A summary plan description, or SPD, is a document that employers must provide, free of charge, to employees and beneficiaries who are part of retirement or health benefit plans governed by the Employee Retirement Income Security Act (ERISA). It outlines essential information about the plan, including how it works, what it covers, and the rights of those participating.
Understanding the Purpose of an SPD
For employees enrolled in employer-sponsored retirement or group health plans subject to ERISA, it’s critical to know what benefits they’re entitled to and how those benefits are managed. ERISA is the federal law that sets the standard for these private-sector benefit plans.
Employers are legally obligated to ensure that a written SPD is made available. This summary gives employees a clear understanding of the plan’s structure, administration, and participant responsibilities. Typically, a plan administrator, sometimes an outside third-party administrator (TPA), is in charge of delivering this information in a way that is easy to understand.
SPD vs. Plan Document: What’s the Difference?
While the plan document is the official legal blueprint that outlines all of a plan’s provisions, the SPD is a simplified version designed for everyday use by employees and beneficiaries. The plan document tends to include technical legal language, while the SPD focuses on clarity and accessibility.
Although ERISA usually requires that both documents exist separately, employers are allowed to merge them into a single document, as long as it meets the legal requirements for both formats.
What Should Be Included in an SPD?
The specific contents of an SPD can vary, depending on the nature of the benefit plan. However, most SPDs will include:
- The official name and type of plan
- Who is eligible to participate
- A summary of benefits available
- When and how benefits become payable
- Events that could reduce or eliminate benefits
- Who contributes to the plan (employer and/or employee)
- Information on union agreements, if applicable
- Participant rights under ERISA
- Instructions for filing a claim
- How to appeal a denied claim
The U.S. Department of Labor, which enforces ERISA, requires that the SPD provide a comprehensive overview of the plan and clearly explain the rights and obligations of participants.
Who Should Receive the SPD?
Employers must distribute the SPD to all plan participants and certain qualified beneficiaries, including:
- Active employees covered by the plan
- COBRA recipients
- Retirees still receiving benefits
- Former employees still enrolled
- Dependents and surviving family members
- Guardians of covered individuals with disabilities
SPD Distribution Timeline
Employers must follow these timelines when providing the SPD:
- Within 90 days of someone becoming a plan participant
- Within 120 days of the plan becoming subject to ERISA
- Within 30 days of a written request from a participant
- Within 60 days after a reduction in plan coverage
- Every 5 years if the plan has been amended
- Every 10 years if the plan has not changed
If significant changes are made to the plan, an updated Summary of Material Modifications (SMM) must be distributed within 210 days after the close of the plan year in which the changes were made.
How Can Employers Distribute the SPD?
According to ERISA’s rules, employers must use a delivery method that ensures actual receipt by participants. Approved methods include:
- Mailing via first, second, or third-class postal service
- Hand-delivery at the employee’s work location
- Digital distribution (e.g., email or intranet), provided specific criteria are met
If the SPD is sent electronically, employers must also send a separate notification to inform the recipient that the document is important and that a paper version is available upon request at no cost.
Penalties for Not Complying with SPD Requirements
Failing to meet SPD requirements can lead to financial penalties. If an SPD isn’t provided within 30 days of a written request, the employer may be fined up to $110 per day. Not supplying the SPD to the Department of Labor upon request can result in a $184 daily fine, capped at $1,846 per violation.
To avoid these consequences and ensure transparency, Beyond encourages employers to maintain updated SPD documentation and follow all ERISA distribution guidelines carefully.