(b)lines Ask the Experts – SMM Required After Plan Change?

October 30, 2012 (PLANSPONSOR (b)lines) – “We recently had an amendment to our ERISA 403(b) plan consolidating our number of recordkeepers from two vendors to one.

“I wish to follow the regulations regarding the legal communication requirements of this amendment to employees, though we will be conducting a communications campaign regarding this change as a practical matter as well. But when I read the legal requirements, I am confused. Something called a Summary of Material Modifications, or SMM, is discussed, but could I not just issue an amended Summary Plan Description (SPD) instead?  And what is the timing?”  

Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:  

The Experts certainly cannot blame you from being confused, since the use of Summary Plan Descriptions, or SPDs, is much more publicized than the use of Summary of Material Modifications, or SMMs. The SMM would merely communicate the plan change itself to participants as a stand-alone document. The SMM is required to be delivered to all plan participants within 210 days after the close of the plan year in which the amendment occurred. However, if you wish to simply send out an entire SPD that is updated with the change included, that would satisfy the SMM requirement as well.  

The reason there are two options is that the SPD itself is only required to be updated every five years for amendments to the plan (and 10 years if there are no amendments to the plan, though it is a true rarity that a plan would not be amended for 10 years!). For plan sponsors who frequently amend their retirement plan, they might find it more administratively convenient, and less expensive, to merely issue a the shorter SMM each time the plan is amended and issue an SPD every five years that includes all interim amendments, rather than print and send an entire revised SPD to each participant each time a plan amendment is made. 

However, all that said, many practitioners suggest notifying employees in advance of important changes.  Such notices can even constitute SMMs.  Early and clear communication with your participants can avoid the types of misunderstandings that tend to lead to controversies and complaints.  And keep in mind that there are also separate advance notice requirements for “blackout” situations if you are changing vendors.  

The Experts wish you the best of luck distributing your plan’s SMM, or SPD, as the case may be!  


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.