What is a Summary Plan Description And Do We Need One For Our Business?

The federal law that governs group life, private pension, and health plans which is also known as The Employee Retirement Income Security Act (ERISA), requires that plan participants receive a document known as a summary plan description (“SPD”). Two departments of labor must draft SPD, and it doesn’t necessary has to be referred to as “The Summary Plan Description.”

Contents in the Summary Plan Description.
The Summary Plan Description is a detailed document that informs plan participants about how the plan is managed and how it operates. Among other things, the SPD must clearly identify in easily understood language the following items:
1-A description or summary of the benefits.
2-The plan name, sponsor, and administration.
3-Funding mechanisms.
4-Participation and qualification guidelines.
5-Calculation methods for service and benefits.
6-Benefit vesting schedules.
7-Benefit payment procedures and timing.
8-Claims submission process.
9-Claims appeal process.
10-Address for service of legal process.
11- Circumstances that may result in ineligibility or a denial of benefits.
12- Technical notices and a report of participants’ in the ERISA.
13- Any questions that any member may have after reading the SDP can only be only answered by contacting the plan manager.

SPD Summary Plan Description

Summary Plan Description will be provided when:
Every plan manager must provide a copy of the SPD to members in the following circumstances:
1-When a new plan takes effect.
2-When an employee becomes eligible to participate in a plan.
3-Upon written request of a plan participant or beneficiary.

Summary Plan Description Exceptions.
Employer-provided daycare, highly compensated employees and welfare plans for management are exempt from the Summary Plan Description requirement. There are no exemptions from the Summary Plan Description requirement for small plans covering fewer than 100 participants.

How Often Must a Summary Plan Description be updated?
1-If a plan is modified or amended within a five-year period, a new Summary Plan description must be distributed to the members. In case the plan has not be changed, the original SPD must be distributed to plan participants every ten years.
2-A “summary of material modifications” may also be used to notify plan participants of a significant plan change.

What Are Common Summary Plan Description Errors that Can Result in ERISA Litigation?
1-Administration disputes or errors that may come up in ERISA litigation include but are not limited to.
2-Failure to follow the procedures described in the SPD.
3-Conflicts between the SPD and any underlying plan document which it describes or summarizes.
4-Failure to clearly disclose situations that may result in forfeitures, benefits reduction, or exclusions.
5-Failure to provide plan documents promptly.

Despite the amount of information contained in your Summary Plan Description, it should be written in a format that is simple to read. Just like with any piece of business writing, it is important to craft your business plan with your expected readers in mind. This is because bankers, investors, and other busy professionals who will read your business plan will not have time to read a tedious document with long-winded paragraphs and large blocks of text.

Overall, Employee Retirement Income Security Act (ERISA) provides clearly proscribed procedures that must be closely followed by plan administrators and sponsors. Questions about ERISA compliance should be directed to an attorney experienced in ERISA matters.

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Most of the employers and employees suffer a great deal when it comes to benefits such as pension plan and health. This challenge often occurs in a situation whereby one does not know his or her rights as an employer and much worse as an employee. The lucky lot that gets their (SPD) Summary Plan Description are basically participants in various retirement system such as “public employee retirement systems (PERS).

SPD Summary Plan DescriptionAs the saying goes “When the sun goes down, do not cry, you may not be able to see the stars.” There is no need for you to be worried anymore since this article is going to drive you in understanding the primary way of informing or rather communicating the benefits of summary plan description (SPD).

Summary plan description (SPD), as defined by DOL, is a primary vehicle that offers information to participants and the one benefiting (beneficiaries) about their plan and how it works. Obligations, benefits and rights of a person are always under the SPD policy. The plan is written for a certain number of participants, and it is sufficiently and efficiently comprehensive to explain the benefits of the covered persons.

The plan administrator always provided the SPDs. Note that all the benefits such as pension plan, all health; medical, dental just to mention but a few, of every employee being the primary requirement in the scheme. Small programs under Form 5500 are an exemption, unlike SPD requirement where the small plan has no exemption. Title I of ERISA makes the church and governmental plans to be exempt because they differ with the Summary Plan Description requirements.

Under ERISA section 104(b) (4), even though the plan does not cover the participants and the beneficiaries, they have a right to receive a copy of the latest SPD after sending a request to the administrator in the form of writing. For every participant covered it is his/her right to receive the SPD from the employer.

Anytime an employer wants to distribute the SPD he should consider the following facts;

1. An employee should not pay a single penny or fee for the SPD
2. In case the employer decides to post the SPD on the company’s or organization’s website, he or she should communicate to his/her employees.
3. The employer should ensure that the employees have the ability to access the SPD in the electronic platform both efficiently as well as with ease.

There are several factors to include and consider in the Summary Plan Description. This is according to Federal Register 29 CFR 2520.102-3. Some of the key factors that must be considered include:

1. According to DOL regulations and ERISA section 102, it requires the following to appear on the SPD;
Plan’s name;
Address of the employer, especially in the case of one employer plan.
Employer identification number (EIN) that has been allocated by the IRS.
Plan sponsor needs to assign a policy number to the project.
The category of the welfare scheme.
The category of administration of the project.
ERISA section 3(16) the name, business address and telephone number.
If the plan has a trust, it should contain each trustee name, title and physical address of the company..
The name and address of the agent in charge of the legal process.
The agreement and the method of obtaining the copy of the agreement presented in a manner of a statement.
The expiry date of the plan and the basis the plan such as fiscal-year basis.

2. Terms and conditions for participation should also be neatly and clearly provided in a statement.

3. A detailed description of the plan.

4. A statement that clearly explains the rules and regulations as well as the penalties.

5. Detailed report on termination and amendment of the plan.

6. Detailed report on circumstances on the program that may lead to the recovery of benefits.

7. Confidentiality in contributions to the SPD plan.

8. A complete statement informing the rights of the beneficiaries and participants according to ERISA regulations.

9. A clear description to react to benefit claims and appealing benefit denials.

Every company, organization, institution as well as firm needs the embracement of having an SPD, Summary Plan Description. It enhances communication and guarantees a top niche of well prepared information to all the participants.

If you have questions or believe you need a summary plan description (SPD), it is never too late to make things right, get yours today with Benefits Compliance Consultants Inc.