(b)lines Ask the Experts – Tips for Reviewing SPDs

“I am new to reviewing SPDs; do the Experts have any suggestions as to how I should review? Thanks!” 

Michael A. Webb, vice president, Cammack Retirement Group, and David Levine, with Groom Law Group, answer: 

Absolutely! Here are just a few suggestions from the Experts:

1)      Make certain the SPD contains all of the provisions required under the Employee Retirement Income Security Act (ERISA)—Assuming that your plan is subject to ERISA, there are certain provisions that an SPD must contain in order to be a valid SPD. Section 2520.102-3 of the Department of Labor (DOL) regulations lists those required provisions. Sometimes SPDs are so generic that they don’t even describe how a plan works—which can be a problem.

2)      Confirm that the SPD is, in fact, a summary—The Experts have reviewed SPDs that were nearly as long as the plan documents that they were intended to summarize! This should not be the case, since the document is a summary document. Thus, you should make certain that the SPD contains all of the required provisions without being unnecessarily lengthy; a side-by-side comparison with the plan document is helpful to determine if language is summarized (good) or merely copied (not so good).

3)      Confirm that all of the SPD language is easy to read and understand—This may sound obvious, but Section 2520.102-2 of the DOL regulations actually requires that the SPD be “understood by the average plan participant and shall be sufficiently comprehensive to apprise the plan’s participants and beneficiaries of their rights and obligations under the plan.” The regulation goes on to state that the SPD will need to be written in a manner that “will usually require the limitation or elimination of technical jargon and of long, complex sentences, the use of clarifying examples and illustrations, the use of clear cross references and a table of contents.” If YOU cannot understand any language in the SPD, you can safely assume that an average participant would not be able to understand it, either. Even if you can understand the language, if you have a high level of benefits knowledge, you may wish to also arrange for someone else in your office to read the SPD who is not as knowledgeable about retirement plans as you for their feedback as well.

4)         Confirm that the SPD accurately reflects the plan provisions—SPDs often contain boilerplate, and it is important to make sure the right boilerplate for your plan has been selected. All of it is important, but particular points to confirm are the summaries of who is eligible, what counts or does not count as compensation or salary, how service is counted, and what the contributions are.

5)         Make sure the legal caveats are there—Typically, it should say something along the lines that it is just a summary, and if it varies in any respect from the plan document, the plan document will control. 

We hope that these tips regarding SPD review are helpful, Good luck!

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.