What is a Summary Plan Description (SPD)?

It is the most important document required by ERISA.  The SPD is the main vehicle for communicating plan rights and obligations to participants and beneficiaries.

SPD Basics

• The Plan Administrator, i.e., the Employer – not the Insurer or the TPA - is responsible for furnishing the SPD. 
  Insurer booklets do not meet the ERISA requirements.

• There is no small plan exemption - Whether a plan covers 2 employees or 20,000 employees, an SPD is required.

• SPDs are required for most ERISA welfare benefit plans – For medical benefit plans including Health FSAs, HRAs, dental and vision plans.  (ERISA does not cover most DCAPs, most HSAs and certain voluntary plans.  Governmental plans and church plans are not ERISA plans either.)

• The SPD must be distributed to all participants -

√ Covered participants must automatically be furnished with the SPD.
√ A current SPD must be furnished within 30 days of request by a participant.
√ SPD must be distributed to newly covered participants within 90 days.
√ For a new ERISA benefit plan, SPD must be distributed within 120 days.
√ Updated SPD to all participants every 5 years; every 10 years for a plan with no changes.

• The format and content of the SPD are prescribed in detail by ERISA - Law requires that specific language is included explaining participants’ rights under the plan.

• A “Wrap Document” wraps itself around and incorporates by reference the insurance certificates, policies, contracts, booklets and other benefit descriptions made by the insurance carriers.  The Wrap Document adds all the necessary ERISA language, then together with the carrier’s documents forms the SPD. 

• Noncompliance Consequences –

Although there are no specific civil penalties for not having an SPD, failure to comply with ERISA requirements is costly:

» Through DOL enforcement actions - DOL will bring civil action to correct violations of ERISA
» Civil penalties for failure to furnish an SPD in response to written request within 30 days; $110 per day.
» Through DOL penalties - DOL imposes criminal penalties on any person who willfully violates ERISA requirements;
    up to $100,000 or imprisoned up to 10 years.
» Through employee lawsuits - Biggest area of liability lies in litigation due to nonexistent SPDs or inaccurate SPDs