SPD and SMM

SPD

The Summary Plan Description (SPD) is the primary disclosure document required by the Employee Retirement Income Security Act (“ERISA”).  Through the SPD, participants and their beneficiaries are given information about the plan, how they make a claim for benefits, and what their rights are under ERISA and the plan.

The SPD must be provided to each participant covered under the plan and to each beneficiary who is receiving benefits under the plan.

The SPD is a summary that is expected to be written such that the average participant will be able to understand the basic provisions of the plan. Your document provider should provide a SPD with your document.

The Department of Labor encourages the use of examples and illustrations as opposed to technical jargon and long wordy explanations.  Restrictions and limitations should be explained in just as much detail as plan benefits.

If a substantial percentage of your participants are literate in a language other than English, a SPD may be required in that alternative language.  You should make your document provider aware if such a situation exists.

The SPD must include the following:

  • name of the plan;
  • name, address and EIN of the employer;
  • a description of the type of plan;
  • the names of fiduciaries and other plan contacts;
  • the requirements for eligibility;
  • an explanation of how benefits accrue;
  • vesting requirements;
  • information regarding when distributions are available;
  • a description of forms of payment available;
  • explanation of QDRO procedures;
  • statement asserting that the plan is an ERISA section 404(c) Plan (if applicable);
  • information regarding the effect of plan termination on a participant’s rights;
  • how to make a claim for benefits;
  • a description of circumstances which may result in disqualification, ineligibility, or denial of benefits;
  • disclosure regarding PBGC coverage (DB plans only);
  • other items as provided in ERISA.

When a plan is first established, the employer has 120 days to distribute the SPD to the new participants.

As employees enter the plan, the SPD must be delivered to each such participant no later than 90 days after he or she enters the plan. Care must be taken in the case of a rehired employee/participant.  Briefly, if the participant has not been paid their benefit and there have not been modifications to the plan, no new SPD is required.

A beneficiary must receive an SPD within 90 days after he or she begins to receive benefits from the plan.

The SPD must be updated every five years, unless there have been no amendments to the plan during those years that would change the content of the SPD.  Every tenth year, the SPD must be updated regardless of whether amendments have been made.

The new SPD must be provided to participants and beneficiaries receiving benefits not later than 210 days after the close of the plan year for which the SPD was updated.

SMM

A Summary of Material Modifications (SMM) is required when there has been a material change in the plan or when information provided in the SPD has changed. This summary must also be written in a manner to be understood by the average participant.

The plan administrator must provide a copy to each participant and beneficiary (who is receiving benefits) not later then 210 days after the end of the plan year in which the amendment was adopted.

Any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties under the Internal Revenue Code or applicable state or local tax law provisions.


Pinnacle Plan Design is a third-party administrator (TPA) for employer-sponsored qualified retirement plans. We specialize in retirement plan design, administration and actuarial consulting. Pinnacle has a local presence in Tucson and Phoenix, Arizona (AZ), Houston, Texas (TX), Denver, Colorado (CO), and San Francisco, California (CA), and we proudly serve clients nationwide.