Summary Plan Description

Overview

The Summary Plan Description (SPD) is one of the most important documents participants are entitled to receive when becoming a participant of an ERISA-covered health benefit plan.  The SPD tells participants what the plan provides and how it operates. It provides information on when an employee can begin to participate in the plan, how service and benefits are calculated, when and in what form benefits are paid, and how to file a claim for benefits. If a plan is changed, participants must be informed, either through a revised summary plan description, or in a separate document, called a Summary of Material Modifications.

Content

The SPD must be written for the average participant and be sufficiently comprehensive to apprise covered persons of their benefits, rights, and obligations under the plan.

• ERISA defines in general terms the content that must appear in the SPD.
• Because of differing benefits, this information can vary widely from plan to plan.
• Various laws also require disclosure about specific rights and benefits.
• In addition, other notices that must be distributed upon enrollment can be (and often are) included in the SPD. However, this is done primarily for convenience and these notices are not required to appear in the SPD.

Please Note: The plan booklet provided by the insurer or third party administrator (TPA) is not necessarily an ERISA compliant SPD. Employers should verify this with their insurer or TPA, or have the booklet reviewed for compliance by their own legal counsel. Rather than rewrite the plan booklet provided by the insurer or TPA, employers often use a wrap document that supplements the booklet and adds the ERISA information necessary to create an ERISA compliant SPD.

The SPD must accurately reflect the plan’s contents as of the date not earlier than 120 days prior to the date the SPD is disclosed.

The SPD must contain the following information:

• Plan Identifying Information:
  • Name of Plan
  • Name & Address of Employer
  • Plan Sponsor’s EIN
  • Plan Number
  • Type of Plan (medical, FSA, disability, etc.)
  • Type of plan administration (insurer, contract, etc.)
  • Plan administrator’s name address & telephone number
  • Name and address of agent for service of legal process
  • Statement that the plan administrator may be served with process
  • Plan year Information about plan trustees (if applicable)
  • Certain information about collective bargaining agreements (if applicable)
• Description of plan eligibility provisions
• Description of plan benefits
• Description of circumstances that would cause a denial of benefits
• Amendment and termination provisions
• Subrogation provisions
• Plan contributions and funding
• Coordination of benefits, and offset provisions
• Claim procedures and limits for lawsuits (if plan imposed)
• Statement of ERISA rights
• Offer of assistance in non-English language (if plan covers minimum number of non-English speaking participants)
• Description of employer’s refund allocation policy (for insured plans relying on Form 5500 exemptions)
• Grant of discretion for plan administrator to interpret plan and make factual determinations

Additional Content Required for Group Health Plans:

• Detailed description of group health plan benefit provisions
  • Cost sharing provisions, premiums and deductibles
  • Co-insurance and co-payment amounts
  • Annual lifetime caps
  • Any benefit limitations
  • When existing and new drugs are covered
  • When medical tests, devices and procedures are covered
  • Preventive services covered and amounts
  • Pre-authorizations or utilization review requirements
  • Use of network providers, composition of provider networks, and when out-of-network services are covered
  • Conditions or limitations on primary care providers or specialists
  • Condition of limitations for emergency medical care
• Role of health insurers (do they provide insurance or administration)
• Procedures for obtaining pre-authorizations, approvals, or utilization review decisions
• Effect of provider discounts on co-pays, deductibles or any other plan aspect
• Information of COBRA
• HIPAA preexisting condition and special enrollment disclosures
• Mental Health Parity Act – mental health parity disclosures
• Women’s Health and Cancer Rights Act – coverage for reconstructive surgery after mastectomy
• Newborns’ and Mothers’ Health Protection Act – minimum hospital stays after childbirth disclosures
• Qualified Medical Child Support Order (QMCSO) information
• Coverage for adopted children
• Disclaimer stating that if there is a discrepancy between the SPD and the plan document, the plan document controls.

