Summary Plan Descriptions (SPD's)

by Doug Griffith

Your Insurance Booklet Doesn’t Count

The idea is simple - provide Summary Plan Descriptions (SPD’s) to all plan participants in a format that is easy to read and understand so employees don't have to rely on complicated and confusing documents. Retirement plans, welfare benefit plans (insurance plans), and cafeteria plans all require an SPD.

There are only a few exceptions, which include:

• Government plans
• Some church plans
• A plan maintained to comply with worker’s compensation laws, unemployment compensation laws, or disability insurance laws
• A plan maintained outside of the United States primarily for the benefit of non-resident aliens
• An excess benefit plan

Lack of an adequate SPD is probably the most common noncompliance issue we see. Most companies provide SPD’s for their retirement plans because most Third Party Administrators (TPA’s) supply them with one. Many times plan sponsors of insured welfare plans (medical, dental, life, and disability) think that the certificate of insurance will suffice as their SPD but more than likely it will not. The certificate of insurance is a state requirement and does not include all the information required to be an SPD, which is a federal requirement.

However, required information can often be added to this certificate and listed on a single page. This document together with a certificate can complete the disclosure requirements for the SPD. The additional information typically needed includes the following:

• Plan name
• Employer name and address
• Employer identification number
• Plan number (not contract number) - This is usually a number assigned by the plan sponsor. These numbers are usually sequential starting with number 501
• Type of plan - This would include the type of benefits offered under the plan
• Type of administration – An example would be insurer administration, sponsor administration, or contract administration
• Administrator name, address, and phone number
• Agent for legal process
• Plan trustees name, title, and principal place of business
• Statement of collective bargaining agreements if relevant

Other disclosures such as COBRA, HIPAA, FMLA, and ERISA language are usually included in the insurance certificate booklets but not always.

The plan administrator is required to distribute an SPD within 90 days of the employee becoming a participant. SPD’s must be mailed to a participant’s last known address if requested in writing. They're also required to have an SPD available to be reviewed by the employee at their business location. If a participant doesn't receive a requested SPD within 30 days of their request the plan administrator faces personal liability up to $110 per day to a maximum of $1000 by the Department of Labor. The greater liability however, may be a civil action for breach of fiduciary responsibility. New SPD’s must be given at a minimum of once every ten years or if the plan has been amended during that time once every five years. Additionally, a Summary of Material Modification must be given when significant changes are made to the plan. A Summary of Material Modification must be provided within 210 days after the end of the plan year in which the modifications are adapted. Material reductions in covered services or benefits need to be disclosed no later than 60 days after the change is adopted.

Just a little effort in this area can bring most plans up to compliance and prevent potential problems. The easiest way to distribute an SPD is in person or by first-class mail.

Contact BusinessPlans to discuss how we can help with your company's Summary Plan Description.