Understanding Your Summary Plan Descriptions

HR Resource
September 21, 2012 — 1,991 views  
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Employers providing a retirement benefit to employees will issue a summary plan description shortly after an employee is hired. Understanding how to read this document is essential to ensure that the retirement plan will meet future financial needs.

Summary Plan Description (SPD) Defined

An SPD is a document given to an employee that has been extended the benefit of participating in a defined benefit or defined contribution plan. These plans are retirement funds that establish either a retirement account or a pension for the employee to use upon retirement. 

Contents of a Summary Plan Description

All of the information that an employee will need in relation to their retirement plan will be contained in the SPD. This document should be thoroughly reviewed upon receipt to ensure that the information provided matches up with anything the employer may have expressed to the employee before or immediately after the employee was hired. Concerns about discrepancies should be brought to the attention of a human resources representative.

The contents of the SPD are as follows:

• Eligibility requirements

It is common for a retirement fund to require the employee to be with the company for a certain amount of time before the plan becomes vested. Prior to meeting this requirement, the employee will likely lose their retirement benefit if they decide to leave the company. Once the plan is vested, the employee will be able to enjoy the retirement benefit upon retirement even if they decide to move on to another company in the meantime.

• Contribution allowances

The minimum and maximum contribution amounts will be detailed in the SPD. Some plans also offer the benefit of employer matching up to a certain contribution amount. 

If the plan is being maintained by contributions from an employer-funded source, this source will be identified and the means by which the plan will stay adequately funded will be discussed.

• Benefit claim process

The SPD provides information that employees need to make sure that they are able to collect benefits upon retirement. While employees should review this information immediately upon receipt of the SPD, it is also important to keep a copy of the document filed away so that the benefit claim process can be reviewed in the future.

• Termination details

Instances in which the benefit may be terminated will be outlined in detail in the SPD. Employees should be sure to review this information to make sure to avoid completing any action that may result in the termination of retirement benefits.

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