A summary plan description (SPD) is a document an employer gives to their employees who are participating in retirement or health benefits plans. It breaks down how much they will be contributing, what kind of tax advantages they'll be getting, and how the benefits will come in.
The summary plan description document is a thorough explanation of the advantages offered by the program and how the plan operates. It must specify when employees are qualified to join the plan, how benefits are computed and paid, how to file a claim, and the time at which benefits become vested.
Employees should be able to understand the SPD's straightforward language. The plan name and its Internal Revenue Service identification number, the employer's name and address, the plan administrator's name and contact information, a list of HIPAA rights, ERISA disclosures, and instructions on how employees can file a grievance or an appeal are all required to be included in this document.
On the business side, employers should ensure that their SPD covers everything it should. With no SPD or an inadequate SPD, employers expose themselves to lawsuits from employees. An SPD that follows ERISA guidelines and clearly lays out exclusions and limitations will protect the company against possible legal action.
The SPD should state what defines an employee who is entitled to various benefits and whether such employees include independent contractors, temporary workers, spouses, domestic partners, and children.