A summary plan description, or SPD, is the document that is given to participants and beneficiaries explaining the material terms of an ERISA plan. It is designed to summarize the plan a company offers. An SPD generally must be provided when a participant first becomes covered by a plan. It also must be provided on written request by a participant or enrolled dependent.
An updated SPD or summary of material modifications (“SMM”) must be provided no later than 210 days after the end of the plan year in which a material change to the plan was made. If there has been a material reduction in covered services or benefits, an SMM must be provided no later than 60 days after the date of the adoption of the material reduction.
Under the health care reform rules, there is a separate requirement that employers issue a revised summary of benefits and coverage (“SBC”) or a notification of material modification for mid-year changes to benefits described in the SBC. This rule is independent of the SPD and SMM rules but complying with the health care reform requirement also will satisfy the SMM requirement.
If there have been material changes to the plan, an updated SPD must be republished and distributed at least every five years. It is hard to imagine a plan that has not made a material change in the last five years, so, practically, almost all plans are required to distribute an updated SPD every five years.
What Should Be Included
There is no magic formula for the perfect SPD. Because plans vary greatly, there is no set formula or checklist for creating a SPD. However, they typically contain:
Description of plan eligibility provisions
Description of plan benefits
Description of circumstances causing loss or denial of benefits (including eligibility or coverage termination)
Amendment and termination provisions
Coordination of benefits
Recovery of overpayments
Plan contributions and funding (including employer’s right to change amounts)
Claims procedures and time limits for lawsuits (if the plan imposes them)
External review information
Statement of ERISA rights
Offer of assistance in non-English language:
where plan has 100 or more participants at the beginning of the plan year and 10% or more are literate only in the same non-English language; or
where plan has fewer than 100 participants at the beginning of the year and 25% are literate only in the same non-English language
Description of employer’s refund allocation policy (for insured plans relying on Form 5500 exemptions)
Grant of discretion for plan administrator (and its delegate) to interpret plan and make factual determinations
AND MOST CONTAIN THE FOLLOWING FOR GROUP HEALTH PLAN SPDs
Detailed description of group health plan benefit provisions (including cost-sharing provisions, preventive services coverage, etc.)
Procedures for obtaining preauthorizations, approvals, or utilization review decisions
Role of health insurers
Effect of provider discounts on co-pays, deductibles, etc.
Various applicable necessary information about GINA, USERRA, Michelle’s Law, etc.
Warning that in the event of a conflict between SPD and plan document, plan document controls
New Plans: Within 120 after the date the plan is created.
Newly Covered Participants: Within 90 days after the participant first becomes covered under the plan.
Ongoing Participants—Material Changes Made: Every five years if material changes are made within that five-year period. (Technically, distribution is not required until 210 days following the last day of the fifth plan year.)
Ongoing Participants—No Material Change: Every ten years if no material changes are made during the ten-year period. (Technically, distribution is not required until 210 days following the last day of the tenth plan year.)
If a participant requests a copy of the SPD and the plan sponsor fails to provide it within 30 days, the Department of Labor can assess a penalty of up to $110 per day.
In a lawsuit, courts often consider the language of an SPD or SMM. If the SPD is inconsistent with the terms of the plan, a court may consider the terms of an outdated SPD in deciding litigation.
Other penalties, including a possible breach of fiduciary claim under ERISA may apply if an updated SPD was not provided.
Lack of an SPD could trigger a plan audit by the U.S. Department of Labor (DOL).
Failure to furnish to the DOL any requested information relating to the employee benefit plan can result in a penalty of up to $152 per day (not to exceed $1,527 per request).