The summary plan description (“SPD”) and disclosure regulations provided by the Department of Labor (“DOL”) are spread across six regulatory sections. They are voluminous. One section, however, provides an alternative method of compliance for providing retirement plan SPDs and summaries of material modification (“SMMs”) to terminated participants and beneficiaries receiving benefits if certain requirements are met.

As part of our ongoing “Debunking SPD Myths” series, we will explain how employers sponsoring retirement plans can take advantage of this little-discussed alternative compliance method to ease their administrative disclosure burden.

General SPD Update Requirements

As we have covered previously, updated SPDs must be provided every five years if there have been changes to the information that must be provided in an SPD, and every ten years even if the plan has not been amended. In the interim, every material change to the plan and every change to the information required to be included in an SPD must be documented with an SMM provided no later than 210 days after the close of the plan year in which the modification was adopted.

Myth: We Need to Continually Provide Updated SPDs to Terminated Participants

The plan sponsor does not need to provide updated SPDs, if on or after the date a participant retires or separates from service, the plan sponsor provides the participant with a copy of the most recent SPD and a copy of any SMM not incorporated in the SPD. Instead of receiving updated SPDs, those participants may then receive a notice explaining:

  1. That the benefit rights of the participant receiving benefits are set forth in the earlier SPD and any subsequent SMMs; and
  2. An affirmative statement that the participant can request copies of the earlier SPDs, SMMs as well as the updated SPD, without charge.

Some information may still need to be communicated to terminated participants in the form of an SMM. For example, information about a change in trustee must be furnished because a terminated participant needs to know that information in order to make inquiries about rights under the plan. On the other hand, information about a modification of how benefits are calculated (which does not affect the determination of benefits of a terminated participant) would not have to be furnished.

Special Rules for Beneficiaries

The above rule also applies for beneficiaries receiving benefits so long as the SPD, SMMs and relevant notice are provided on or after the date that the beneficiaries begin receiving benefits.

Conclusion

Particularly for frozen plans or plans with large numbers of deferred vested participants, implementing the above procedures can cut down on the administrative costs of compliance. Plan sponsors should consider every opportunity to streamline and ease compliance tasks. An experienced ERISA attorney can help walk employers through this process.

See part 1 of our “Debunking SPD Myths” series: The SPD Basics, and (Almost) Every Employer Needs One

See part 2 of our “Debunking SPD Myths” series: Think That Emailing Your SPD to Employees is Always Enough? Think Again

See part 3 of our “Debunking SPD Myths” series: Your Insurance Contracts and Summaries of Benefits and Coverage are Not SPDs for Your Health or Other Welfare Benefits Plan

About the Author

Eric W. Gregory is an Associate in Dickinson Wright’s Troy office where he assists clients in all areas of employee benefits law, including qualified retirement plans, welfare plans, and non-qualified compensation programs. Eric can be reached at 248-433-7669 or egregory@dickinsonwright.com and you can visit his bio here.