(b)lines Ask the Experts – Are SPDs Needed for 457(b) Plans?

I work for a large museum that sponsors multiple retirement plans.

“In a recent document review, I discovered that, although all our plan documents were executed and up to date, and most of our plans also provide current summary plan descriptions (SPDs) to plan participants, our 457(b) plan lacked an SPD. Do I need to correct this apparent oversight?” 

Michael A. Webb, vice president, Cammack Retirement Group, and David Levine, with Groom Law Group answer:  

First of all, the Experts commend you for your plan document review; all plan sponsors should be performing this activity regularly to ensure that a) all plan documents and related amendments are signed b) the documents comply with current law and conform the current operation of the plans in all aspects.

However, the lack of an SPD for your 457(b) is likely not an oversight, in the sense that a summary plan description is only required under the Employee Retirement Income Security Act (ERISA). Plans that are not subject to ERISA, including all 457(b) plans (which will be either of a non-qualified church controlled organization, governmental or “top hat” (i.e., for a select group of management or highly compensated employees)), are not required to have an SPD at all.

That does not mean, though, that having one might not be advisable, even if not required. An SPD is to make sure that participants understand the terms of their plan, and avoiding misunderstandings as to what benefits are is probably the best way to avoid pension litigation. For this reason, church, governmental and sometimes top hat plans may choose to provide a summary of the plan document for employees, though it may not be called that. If a plan is non-ERISA, it is important, though, to avoid putting any boilerplate or other language in the SPD that might suggest it is governed by ERISA.

“Top hat” 457(b) plans for tax exempt organizations are perhaps less likely to have detailed summaries because many of these plans only cover a handful of people and there is often one-on-one discussion about the plan with eligible employees. However, for larger tax-exempt organizations, summary style documents can be more common.

Thank you for your question!


NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.  

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