Every employer that sponsors a health, dental, life, disability or retirement plan covered by ERISA owes participants a summary plan description. Insurance carriers do not take this duty off your hands. The plan administrator, usually the employer, is responsible for the SPD, and many employers learn that only when a participant or the Department of Labor asks for one.
This guide covers what an SPD is, what it must include, when and how to deliver it, and how it fits alongside your other plan documents.
What is a summary plan description?
A summary plan description is the plain-language guide to an employee benefit plan that ERISA section 102 requires every plan administrator to give participants. It explains what the plan provides, who is eligible, how benefits are paid, how to file a claim and appeal a denial, and what rights participants have under federal law.
The SPD is the document participants actually read. The plan document governs the plan, and the SPD tells people how to use it. Because participants rely on it, the SPD must be accurate, complete and consistent with the plan document. When the two conflict, courts have often held the plan to what the SPD promised.
Private employers of any size that sponsor an ERISA plan need an SPD for it. Plans sponsored by government employers and most church plans are not subject to ERISA, so the SPD rule does not apply to them. If you are not sure which of your benefits are covered, see who is subject to ERISA and ERISA vs. non-ERISA plans.
What must an SPD include?
An SPD must include the plan’s identifying details, the administrator and agent for legal process, eligibility and benefits, claims procedures and a statement of ERISA rights, among other items. The required contents are set out in 29 CFR 2520.102-3. Use this as a checklist when you review your SPD.
| Required item | Applies to | Regulation |
|---|---|---|
| Plan name, and any common name participants use | All plans | 2520.102-3(a) |
| Sponsor’s name and address | All plans | 2520.102-3(b) |
| Sponsor’s employer identification number (EIN) and the three-digit plan number used on Form 5500 | All plans | 2520.102-3(c) |
| Type of plan (for example, group health, disability, 401(k)) | All plans | 2520.102-3(d) |
| Type of administration (for example, insurer administration or third-party administration) | All plans | 2520.102-3(e) |
| Plan administrator’s name, business address and business phone number | All plans | 2520.102-3(f) |
| Agent for service of legal process, with address | All plans | 2520.102-3(g) |
| Name, title and business address of each trustee | All plans | 2520.102-3(h) |
| Collective bargaining agreement statement, if one applies | Collectively bargained plans | 2520.102-3(i) |
| Eligibility requirements and a description of benefits | All plans | 2520.102-3(j) |
| QMCSO procedures, or a statement that participants can get them free of charge | Welfare plans | 2520.102-3(j)(2) |
| Cost sharing, annual or lifetime caps, preventive services, prescription drug coverage, network rules, emergency care and preauthorization requirements | Group health plans | 2520.102-3(j)(3) |
| Circumstances that can cause loss, denial or reduction of benefits, and how the plan can be amended or terminated | All plans | 2520.102-3(l) |
| COBRA continuation coverage rights and obligations | Group health plans subject to COBRA | 2520.102-3(o) |
| Sources of contributions and how they are calculated | All plans | 2520.102-3(p) |
| Funding medium, such as the insurer or trust, including insurer details | All plans | 2520.102-3(q) |
| End date of the plan year | All plans | 2520.102-3(r) |
| Claims and appeals procedures, including time limits and remedies | All plans | 2520.102-3(s) |
| Statement of ERISA rights | All plans | 2520.102-3(t) |
| Hospital length of stay for childbirth (Newborns’ and Mothers’ Health Protection Act) | Group health plans with maternity coverage | 2520.102-3(u) |
Retirement plans have additional items, such as normal retirement age, vesting and break-in-service rules, joint and survivor benefits, and PBGC insurance status.
Two details employers often get wrong: welfare plan numbers on Form 5500 start at 501 (retirement plans start at 001), and the SPD must name an agent for service of legal process even when that agent is simply the employer.
How must an SPD be written?
