The Summary Plan Description (SPD) is one of the important 401(k) plan documents that provides plan participants (and their beneficiaries) with the most important details of their benefit plan, like eligibility requirements or participation dates, benefit calculations, plan management instructions, and general member responsibilities.
That’s the basic definition, but there’s a lot more that you need to know about the SPD for successful benefits administration. We’ve covered it all below:
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The SPD is one of the most important documents associated with your retirement benefit plan. As a summary of the adoption agreement or plan document for your plan, the SPD must contain all the information relevant to plan participants.
From the plan participant’s perspective, the 401(k) Summary Plan Document is the go-to document for quick, yet thorough and descriptive information about their 401(k) benefit plan. Almost all basic questions an employee might have about the function and management of their plan should be answered in the SPD – in plain, non-technical language.
Note: The SPD is not to be confused with the Summary Annual Report, or SAR. Though they are both required by ERISA to be distributed to all 401(k) plan participants, the SAR The is a summary of the IRS Form 5500, not the 401(k) Plan Document or Adoption Agreement.
Here is some of the most important required information in a 401(k) SPD:
The SPD for a 401(k) retirement plan is generally between 10-20 pages, though this will vary depending on your plan and business.
Want the full (and we mean full) list of SPD requirements? Check out the Department of Labor’s full list of Summary Plan Description Requirements.
The SPD is created to match the 401(k) Plan Document (or Adoption Agreement), and should always reflect the most recent version of the retirement plan that is put into practice. If any amendments are made to the plan, ERISA requires that the participants are duly notified. To accomplish this, 401(k) plan administrators have two options: to distribute a new SPD, or to hand out a Summary of Material Modifications.
A new 401(k) SPD is pretty straightforward, after all, we just went over details of SPDs, so let’s briefly touch on SMMs:
The Summary of Material Modifications (SMM) is a short document specifically for reporting any change in the plan that materially affects the plan design or pricing or impacts the participant. SMMs can be attached to the current 401(k) SPD as a sort of amendment or addendum, rather than requiring the creation and distribution of whole new SPD.
Employee Retirement Income Security Act (ERISA) mandates that employees receive timely and reasonable information about their retirement benefits. The Department of Labor (DoL) takes this seriously, and may fine retirement plans that fail to comply with the deadlines for distribution that they have laid out. Reports of unreceived SPDs or SMMS are red flags that can bring a DoL auditor to your door.
It won’t surprise you that the creation and distribution of 401(k) benefit plan information must adhere to a relatively strict schedule for reporting, which we’ve detailed below:
Yes! In general, retirement plan documents that ERISA requires you to provide to plan members can be distributed electronically – including the 401(k) SPD. This does come with a few caveats, most of which will be almost automatically covered if you’ve chosen a standard delivery system like email:
The SPD should be available in the office at any time and online (on a team site or employee benefits platform – if applicable). To make sure you don’t face any unexpected compliance issues, be certain that whenever changes or amendments are made to the retirement plan, those changes are reflected in the SPD (or added in an SMM) across all platforms and distribution channels.
You likely know that ERISA was put in place largely to protect employees and their retirement benefit plan interests. Because of this, federal law mandates both the creation and timely distribution of important benefit plan documents. Failing to furnish those 401(k) documents in a reasonable timeframe is treated seriously, and some hefty fines could be incurred as a result.
Fee increases in 2016 (to adjust for inflation) mean that you may be paying more than you expected. Failure to provide the 401(k) plan documents (which includes the summary plan description and any summaries of material modification) can result in fees of $147/day – with a maximum of $1,472 per request.
In addition to these fees, problems like missing SPDs or SMMs are significant red flags and could bring about a U.S. Department of Labor 401(k) audit. Careful management of any benefit plan is critical for avoiding the stresses and fines associated with a DoL audit. In this instance, that begins with ensuring your SPD is descriptive and accurate, and correctly following the SPD distribution and modification schedule.
Without a fiduciary, any compliance issues are the financial responsibility of the plan administrator or plan trustees.
Normally the SPD is one of those “hiring paperwork” packets that gets skimmed and tucked (or thrown) away and pretty much never looked at until a moment of “wait, whoops, what were the terms of my 401(k)…”
The SPD is a document employees should thoroughly familiarize themselves with. For employees to make the most of their benefits, they need to understand the details of those benefits. The SPD will tell them everything they need to know about their 401(k) plan.
Here some of the most important and useful details found in the SPD:
The SPD is just one of the many documents to juggle in the everyday management of your employee retirement benefits, but it is an important one. Incorrectly distributing or updating your SPD can mean major fines, but it’s not all about avoiding a fine. Successful SPD coordination can mean employees who are informed, educated, and excited about their retirement benefits. What business doesn’t want that?
Give your employees more than just a 401(k), join the movement.
