A summary plan description, or SPD, is the document that is given to participants and beneficiaries explaining the material terms of an ERISA plan. Both pension plans and welfare plans are required to provide SPDs to participants. 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 beneficiary.
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. For health plans, additional rules apply. 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.
There are significant consequences to an employer for not providing an updated SPD, including:
- 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 If the SPD is inconsistent with the terms of the plan, a court may consider the terms of an outdated SPD in deciding litigation.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.
Employers should consider reviewing all of their benefit plans to make sure each SPD is up to date and has been distributed.