Current Thinking

The Ins and Outs of Plan Notices

The importance of an accurate, current and comprehensive summary plan description (SPD) cannot be overstated. In fact, recent court cases have highlighted the need for employers to review their plan’s SPD to ensure it does not conflict with the Plan Document.

 What is the summary plan description (SPD)?

The SPD is the primary vehicle for informing plan participants and beneficiaries of their rights and obligations under the plan. The SPD is essentially a summary of the key features of a retirement plan.

What information should the SPD include?

The Employee Retirement Income Security Act of 1974 (ERISA) specifies what is required in the SPD. The SPD contains a variety of information, such as:

  • The plan’s name and the name and address of the plan sponsor,
  • Participant eligibility requirements,
  • A description of benefits and the vesting schedule,
  • The plan’s normal retirement age,
  • The sources of plan contributions,
  • Benefit claim procedures, and
  • Participant rights under ERISA.

Is there a specific format that the SPD must follow?

No, but it must be complete and understandable. The language should be written in a way that is easily understood by the average participant and not misleading.

When should the SPD be distributed?

In general, employers are obligated to provide participants and beneficiaries with the SPD within 120 days after a plan becomes effective. New participants have to receive the SPD within 90 days of becoming a participant. An updated SPD, which incorporates all interim plan amendments, must be furnished no later than 210 days after the end of the fifth plan year after the previous SPD. If there have been no changes to the plan, a new copy of the SPD must be distributed every 10 years.

Can the SPD be sent electronically to participants?

If certain requirements are met, employers may furnish the SPD using electronic media, such as the Internet, an intranet, or e-mail. However, employers should ensure that appropriate measures are taken prior to electronic delivery of the SPD.

For electronic dissemination of plan documents, regulations mandate that employers provide notice to participants that the forthcoming document contains important plan information (e.g., employers must give a description of the significance of the SPD and advise recipients that a paper copy of the SPD is also available upon request). The employee’s consent may be needed. (This depends on the employee’s job function and the availability of electronic access.) Paper versions of the SPD must be given to any recipient without the ability to access documents in electronic form.

Do plans have to provide non-English versions of the SPD?

No. However, if several plan participants are literate only in the same non-English language (25% or more for plans with fewer than 100 participants, and the lesser of 500 or 10% for plans with 100 or more participants), then the plan must provide a non-English language notice that offers the participants assistance in learning about their rights and benefits under the plan.

What if there is a conflict between the SPD and the plan document?

Where there is a conflict between the official plan document and the SPD, and the SPD describes a benefit more favorable to the participant, the SPD has prevailed in a number of cases. Thus, it is critical that employers verify that their SPD is up to date, consistent with plan documents, and contains all the essential information relating to the plan.

In addition to the SPD, what other disclosure notices do plans have to provide participants?

There are several. For example:

  • A summary annual report (SAR) must be furnished within nine months after the end of the plan year. The SAR is a summary of the information appearing in the plan’s annual report (Form 5500).
  • A summary of material modifications (SMM) to the plan has to be provided to participants within 210 days after the end of the plan year in which the modification was adopted.

And plans also must provide participants with the following documents upon written request:

  • Statement of the participant’s total accrued benefits,
  • Most recent annual report,
  • Plan document,
  • Trust agreement, and
  • Collective bargaining agreement (or any other document) under which the plan is established.

 FOR PLAN SPONSOR USE ONLY.  This material is provided solely for informational purposes and does not constitute investment, tax, legal or accounting advice on the matters addressed. Neither Pentegra Services, Inc., its subsidiaries, nor any of their respective employees intend that this material should be relied on as investment, tax, legal or accounting advice, which should be sought from a professional advisor. Performance information shown, if any, reflects past performance and does not indicate or guarantee future investment results. ©2018 Pentegra Retirement Services


About the Author

Chuck Coldwell

Chuck Coldwell is Vice President – National Director, Consulting and BOLI Services at Pentegra. He oversees Pentegra’s retirement services consulting, marketing and communications business development practice areas. In these roles, he works closely with Pentegra’s teams to develop strategic initiatives designed to enrich the client and participant experience and meet the ongoing needs of clients. He also leads Pentegra’s BOLI business development efforts, working with clients to design customized strategies for benefit financing using BOLI. A Qualified Pension Administrator (QPA), he holds a B.A. in Economics and Psychology.