Recipients

The SPD must be automatically given to participants, free of charge, when they become covered by the plan. This typically includes:

• Participants covered under the plan; however, a separate SPD does not need to be provided to beneficiaries, such as spouses or dependents, as long as the participant receives it.
• COBRA qualified beneficiaries.
• Parent or guardian of a child designated under a Qualified Medical Child Support Order (QMCSO).
• Spouse or dependent of a deceased retiree who remains entitled to benefits.
• Guardian of an incapacitated person.

Timing

The SPD must be furnished:

• With plan enrollment materials or within 90 days of coverage.
• Upon request by a plan participant or person entitled to receive an SPD.
• An updated SPD must be furnished every 5 years if the plan is amended.
• If a material modification is made of the plan, participants must be furnished an updated SPD or Summary of Material Modifications within 210 days after the end of the plan year in which the change was adopted.
• If a material reduction in covered services or benefits is made to the plan, a new SPD or Summary of Material Reduction in Covered Services or Benefits must be sent within 60 days of the adoption of the plan change.
• If there are no changes, a new SPD must be furnished every 10 years.

Distribution Methods

The Department of Labor (DOL) has specifically approved certain delivery methods. These include:

• First-class mail (or second- and third-class mail if return/forwarding postage is guaranteed and address correction is requested).
• Hand delivery of SPDs at the worksite. Simply placing the SPDs in a location frequented by employees is NOT an acceptable distribution method.
• Electronically, if all employees have access to computers and a notice is provided at the time the electronic SPDs are provided.

See Delivery Methods for a more detailed description of delivery requirements.

Non-English Language

Under certain circumstances, the SPD and SMM must state an offer of assistance in a non-English language.

This assistance must be calculated to provide participants a reasonable opportunity to become informed as to their rights and obligations under the plan.

If applicable, this offer of assistance (written in the non-English language) should appear at the beginning of the SPD or SMM or on its cover.

The obligation for providing this assistance applies to:

• Plans with 100 or more participants that have the lesser of 10% or 500 or more participants literate only in the same non-English language
• Plans with fewer than 100 participants that have 25% of more participants literate only in the same non-English language

Material Modifications

The Summary of Material Modifications (SMM) describes material modifications to a plan and changes in the information required to be in the SPD. 

• This must be distributed to participants not later than 210 days after the end of the plan year in which the change was adopted.

If the SPD is updated with the material modifications and distributed within this time period, the SMM does not need to be sent out.

Material Reduction

The Summary of Material Reduction in Covered Services or Benefits describes any modification or change that would be considered by the average plan participant to be an important reduction in covered services or benefits.

• This must be distributed to plan participants within 60 days of adoption of the material reduction on group health plan services.

Noncompliance

Failure to Comply with Content or Format Rules

If a SPD is not compliant with the SPD content or format rules, an employer may leave itself liable for:

• Breach of its fiduciary duty if the SPD misleads the plan’s participants
• Unenforceability of the terms and conditions of the plan
• Payment of additional benefits not intended to be a part of the plan

Failure to Prepare or Supply an SPD

• There are no specific or additional penalties for not automatically providing a SPD, beyond the actions that can be taken for violating an ERISA provision.
• Participants and beneficiaries may bring suit to enforce any provision of ERISA, including the distribution of SPDs.
• Criminal penalties may be assessed against any individual or company that willfully violates an ERISA disclosure requirement.
  • This penalty can be up to $100,000 and/or imprisonment of up to 10 years.
  • The penalty can be increased up to $500,000 if assessed against a company.
• The Plan Administrator may be liable for a penalty of up to $159 per day (for 2020), per occurrence penalty if it does not provide a response to a participant or beneficiary who requests a copy of the SPD in writing.
• If a plan does not have an SPD, a court may enforce other, informal plan descriptions that may make an employer liable for benefits it did not intend to be a part of the plan.
• Employers should also keep in mind that the SPD is often the primary disclosure document for other health and welfare plan disclosure requirements, such as COBRA rights and other health plan mandates.  Failure to provide these notices may result in additional fines, penalties or civil actions.

Additional Resources

Click Here for Department of Labor Website