48 SEPTEMBER / OCTOBER 2021 The Summary Plan Description What is it, and what does it contain? HUMAN RESOURCES A summary plan description (SPD) is a comprehensive document given to retirement plan participants and beneficiaries that outlines the retirement plan’s provisions, benefits and responsibilities under the plan, meant to be easily understood by plan participants. Department of Labor regulations outline what an SPD must contain, such as plan and employer identification, eligibility and benefit requirements, contribution information, claim procedures and ERISA rights. When and to whom must the SPD be given? The employer must distribute the SPD to all eligible employees within 120 days of adopting the retirement plan. After the initial distribution of the SPD, the employer must distribute the document to new employees within 90 days of their becoming eligible to participate in the plan. The SPD also must be distributed to beneficiaries under the plan within 90 days of their becoming entitled to benefits. If there have been changes to the plan, an updated SPD must be issued at least every five years. If the plan has not had any changes, an updated SPD must be issued at least every 10 years. When must changes to an SPD be communicated to participants? Changes to a qualified retirement plan that affect the SPD can be communicated with a summary of material modification (SMM). An SMM is a summary of any amendment change made to the qualified plan provisions, features or operation, also meant to be easily understood by plan participants. An SMM or an updated SPD must be distributed to employees 210 days after the end of the plan year during which the change was adopted and must be distributed to each plan participant and beneficiary entitled to benefits. Can an SPD or SMM be delivered electronically? Yes. DOL regulations incorporate safe harbor guidelines for the electronic delivery of these documents. Safe harbor guidelines are met if: • The employer reasonably ensures that the electronic delivery system results in actual receipt by participants (includes beneficiaries) of transmitted documents; • Electronically delivered documents are prepared and provided according to DOL regulations; • Notice is provided to each participant, either electronically or in paper form, informing the participant of the electronically delivered documents, the significance of such documents, and the participant’s right to request and receive, free of charge, a paper copy of each of the electronic documents; and • The employer provides a paper copy – without charge – of any document originally delivered to the participant through electronic means if the participant requests it. What are the consequences of not having an SPD? There are no specific penalties under ERISA for a plan that fails to have an SPD, but there are some consequences an employer could face: • If a participant or beneficiary requests an SPD, the employer must provide it within 30 days. Otherwise, an employer could be subject to a DOL penalty of up to $110 per day. • If a plan is going through audit, the DOL most likely will ask for a copy of the plan document and the SPD. An employer that cannot respond to the DOL’s request may trigger additional document requests and DOL enforcement actions. The DOL may also charge a plan a penalty of $156 per day (capped at $1,566 per request) for not providing this document. • Not having an SPD also allows participants to use other evidence or employer representations to support benefit claims or lawsuits against the employer. HB Leslie Valenzuela ERISA Consultant Ascensus ERISAcommunications@ ascensus.com Ascensus is an associate member of the Indiana Bankers Association.
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