As an employer in Nebraska who offers employee benefit plans, such as retirement or health plans, to your workforce, you have certain obligations under the federal law known as the Employee Retirement Income Security Act (ERISA) of 1974. One of these obligations is to provide a Summary Plan Description (SPD) to all plan participants and beneficiaries. An SPD is a document that explains the essential features and rules of your benefit plan in a clear and understandable language. It is not only a legal requirement, but also a valuable tool to communicate and educate your employees about their benefits.
In this article, we will explain what an SPD is, what it should include, when and how you should distribute it, and how Vesta Employee Benefit Solutions can help you create and maintain an SPD that complies with ERISA and other applicable laws.
What is an SPD?
An SPD is a summary of the plan document, which is the legal contract that governs your benefit plan. The plan document contains all the details and provisions of your plan, such as eligibility, enrollment, benefits, contributions, vesting, claims, appeals, and termination. The SPD, on the other hand, is a simplified and concise version of the plan document that highlights the most important information that your employees need to know about their benefits.
An SPD should answer the following questions:
- What kind of benefits does the plan offer and how are they calculated?
- Who is eligible to participate in the plan and when can they enroll?
- How and when can employees make contributions to the plan, if applicable?
- How and when can employees change or terminate their coverage, if applicable?
- How and when can employees access their benefits and file claims?
- What are the rights and responsibilities of employees and employers under the plan?
- What are the procedures and deadlines for appealing denied claims or other plan decisions?
- What are the circumstances that may result in the loss or reduction of benefits?
- How is the plan funded, administered, and maintained?
- How can employees contact the plan administrator, fiduciary, or trustee for more information or assistance?
An SPD should also include the following information:
- The name of the plan and the plan sponsor (employer)
- The plan number assigned by the Internal Revenue Service (IRS)
- The plan year (the 12-month period used for plan administration and reporting)
- The type of plan (such as a 401(k) plan, a health insurance plan, or a wellness program)
- The name, address, and phone number of the plan administrator (the person or entity responsible for running the plan)
- The name, address, and phone number of the plan fiduciary (the person or entity responsible for managing the plan assets and acting in the best interest of the plan participants)
- The name, address, and phone number of the plan trustee (the person or entity responsible for holding and safeguarding the plan assets, if different from the fiduciary)
- A statement of the participants’ rights and protections under ERISA, such as the right to receive plan documents, the right to sue for benefits, and the right to report plan violations
- A statement of the participants’ rights and obligations under other federal laws that affect employee benefits, such as the Affordable Care Act (ACA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Health Insurance Portability and Accountability Act (HIPAA), and the Genetic Information Nondiscrimination Act (GINA)
An SPD should be written in a manner that can be easily understood by the average plan participant. It should avoid technical jargon, legal terms, and abbreviations, and use plain language, examples, and definitions. It should also be consistent with the plan document and reflect the current plan design and provisions.
What should you do with an SPD?
As an employer, you have the following responsibilities regarding the SPD:
- You must provide an SPD to each plan participant and beneficiary within 90 days of becoming covered by the plan, or within 120 days of the plan becoming subject to ERISA, whichever is later.
- You must provide an updated SPD to each plan participant and beneficiary at least every five years, if you make any changes to the plan document or the information required to be included in the SPD. If you do not make any changes, you must provide an updated SPD at least every 10 years.
- You must provide a summary of material modifications (SMM) to each plan participant and beneficiary within 210 days after the end of the plan year in which you make any material changes to the plan document or the information required to be included in the SPD. A material change is one that affects the content of the SPD or the rights or obligations of the plan participants or beneficiaries. An SMM is a document that describes the change and its effective date, and can be either a separate document or part of an updated SPD.
- You must provide a copy of the SPD or the SMM to any plan participant or beneficiary upon written request, within 30 days of receiving the request. You may charge a reasonable fee for copying and mailing the document, but not more than 25 cents per page.
- You may distribute the SPD or the SMM electronically, such as by email or posting on a website, if you meet certain conditions, such as ensuring that the document is accessible, readable, and printable, and that the recipients are notified of the document’s availability and significance. You may also distribute the document in paper form, such as by mail or hand delivery.
If you fail to provide an SPD or an SMM as required by ERISA, you may face penalties from the Department of Labor (DOL), such as fines of up to $110 per day per violation, or lawsuits from the plan participants or beneficiaries, such as claims for benefits or damages.
How can Vesta help you with an SPD?
Creating and maintaining an SPD that complies with ERISA and other applicable laws can be a challenging and time-consuming task for employers. You may not have the expertise, resources, or tools to draft, update, and distribute an SPD that meets the legal requirements and reflects your specific plan design and provisions. You may also face difficulties in ensuring that your SPD is clear, accurate, and consistent with your plan document and other plan materials.
That is why you need Vesta Employee Benefit Solutions, a leading provider of employee benefits solutions in Nebraska, with over 10 years of experience and expertise. Vesta can help you with the following services:
- Design, implement, and manage an SPD that complies with ERISA and other applicable laws, and that suits your specific needs and goals
- Review, revise, and update your existing SPD to ensure that it reflects the current plan design and provisions, and that it meets the legal requirements and standards
- Prepare and distribute an SMM to inform your plan participants and beneficiaries of any material changes to the plan document or the information required to be included in the SPD
- Provide you with guidance and support on how to distribute the SPD or the SMM electronically or in paper form, and how to respond to requests for copies of the document
- Assist you with other aspects of your employee benefit plan, such as benefits enrollment, employee engagement, compliance support, and wellness programs
To learn more about Vesta and how they can help you with your SPD and other employee benefits needs, give them a call. Vesta is ready to help you with your SPD and other employee benefits needs.