ERISA-Mandated Plan Documents and SPD in the Workplace

Feb 7, 2025

Human Resources (HR) is a corporate function that spans areas such as onboarding and off-boarding employees, processing payroll and other documentation, and ensuring that compliance reporting mandates are met. Professional employer organizations (PEO) help companies of all types and sizes, including those without dedicated HR departments, streamline these functions. They assist with developing employee handbooks, filing taxes, maintaining worker’s compensation, and managing risk and performance.

One area of focus for PEO is administering corporate health and welfare plans, which are mandated by the Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, most private employers that sponsor benefit plans must create plan documents and a summary plan description (SPD).

Plan documents are comprehensive documents, composed in plain language, that provide plan participants and beneficiaries with details on available benefits, eligibility, and funding methods of benefits. They also name the fiduciary, or plan manager, and provide details on amending the plan and the processes involved in allocating plan responsibilities. This not only enables employees to easily understand their benefit plans but also guides the plan sponsor and administrator in executing assigned responsibilities and making decisions.

ERISA additionally requires that companies create SPD, which summarizes the most important facets of plan information for participants. Among the items detailed within an SPD are plan benefits and those circumstances that would lead to a denial or loss of benefits. The document also covers benefit claim procedures and lays out the ERISA rights that each participant accesses. Like the plan document, the summary plan description must be written in a clear and straightforward manner that is understandable to the average plan participant.

In some cases, companies combine the SPD and the plan document into a single unified document. This must comply with both ERISA’s SPD content and format rules, as well as ERISA’s requirements for written plan documents. Companies must provide the SPD at specific times to employees so that they can enroll in plans with full information and disclosure.

Participants and beneficiaries have the right, at any time, to request SPD and plan document copies. Not furnishing the requested documents within 30 days makes the ERISA plan administrator (often the employer) liable for $110 in daily penalties. These accrue even if the administrator has previously provided the documents as part of its normal course of health and benefits administration. This makes a PEO’s services important in managing and fulfilling such requests and ensuring compliance.

It’s important to note that group health plans also require separate and additional documentation, known as a summary of benefits and coverage (SBC). Under the Affordable Care Act (ACA), both job-based health plans and insurance companies provide SBC, which summarizes details of a health plan’s coverage and benefits in easy-to-understand language. With all major medical plans issuing SBCs, they provide consumers with details that enable them to compare specific policies and make informed decisions about which health coverage option to select.

The SBC is often mistaken for the SPD. However, with ERISA-mandated SPD, the onus is on the employer to provide employees with documentation on the specific benefit plan options offered in the workplace. This contrasts with SBC, which is the health plan or insurance provider’s responsibility to deliver.