A Summary Plan Description is a document that employers must give free to employees who participate in Employee Retirement Income Security Act-covered retirement plans or health benefit plans. The SPD is a detailed guide to what benefits the plan provides and how the plan works. It must describe when employees become eligible to participate in the plan, how benefits are calculated and paid, how to claim benefits, and when benefits become vested.

The SPD should be in a plain language that employees can understand. It must include the plan name and its IRS-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.

Breaking Down Summary Plan Description

When you first get hired, you should receive an SPD covering your new employer’s health care and retirement benefits within 90 days. The company may distribute the document to you electronically if you regularly use a computer at work or as a hard copy. If you only receive an electronic copy, you may request a written copy.

A Summary Plan Description Should Answer Your Questions

Read the plan carefully to learn details such as these:

  • Is there a minimum age requirement to participate in the plan?
  • Is there a minimum service requirement to participate in the plan, and if so, what is it and how is it calculated?
  • When does the plan year begin and end? Does it run from Jan.1 to Dec. 31, or does it have different start and end dates? This information is important for health plans because you want to know when your annual deductible resets.
  • Do I make contributions to the plan or do all contributions come from my employer?
  • For retirement plans, does the plan allow rollover contributions from other plans? For example, can I roll my 401(k) from my former employer over into this plan?
  • For retirement plans, how are employer and employee contributions invested? Are there default investments that the money will go to if I don’t select specific investment options, and if so, what are they? How do I change my investment selection?
  • When do I become vested in the retirement plan? Am I immediately 100 percent vested, or do I have to work for the company for a certain number of years to become partially or fully vested?
  • Am I allowed to borrow from my retirement account, and if so, what are the rules?
  • What happens to my benefits if I become disabled? If I leave the company? If I retire? If I die? If I take a leave of absence?

A Summary Plan Description Offers Employers Protection Against Lawsuits

On the business side, employers should be careful to make sure they have an SPD that it covers everything it should. With no SPD or an inadequate SPD, employers expose themselves to lawsuits from employees. Having an SPD that follows ERISA guidelines makes exclusions, and limitations crystal clear helps to protect the company against such lawsuits.

It’s also essential to define what makes an individual an employee who is entitled to various benefits and whether the benefits independent contractors, temporary workers, spouses, domestic partners, and children. Further, if 10 percent or more of your employees speak a language other than English, you must publish your SPD in those other languages too. Hiring an attorney who understands ERISA law to review the SPD before you distribute it can help ensure the document is complete, thorough, accurate, and complies with state and federal law. It can take months to create an SPD from start to finish. Making sure your employees can understand it easily will reduce complaints, lawsuits, and questions to human resources from confused employees.

Employers may change the benefits they offer from time to time. When this happens, they must notify all employees in writing by giving them a revised SPD or a summary of material modifications that explains the changes to the SPD. The company must distribute the notification within 60 days of the change becoming effective if it reduces coverage or benefits and within 210 days after the end of the plan year when the change became effective if it does not reduce coverage or benefits.