Summary Plan Description

What Is A Summary Plan Description?

Summary Plan Descriptions (SPDs) are often used papers that summarize the key components of a defined benefit or defined contribution insurance plan, such as eligibility requirements, the scope of coverage offered, and the formulas used to determine benefits and payouts. After the purchase of a policy, providers are required under the Employee Retirement Income Security Act of 1974 (ERISA) to deliver a copy of the summary plan description to each employee. The explanation must be simple to read and easily available.

Which Medical Insurance Policies Demand A Summary Plan Description (Spd)?

Plans like the ones below need an SPD:

• Plans for group health insurance
• life insurance
• dental insurance
• vision insurance
• disability insurance
• retirement plans
• health reimbursement arrangements

What Should Be Included In The Spd?

The SPD must be prepared with the ordinary participant in mind and contain enough information to inform covered individuals of their rights, duties, and benefits under the plan.

• ERISA provides a broad description of the information that must be included in the SPD.
• Many laws also demand disclosure of certain rights and advantages, and this information might vary greatly from plan to plan due to the various perks.
• The SPD may also contain other notices that must be given upon enrolment, and this is frequently the case. These alerts are not needed to appear in the SPD, and this is only done for convenience.

When Must The Spd Be Delivered, And To Whom?

• Within 120 days of establishing the retirement plan, the company must provide the SPD to all eligible workers. Within 90 days of a new employee's eligibility to join the plan, the employer must deliver the SPD to them once it has been initially distributed. Additionally, the SPD must be sent to plan beneficiaries within 90 days of their becoming eligible for benefits.
• A modified SPD must be released at least every five years if the plan has undergone adjustments. At least every ten years, an updated SPD must be released, even if there have been no modifications to the plan.

What Consequences Result From The Lack Of A Written Plan Document/Spd?

Failure to have a plan document or SPD is not specifically punishable under ERISA. However, not having a plan document or SPD can have serious consequences for an employer, including the following:

• An SPD must be given to a participant or beneficiary who requests one within 30 days of the request. Otherwise, a DOL fine of up to $110 per day might be imposed on the employer.
• The DOL will probably request a copy of the plan document and the SPD if a plan is being audited. If an employer doesn't comply with the DOL's request, it might result in further document demands and DOL enforcement proceedings. For failing to provide this document, the DOL may also impose a fine of $156 each day (maximum at $1,566 per request).
• Participant use of other evidence or employer assertions to support benefit claims or legal actions against the employer is also permitted in the absence of an SPD.

How To Distribute Spds

Distribution of SPDs to employees can be done in a number of ways. If it's being sent out by mail, it's crucial to make sure that everyone on the mailing list will receive it. Employers may provide SPDs to their employees by:

• Mail (first, second, or third class)
• Special inserts to company publications – as long as there is a notice prominently displayed on the cover that the SPD is included.
• Hand-delivery
• Electronic distribution (download the Digital Distribution Guide for electronic distribution requirements)

What Distinguishes A Summary Plan Description From A Plan Document?

Plan Document

ERISA-compliant plans have to be "formed and maintained pursuant to a written instrument" known as the plan document. The plan document is a detailed document outlining the rights of the plan's participants and beneficiaries. It also serves as a manual for the plan sponsor and administrator in terms of decision-making and carrying out their duties. It outlines the benefits offered, who is eligible, how they are supported, who is the named fiduciary, how the plan can be altered, and the steps for assigning plan duties.

Summary Plan Description

An SPD is a requirement of ERISA for employee benefit programs. The SPD's primary purpose is to provide participants with a clear summary of the plan's details. Many specific topics, including information on the plan's identification and eligibility, a description of the benefits of the plan and the events that might result in their loss or denial, benefit claim processes, and a statement of members' ERISA rights, must be included in the SPD. It must be provided at certain times to specific people and written in a way that is intended to be comprehended by the ordinary plan participant.

What Appears In A Summary Plan Description?

A summary plan description should seem professional because it is a legal document from a corporation to its employees.

Include the name and year of the plan, the employer's tax ID number, the employer's name and address, and the name and contact information of the plan administrator. The retirement and health benefits plans should also include a summary of the advantages, the characteristics of the plan, the rights of the employee, the employer's and the plan provider's guarantees, and any other relevant data.

Conclusion

If you're setting up a health reimbursement arrangement (HRA) or other employee benefits for your business, preparing a set of plan papers is one of the first requirements outlined by the Employee Retirement Income Security Act (ERISA) for plan administrators. One of these essential documents is the summary plan description (SPD).

It might be overwhelming to set up your first ERISA-compliant benefit and create all of the necessary plan documentation, but with the correct resources and assistance, it can be simple.