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PS COACH
Washelesky says. " In electronic versions,
jump or anchor links, along with section
references, make it easier for the reader
to move among sections. These versions
should also be searchable. "
SPDs need to cover a wide range of
topics. The DOL lists these as follows:
The name and type of the plan; the plan's
requirements regarding eligibility; a
description of benefits and when participants
have a right to them; a statement
that the plan is maintained pursuant to a
collective bargaining agreement, if applicable;
the source of contributions to the
plan and the methods used to calculate
the amount of contributions; the provisions
governing termination of the plan;
the procedures regarding claims for benefits
and remedies for disputing denied
claims; and a statement of rights available
to plan participants under the Employee
Retirement Income Security Act (ERISA).
" A well-crafted SPD can be a transformative
tool for participants, enabling
self-service and building confidence in
the participant's own understanding of
his benefits, " Washelesky says. " It allows
human resources [HR] professionals and
benefits specialists to focus on the most
complicated participant inquiries, which
can't be addressed within an SPD. " For
plans where participants pay plan administration
expenses, finding their own
answers instead of asking the HR representative
saves that person's time-and,
therefore, cost to the plan, she explains.
Some of Fidelity's clients are taking
the SPD a step further, embracing the
communication and educational opportunity
afforded by this required disclosure,
Chisholm says. " Many of our plan sponsor
clients view this as a way to educate and
communicate with their participants as
opposed to a requirement to provide a short
version of the plan document, " he says.
" They're making them visually
appealing, with callouts, charts and more
supplemental information than what is
required, making them a little more fun
to read, " he says. " They might embed
some financial planning components-for
" They are making them visually
appealing, with callouts, charts and
more supplemental information
than what is required ... "
instance, talk about how increasing deferrals
would project out to retirement age, to
really entice employees to contribute to the
plan and improve their overall retirement
readiness. The sponsors think of it as an
opportunity to demonstrate the benefits a
plan is providing. "
When to Issue the SPD
As noted above, an SPD must be sent to all
participants within 90 days of their eligibility
to enroll. Participants must also be
informed of plan changes, and will receive
a revised SPD. " The DOL [Department of
Labor] says updated SPDs should generally
be prepared within five years of any
plan amendment that changes information
required to be disclosed in the SPD, "
says Joleen Workman, vice president of
customer care at Principal in Des Moines,
Iowa. " However, the sooner an SPD can
be updated to reflect changes in the plan,
the better. Document providers should
have systematic support to ensure that
updated SPDs and summaries of material
modifications [SMMs] are provided well in
advance of the DOL timing requirements. "
Even if a plan is not amended, sponsors
must reissue their SPDs every 10
years, Chisholm says, also referring to
DOL rules. " But because of ever-changing
regulations, most plans do get regularly
amended. Rather than issuing an updated
SPD within the five-year required time
frame, many sponsors reissue an amended
SPD the year the change was made. "
It is also a good practice to have an
ERISA attorney review the SPD to ensure
it is consistent with the other essential
plan documents, says Lee Stevens, head
of large and mega market sales at T. Rowe
Price in Baltimore. Employers should
go to great lengths to guarantee that the
Art by Philip Lindeman
documents reach the participants, she
adds. " While the federal government
says that 98% of people have an email
address, " in some industries, workers do
not have access to computers, so sponsors
may need to mail a paper copy.
" Plan sponsors must use measures
reasonably calculated to confirm actual
receipt of the material by plan participants
and beneficiaries, " Washelesky stresses.
Should an employer have a large
group of non-English-speaking workers,
the DOL requires that someone be available
who can explain the SPD to them
in their native language, Chisholm says.
But many sponsors have found this to
be cumbersome and simply translate the
SPD for those workers, he adds.
As with other important procedures
associated with running a retirement plan,
documenting the SPD process is critical,
Washelesky says. " It's important for the
plan administrator to maintain a record of
the covered participants required to receive
an SPD, SMM or other ERISA-required
document, " she says. " They should also
document the method of delivery used,
each participant's last known address and
the date when each document was provided
to each participant. "
Fines and Penalties
The DOL, through its Employee Benefits
Security Administration (EBSA), sets the
content requirements for SPDs and SMMs,
Washelesky says. If a sponsor fails to issue
an SPD or omits information, that would be
considered an ERISA violation. " Penalties
depend on the violation and whether or not
it was deliberate. The penalty assessed may
include fines or payments to participants
and result in changes to the company's
practices or procedures. " -Lee Barney
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