Summary Plan Description:
Definition, Comparison & Benefits

A Summary Plan Description (SPD) is a document that employers must provide free to employees who participate in Employee Retirement Income Security Act (ERISA)-covered retirement plans or health benefit plans. The SPD serves as a detailed guide explaining the benefits the program provides and how the plan operates, written in understandable language that the average participant can comprehend.

The Employee Retirement Income Security Act (ERISA) requires plan administrators to give participants and beneficiaries this comprehensive overview describing their rights, benefits, and responsibilities under the plan. New employees must receive a copy of their plan sponsor's latest Summary Plan Description within 90 days after becoming covered by the plan, or within 120 days of a newly established program.

Related terms: Plan Document, Summary of Material Modifications, ERISA, Plan Administrator

A Summary Plan Description must include specific information to help participants understand their plan. The SPD must contain the plan name and its Internal Revenue Service-assigned number, the employer's name and address, the plan administrator's name and contact information, a statement of Health Insurance Portability and Accountability Act rights, ERISA disclosures, and guidance on how employees can file a grievance or an appeal.

The SPD includes the following 10 essential elements:

• Name and type of plan
• Plan's requirements regarding eligibility
• Description of benefits and when participants have a right to those benefits
• Statement that the plan is maintained pursuant to a collective bargaining agreement, if applicable
• Statement about whether the plan is covered by termination insurance from the Pension Benefit Guaranty Corporation
• Source of contributions to the plan and the methods used to calculate the amount of contributions
• Provisions governing termination of the plan
• Procedures regarding claims for benefits and remedies for disputing denied claims
• Statement of rights available to plan participants under ERISA
• Information on when an employee can begin to participate in the plan and how to file a claim for benefits

New employees must receive a Summary Plan Description within 90 days after becoming covered by the plan. For newly established programs, the SPD must be distributed to plan participants within 120 days. The document must be delivered in a way that employees can reliably receive it, such as by hand delivery at worksites, first-class mail, or electronically through email or company intranet.

For electronic delivery under ERISA, administrators must ensure receipt, protect personal information, and provide documents in the required format. Participants must be informed of the document's importance and have the option to request a paper version. Affirmative consent for electronic delivery is generally required.

A Summary Plan Description must be updated and distributed every 5 years if there are any changes to the plan, and every 10 years if no changes are made. When changes occur between these update cycles, employers must inform participants either through a revised SPD or through a separate document called a Summary of Material Modifications (SMM).

The company must distribute notification within 60 days of the change becoming effective if it reduces coverage or benefits. If the changes do not reduce coverage or benefits, the notification should be distributed within 210 days after the end of the plan year when the change became effective. The Summary of Material Modifications must be furnished within 210 days after the close of the plan year in which the modification was made.

Employers are required by law to provide Summary Plan Descriptions for health and retirement benefits, regardless of the number of employees they have or plan participants in a program. However, there are 4 specific exceptions where SPDs are typically not required:

• Plans provided or managed by government entities
• Plans provided or managed by churches
• Plans solely for complying with workers' compensation, unemployment, or disability laws
• Plans outside the U.S. for the benefit of nonresident aliens or unfunded excess benefit plans

Employers are solely responsible for preparing, filing, and distributing Summary Plan Descriptions. This duty does not fall on the insurance company, nor does a Certificate of Insurance count as an SPD, which is a common misconception.

If an employer fails to provide a Summary Plan Description free of charge to employees participating in a covered retirement or health benefits plan, they may face costly fines. Non-compliance can result in daily fines up to 110 dollars per day if the SPD is not provided within 30 days of a request.

Employers without proper SPDs expose themselves to serious issues including frequent Department of Labor audits, legal action from employees, and employee dissatisfaction over benefit coverage. An SPD that follows ERISA guidelines and clearly lays out exclusions and limitations will protect the company against possible legal action.

Summary Plan Descriptions must be written in plain language that the average participant can understand. If 10 percent or more of employees in a plan with 100 or more participants speak a language other than English, the SPD must be published in those other languages. For plans with fewer than 100 participants, the threshold is 25 percent.

The document should use clear, professional language that avoids overly technical jargon while still maintaining legal accuracy. The SPD must be written in a manner that makes the intentions clear, leaving no room for misunderstanding, misinterpretation, or misconstruing.

A Summary Plan Description is often compared to 3 related employee benefit documents:

Summary Plan Description vs. Plan Document

A Plan Document is a technical document explaining the benefits available to employees and the plan's operating rules, which is generally not distributed to plan participants. A Summary Plan Description is a written document distributed to plan participants that details the features, benefits, rules, and procedures to make claims in understandable, plain language.

Summary Plan Description vs. Summary of Material Modifications

A Summary Plan Description is the comprehensive base document describing the entire plan and must be updated every 5 to 10 years. A Summary of Material Modifications is a separate document used to communicate specific changes to the plan between SPD updates, and must be distributed within specific timeframes based on the nature of the changes.

Summary Plan Description vs. Summary of Benefits and Coverage

A Summary of Benefits and Coverage is a uniform template that uses clear, plain language to summarize key features of health plans, such as covered benefits, cost-sharing provisions, and coverage limitations. A Summary Plan Description provides more comprehensive information including participant rights under ERISA, claims procedures, fiduciary responsibilities, and the grievance and appeals process.