Compliance Reminder
ERISA is a complex federal law, and employers should always seek guidance from qualified ERISA counsel when applying these rules to their own benefit plans. This content is provided for informational purposes only and does not constitute legal advice.
Overview
The Summary Plan Description (SPD) is the primary communication tool between an employer (plan sponsor) and its employees (plan participants).
While the Plan Document serves as the legal foundation, the SPD is the employee-facing summary written in plain, understandable language that explains what benefits are provided, who is eligible, and how the plan operates.
Under ERISA, every covered plan must maintain and distribute an SPD. Employers who rely solely on carrier materials (like benefit booklets or insurance certificates) are not compliant – those materials describe the policy, not the employer’s ERISA plan.
Like all ERISA Plan Documents, creation and maintenance of SPDs are ultimately the employer’s responsibility, often completed in coordination with ERISA counsel and/or a Third-Party Administrator (TPA).
Purpose and Function
The SPD fulfills ERISA’s requirement that plan sponsors communicate plan rights and obligations clearly.
It provides employees and their covered dependents with a complete picture of their benefits, how to use them, and what happens when circumstances change (such as during leave, termination, or life events).
The SPD must:
- Summarize the plan’s key terms and benefits.
- Identify eligibility rules, waiting periods, and dependent coverage.
- Describe how benefits are funded (employer-paid, employee-paid, or shared).
- Explain claims and appeals procedures.
- Outline how the plan can be amended or terminated.
- State participants’ ERISA rights and protections, including their right to access plan documents.
Together, the Plan Document and SPD form the backbone of ERISA compliance – the first establishes the plan’s legal existence, the second ensures it is communicated effectively.
Note: The items listed above are representative of key SPD content areas but are not exhaustive. ERISA prescribes additional disclosures and formatting requirements that must also be included.
Distribution Requirements
SPDs must be furnished automatically to participants and beneficiaries:
- Within 90 days of becoming covered under the plan.
- Within 120 days of a new plan being established.
- Every 5 years if the SPD is amended.
- Every 10 years if unchanged.
Electronic delivery is allowed if it meets DOL standards for accessibility, notice, and consent (for example, email or intranet with confirmation of receipt).
Employers must ensure that all eligible employees – including those on leave or COBRA – receive the SPD.
Summary of Material Modifications (SMM)
When plan terms change, employers must communicate those updates through a Summary of Material Modifications (SMM) or by issuing an updated SPD.
- SMMs must be distributed within 210 days after the end of the plan year in which the change occurred.
- If the change reduces benefits or coverage, it must be distributed within 60 days of adoption.
Maintaining and distributing SMMs promptly helps prevent disputes and demonstrates good-faith compliance if the DOL audits or a participant challenge arises.
Note: Some benefit changes may also trigger a separate ACA Summary of Benefits and Coverage (SBC) notice requirement. The ACA generally requires advance notice (within 60 days before the effective date) of a material reduction in benefits or coverage. Employers should ensure timing and content align across both ERISA and ACA disclosure rules.
Common Employer Misconceptions and Pitfalls
- “The carrier’s booklet is my SPD.”
False. Carrier materials explain the insurance policy, not the employer’s plan as required by ERISA. - “Only large employers need SPDs.”
False. ERISA applies to virtually all private-sector employers, regardless of size. - “My health insurance carrier creates this for me.”
False. Carriers cannot document employer-established plan provisions under ERISA – such as waiting periods, funding arrangements, eligibility rules, and other employer-specific policies. These must be outlined by the plan sponsor. - “We don’t need an SPD for self-funded (or level-funded) plans.”
False. Self-funded plans rely entirely on employer-issued SPDs since there is no carrier booklet. They are also governed solely by federal ERISA law, not state insurance law, making proper documentation even more critical.
Key Takeaway
The SPD is the most important communication document under ERISA.
It ensures participants understand their rights, the plan’s rules, and how benefits are managed. Employers must create, maintain, and distribute SPDs that supplement carrier materials and accurately reflect the employer’s plan operations. Just as importantly, employers must follow the policies and procedures established in their own SPDs and Plan Documents.
A complete, compliant SPD protects both the employer and employees – ensuring clarity, consistency, and trust in how benefits are administered.