The SPD must be written so the average participant can understand it, and it must be detailed enough to tell participants their rights and obligations (29 CFR 2520.102-2(a)). In practice that means plain words, short sentences, examples where they help, clear cross-references and a table of contents.
Limits cannot be hidden. Restrictions, exclusions and reductions must appear with at least the same prominence as the benefits they limit, and the document cannot overstate benefits or play down the limits (29 CFR 2520.102-2(b)).
The foreign-language notice rule
Some plans must include a notice in another language offering help understanding the SPD. Under 29 CFR 2520.102-2(c), the rule applies when:
- Fewer than 100 participants: 25% or more of participants are literate only in the same non-English language.
- 100 or more participants: the lesser of 500 participants or 10% of participants are literate only in the same non-English language.
The SPD can stay in English, but it must prominently display a notice, written in that language, explaining how to get help. The help itself can be oral, as long as it is given in that language and gives participants a reasonable chance to understand their rights. Participants are counted at the start of each plan year, so a growing workforce can trigger the rule.
When is the SPD due?
The SPD is due within 90 days after someone becomes a participant, with further deadlines for new plans, periodic updates and requests. The rules are in 29 CFR 2520.104b-2 and 2520.104b-3, and ERISA section 502(c)(1).
| Event | Deadline |
|---|---|
| Employee becomes a participant | Within 90 days after the person becomes a participant |
| New plan becomes subject to ERISA | Within 120 days after the plan becomes subject to ERISA (the later of the two deadlines applies) |
| Updated SPD, plan was amended | Every 5 years, within 210 days after the end of the fifth plan year |
| Updated SPD, plan was not amended | Every 10 years, within 210 days after the end of the tenth plan year |
| Material change to the plan (summary of material modifications, or SMM) | Within 210 days after the end of the plan year in which the change was adopted |
| Material reduction in group health plan benefits | Within 60 days after the change is adopted, unless the plan sends updates at regular intervals of no more than 90 days |
| Participant or beneficiary asks in writing | Within 30 days of the request |
A material reduction is any change the average participant would see as an important cut, such as dropping a benefit, raising premiums, deductibles or copays, or adding a new preauthorization requirement.
SPDs are no longer filed with the DOL routinely. The administrator must furnish one to the DOL only if it asks (ERISA section 104(a)(6)).
How do you deliver an SPD?
Delivery must use a method “reasonably calculated to ensure actual receipt” (29 CFR 2520.104b-1(b)). Posting a copy on a bulletin board or simply making it available does not count.
Acceptable methods include:
- Hand delivery at the worksite.
- Mail, first class, or second or third class with return and forwarding postage guaranteed and address correction requested.
- An insert in a company publication, if the mailing list is current and the front page flags the insert. Anyone not on the list needs another method.
- Electronic delivery under the DOL safe harbor described below.
The electronic disclosure safe harbor
For health and welfare plans, electronic delivery relies on the safe harbor the DOL adopted in April 2002, now at 29 CFR 2520.104b-1(c). It covers two groups:
- Employees with work-related computer access. People who can access documents electronically wherever they are expected to work, and for whom the employer’s system is an integral part of their job.
- Everyone else who consents. Other participants, beneficiaries and former employees can receive the SPD electronically only after affirmatively consenting, in a way that shows they can open the documents. Before they consent, they must be told what documents they will receive, that they can withdraw consent at any time without charge, how to update their address, that they can get a paper copy, and what hardware or software they need.
In either case, the administrator must take reasonable steps to confirm actual receipt (for example, tracking bounced emails), protect confidential information, tell recipients why the document matters, and provide a paper copy on request.
The DOL’s 2020 notice-and-access rule, which lets plans post documents online by default, applies only to retirement plans. Health and welfare plans still use the 2002 safe harbor.
Employees do not sign the SPD. Keep proof of delivery instead: mailing records, email logs, or enrollment system confirmations with dates.
SPD vs. plan document vs. SBC vs. wrap.
