a material reduction of health benefits must be provided no later than 60 days after the change is adopted.



Distribution Methods of SPDs and SMMs

SPDs must be delivered in a manner reasonably calculated to ensure actual receipt. Hand delivery and first-class mailing are acceptable. Leaving copies at a worksite or posting on a bulletin board are not.

Electronic disclosure of SPDs and SMMs is possible and increasingly popular. However, special rules apply. See Electronic disclosure for more information.

Design Considerations

Importance of Accuracy

Courts sometimes enforce the language of an SPD even if conflicts with plan provisions. Accuracy is extremely important to avoid costly disputes. The review of an SPD should be conducted with the same care as that of the plan document.

One technique to avoid plan document conflicts with the SPD is to combine them into a single unified document. Although this technique requires the plan document to be written more carefully, a plan document that is written in precise but plain English can be advantageous for both participants and administrators. Combined plan documents and SPDs are most often created for simple welfare plans.

Importance of Presentation

An SPD is an important legal document. It is also an opportunity to convey the value of employer benefits to employees. Overly promotional language (especially in retirement plans) is not a good idea, but concrete examples of the benefits of a plan (with appropriate disclaimers) may increase the perceived value of a benefit for employees.