Do your employees understand your benefit plan’s summary plan description (SPD)?
While a number of plan sponsors might say yes, they may want to rethink their answer. Defined as a key document in summarizing all plan rights, benefits, and responsibilities in a simple, easy fashion, the SPD has transformed into a sort of defense mechanism formed by plan sponsors, with pages upon pages of compound information and lengthy sentences to avoid legal concerns.
“The Unfortunate Truth About Your SPDs,” by Katherine Tange-duPré, a consultant at Bryan, Pendleton, Swats & McAllister, LLC, highlights the significance for plan sponsors to simplify SPDs, addresses worries among plan sponsors fretful of legal repercussions, and explores options for building a readable, clear document for employees.
“Think about what the SPD is, and think about where the audience is,” says Tange-duPré. “The SPD is the primary source of information that an employee is going to get—the most comprehensive source—other than a plan document. So, it has to be simple enough for them to understand.”
Described as a reference tool for the employee, Tange-duPré notes how an SPD must have two qualities: accessibility and ease of reading. Loaded with information about when employees may begin participating in plans, benefits involved, vesting and so on, the language utilized in SPDs is critical. Because of this, some plan administrators hold concerns surrounding potential legal repercussions, fretful that in simplifying a document too much, they will accidentally miss a specific detail and land themselves into a lawsuit. “A lot of people think, ‘well if we simplify, we’re going to leave things out’,” Tange-duPré tells PLANSPONSOR.
Court decisions in the Amara v. CIGNA Corp. ordering plan reformation after finding that CIGNA misled employees about benefits in its pension plan’s SPD, may also fuel plans sponsors’ legal concerns. However, Tange-duPré notes that it was the misleading, not the simplifying, that caused the trouble.
“We don’t want to mislead anybody, but simplifying doesn’t mean leaving stuff out,” she says. “It simply means that you make it understandable.” NEXT: Considerations for simplifying SPDs