An SPD is one of several plan documents, and each does a different job. Employers often assume a carrier certificate or an SBC covers the SPD requirement. It does not.
| Summary plan description (SPD) | Plan document | Summary of benefits and coverage (SBC) | Wrap document | |
|---|---|---|---|---|
| What it is | Plain-language summary of the plan’s terms, rights and procedures | The written instrument that governs the plan | Standardized summary of a health plan’s coverage and costs, in a federal template | A plan document that incorporates carrier policies and adds the provisions ERISA requires |
| Required by | ERISA section 102 | ERISA section 402 | Affordable Care Act (Public Health Service Act section 2715) | Not required by name; a common way to meet the plan document and SPD rules |
| Applies to | All ERISA plans | All ERISA plans | Group health plans only | Usually insured health and welfare plans |
| Audience | Participants and beneficiaries | Fiduciaries, administrators, service providers, courts | Participants and people choosing coverage | Fiduciaries and, when it doubles as the SPD, participants |
| Delivered | Automatically within 90 days of joining, and on the update cycles above | Only on written request, within 30 days | At enrollment and renewal, and on request | Depends on whether it also serves as the SPD |
Many employers with insured benefits use a combined wrap document that serves as both the plan document and the SPD, with the carrier certificates attached. That works if the combined document includes every item in the checklist above.
What does a good SPD look like?
There is no official sample SPD for welfare plans, and a generic template will not match your plan. A well-built SPD for a group health plan usually follows this order:
- Plan information page. Plan name, sponsor, EIN, plan number, plan year, type of plan and administration, plan administrator, agent for service of legal process, and the insurer or TPA for each benefit.
- Eligibility and enrollment. Who qualifies, including hours and waiting periods, when coverage starts and ends, dependent eligibility, special enrollment rights and QMCSO procedures.
- Benefits and costs. What each benefit covers, how employer and employee contributions are set, and the cost sharing that applies, often by referencing the carrier certificate.
- Limits and exclusions. What is not covered and what can cause loss or reduction of benefits, given the same prominence as the benefits themselves.
- Claims and appeals. How to file a claim, the decision deadlines, how to appeal, and the right to external review where it applies.
- COBRA and other required notices. Continuation coverage rights, Newborns’ Act and Women’s Health and Cancer Rights Act language, and any foreign-language notice.
- Amendment and termination. The employer’s right to change or end the plan.
- Statement of ERISA rights. The consolidated statement the regulation requires.
Before you finalize it, compare every eligibility rule, benefit and exclusion against the plan document and the carrier certificates. Most SPD problems are inconsistencies, not missing sections.
What are the penalties and risks?
The main statutory penalty applies when a participant asks for plan documents in writing and does not receive them within 30 days. A court may hold the plan administrator personally liable for up to $110 a day from the date of the failure (ERISA section 502(c)(1), as adjusted by 29 CFR 2575.502c-1). The amount is at the court’s discretion, and this figure is not adjusted for inflation each year.
The larger risks are often indirect:
- Inconsistent terms. When the SPD and plan document conflict, courts have often enforced the version more favorable to the participant, which can mean paying a claim the plan never meant to cover.
- Missing claims language. A plan without proper claims and appeals procedures can lose the benefit of its internal appeal process, letting a participant go straight to court.
- DOL investigations. The DOL can request the SPD at any time, and a missing or outdated one often leads to questions about the rest of the plan’s compliance.
- Willful violations. Willful failures to meet ERISA’s reporting and disclosure rules can carry criminal penalties.
ERISA also requires plan records to be kept for at least six years after the filing date of the reports they support. Keep each version of the SPD, each SMM, and proof of when and how each was delivered, so you can show what participants were told at any point.
Ethos Benefits reviews SPDs, wrap documents and delivery practices as part of its ERISA compliance services. For the rest of the calendar, see the ERISA compliance checklist.