Employers offering a qualified retirement plan must ensure that Summary Plan Descriptions (SPDs) and updates are available to all employees. A recent court case demonstrates that using intranets/internal websites or common-area postings (such as a break room posting) are not enough to meet that requirement.
What is the best practice?
Although workplaces are increasingly using shared intranet sites for their SPDs, a best practice is to notify employees as necessary of the location of the SPD as well as plan document updates.
Employers should consider their participants’ locations and job requirements to know what type of notification (i.e., paper or electronic) is appropriate. For example, a company whose plan participants don’t have regular access to an individual (not shared) computer through their jobs will need to distribute paper copies of the SPD and notices as needed, since those participants might not use work email regularly. All participants whose jobs include regular access to an individual computer may be sent notices via their work email.
Why the change?
In a recent Federal court case, the judge ruled in favor of the beneficiaries of a life insurance plan participant who was enrolled in her employer’s ERISA plan but had stopped working and paying premiums after becoming disabled. When she passed away, her beneficiaries were denied life insurance benefits because the insurer had not received the premium waiver for disabilities from the participant, so she was not covered when she died. As a result, the beneficiaries sued the employer and won because, while the SPD was available electronically on the employer’s intranet site, there was no evidence that participants were notified of its availability nor furnished hard copies.
This case is a good reminder of employers’ ongoing responsibilities to provide timely and appropriate notification of benefits plan documents and notices for plan participants.
What if I have questions?
If you have any questions about retirement plans and Summary Plan Document distribution, plan requirements, or reporting, please contact Brad Bechtel using his contact information below.
Information in this document has been obtained by Allen, Gibbs & Houlik, L.C. from sources believed to be reliable. However, AGH does not guarantee the accuracy nor completeness of any information. This communication does not and is not intended to provide legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly, AGH assumes no liability whatsoever in connection with its use. Nothing in this communication can be used to avoid penalties that may be imposed by a governmental taxing authority or agency.
Senior Vice President
Employee Benefit Services
Brad Bechtel leads AGH’s employee benefit services (EBS) division, which serves clients nationwide. EBS is one of the region's largest providers of retirement plan recordkeeping services for daily valuation plans. The division provides consulting services to clients on employee benefit plans including plan design, implementation, operation, fiduciary due diligence, compliance, and through affiliate AGH Wealth Management, discretionary and non-discretionary investment fiduciary services, investment advisory services and employee education.
Bechtel is experienced in executive compensation, including non-qualified, phantom stock, top hat and excess benefit plans, as well as other deferred compensation approaches. He has consulted for numerous Fortune 500 corporations on investment management and fiduciary due diligence. He also provides search and selection due diligence consulting services for companies seeking new investment and recordkeeping providers for their qualified plans. Bechtel is a registered investment advisor who holds Series 7, 24, and 66 FINRA registrations, and he is a member of the American Society of Pension Professionals & Actuaries.