The SPD Distribution Rules Employers Often Miss
Many employers aren't aware of Summary Plan Descriptions (SPD) distribution rules and post their SPDs somewhere in the Human Resources Information System (HRIS) or the company shared drive, assuming that is enough. Others aren’t even aware they must provide SPDs to employees.
Distributing SPDs is one of those benefits-compliance requirements under the Employee Retirement Income Security Act of 1974 (ERISA) that's easy to overlook. The insurance carrier or benefits broker may prepare the document (but not always), and the plan administrator is generally responsible for ensuring the right individuals receive it on time and through an acceptable delivery method.
First, what is an SPD
A Summary Plan Description, or SPD, explains how an employee benefit plan works. It describes important information such as eligibility, benefits, employee rights, claims and appeal procedures, and circumstances that may result in a loss or reduction of benefits.
ERISA-covered plans generally require an SPD. Depending on the employer's benefit offerings, this may include medical, dental, vision, health flexible spending accounts (FSA), employee assistance programs (EAP), disability benefits, life insurance, and retirement plans. Employers sometimes use a wrap SPD to combine several welfare benefits into one ERISA-compliant document, although only certain plans are appropriate to include.
Having the SPD is only half the job
Placing a copy of the SPD in a filing cabinet, on a shared drive, or in an HRIS does not, by itself, satisfy the distribution requirement. The SPD must be furnished to participants and certain beneficiaries. The delivery method must be reasonably calculated to ensure the person actually receives the document.
When must the SPD be provided?
The most common distribution deadlines are:
Newly covered participants: within 90 days after the participant becomes covered under the plan.
Beneficiaries receiving benefits: within 90 days after the beneficiary first begins receiving benefits.
A new plan: within 120 days after the plan first becomes subject to ERISA.
An amended plan: an updated SPD must generally be furnished at least once every five years.
A plan that has not been amended: an updated SPD must generally be furnished at least once every 10 years.
A written request: a requested SPD generally must be provided within 30 days.
Do not confuse the five- and 10-year update rules with the obligation to communicate material changes in the meantime. A Summary of Material Modifications, or an updated SPD, may be required sooner when the plan changes.
Who must receive an SPD?
That list may extend beyond active employees. Depending on the plan and the person's status, it can include:
Employees who participate in the plan
COBRA participants who remain covered
Beneficiaries who are receiving benefits
Certain individuals with independent rights under the plan, including some alternate payees or representatives of children covered under a Qualified Medical Child Support Order
An actively covered employee's dependents generally do not each need a separate copy unless a dependent has an independent right to the document or requests one.
Electronic delivery is allowed, but there are rules
Email and an HRIS can be efficient ways to provide SPDs. The problem is that many employers treat access to an HRIS as automatic permission to deliver every ERISA document electronically. It is not that simple. For practical purposes, recipients generally fall into three groups:
Employees with regular work-related computer access: These employees generally do not need to provide consent for electronic delivery. However, they must be able to access electronic documents where they perform their duties, and using the employer’s electronic system must be an integral part of their regular job duties.
Employees without regular work-related computer access: These employees must affirmatively consent to electronic delivery and must not have withdrawn that consent. When documents will be delivered through email, the Internet, or another electronic communication system, consent must be given or confirmed electronically in a way that demonstrates the employee can access the format that will be used.
Former employees, COBRA participants, retirees, and beneficiaries: These individuals generally must affirmatively consent to electronic delivery unless another applicable electronic-delivery rule applies. If you have not obtained valid consent, provide the documents using an acceptable paper-delivery method.
This means that giving an employee access to a shared kiosk, personal smartphone, or HRIS is not necessarily enough. The key question is whether access to the employer's electronic system is an integral part of that employee's regular job duties.
What must the electronic consent explain?
For an employee or other recipient who must consent, the consent process should clearly explain:
The types of documents covered by the consent
That consent may be withdrawn at any time without charge
How to withdraw consent
How to update the email address or other electronic contact information
The right to request a paper copy and whether it will be provided without charge
The hardware and software needed to access and retain the documents
Here is the part that is often missed: when documents will be delivered through email, the Internet, or another electronic communication network, consent must be given or confirmed electronically in a way that reasonably demonstrates the person can access the electronic format that will be used. The person must also provide an electronic address for receiving the documents. A paper consent form may begin the process, but it must be followed by an electronic confirmation, such as responding to an email, clicking a confirmation link, or acknowledging consent through the electronic system that will be used.
Can the SPD be posted in the HRIS?
Yes, an HRIS or secure website may be part of a compliant delivery process, but posting the document there is not enough on its own. When furnishing the SPD, the employer must:
provide notice that identifies the document's importance
tell the recipient where and how to access it, and
explain the right to request a paper copy and how to request it.
The system should be designed to result in actual receipt. That includes monitoring undeliverable emails, keeping electronic contact information current, and following up when a communication does not go through.
Documents must be provided in a format the recipient can access, save, and print, and you must protect the confidentiality of personal benefit information.
Acceptable paper delivery methods
Hand delivery
You may give a participant a complete paper copy in person. Whenever practical, obtain a signed acknowledgment as evidence that you provided the document.
You may send an SPD by first-class mail to the participant's last known address. Keep a record of what you mailed, the mailing date, the address used, and who was included. If mail is returned, research the correct address and resend it when you have an updated address.
Former employees, retirees, COBRA participants, and beneficiaries often need paper delivery unless they have properly consented to electronic delivery or another applicable electronic-delivery rule applies.
Keep evidence that the SPD was distributed
A good process does more than send the document. It creates a record showing what happened. At a minimum, consider retaining:
The participant or beneficiary's name
The plan, version, and effective date of the SPD
The date and method of delivery
The mailing or email address used
Required electronic consent and confirmation
Evidence of successful transmission or acknowledgment
Returned or undeliverable communications and the follow-up taken
Paper-copy requests and the date each copy was provided
Review your SPD distribution process annually
If you are not sure your organization is handling SPDs correctly, start by asking these questions:
Do we have a current SPD or wrap SPD for every ERISA-covered benefit plan?
Who is responsible for distributing each SPD?
Are new participants receiving the SPD within the required timeframe?
Are we delivering the document, or merely posting it somewhere?
Which employees regularly use the employer's electronic system as an integral part of their job duties?
Have employees without that work-related access completed a compliant electronic consent and confirmation process?
What do we do when an email or mailed document is returned?
Can we show which version of the SPD each participant received and when?
Do not wait for a complaint or audit
Failing to follow these requirements can be costly. If a plan administrator does not provide an SPD or another required plan document within 30 days after receiving a participant’s written request, a court may impose a penalty of up to $110 per day. Although this penalty is not automatic for every late or improper distribution, compliance failures can also lead to Department of Labor scrutiny, participant claims, legal expenses, and difficulty enforcing plan provisions.
SPD distribution is not complicated once an employer has a clear procedure. The risk comes from assuming the broker, insurance carrier, or HRIS provider has handled it without confirming who is responsible, which employees have received the document, and whether the delivery method meets ERISA requirements.
Take action now to ensure your organization has current SPDs, distributes them within the required timeframe, uses an approved delivery method, and maintains records showing when and how each SPD was provided.
Disclaimer: The information provided in this blog is for informational and educational purposes only and should not be construed as legal advice. Laws and regulations vary by jurisdiction and specific circumstances. Employers and individuals should consult an attorney or qualified legal professional to determine the appropriate course of action for their situation.
Roberta Edwards is a Senior HR Consultant with over 20 years of professional experience. Follow Edwards HR Consulting on LinkedIn and Facebook and read more about Roberta here.
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