Summary Plan Descriptions Used as Plan Documents Pose Risk

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By Sean Forbes  

More than half of medium-size and large employers use their health benefits summary plan descriptions as their plan documents, which raises compliance concerns because summary plan descriptions should not be used this way, according to a survey report by HighRoads, a benefits plan management and health-care compliance company.

The Employee Retirement Income Security Act requires that summary plan descriptions be understandable to the average plan participant. But plan documents often are highly technical and difficult for those unfamiliar with benefits law to understand.

ERISA "stipulates that there should be two separate documents, a plan document and an SPD," Kim A. Buckey, principal, compliance communications services for HighRoads, told Bloomberg BNA in a Jan. 23 e-mail.

In the Fifth Annual Compliance Trends Survey Report, which was released Jan. 22, 56 percent of respondents said that they use two separate documents. However, the respondents might have been confusing the concept of a summary plan description with the concept of a wrap plan document, the report said.

A wrap plan document incorporates, or wraps around, one or more summary plan descriptions, HighRoads said. Sixty-seven percent of respondents said they had a wrap plan document.

The 2013 HighRoads survey was the first time that respondents were asked if they used their summary plan descriptions as plan documents, Buckey said.

Compliance Issues

"While ERISA does not spell out much in the way of requirements for plan-document content or format, it is very prescriptive with respect to SPDs, detailing what content should be included and specifically stating that the SPD be written so as to be understood by the average plan participant and not containing jargon. Since plan documents tend to be very legal documents, that would seem to conflict with the notion of using an SPD as a plan document," Buckey said.

In some cases, courts have ruled that such plans are not in compliance because "a plan document cannot simultaneously describe itself and summarize itself in one document," she said.

Despite the risks associated with noncompliance, 66 percent of respondents said they have a formal compliance strategy and 69 percent said that they have teams devoted to governance, compliance, or to both, the report said. Nearly a third of employers said that they have neither a governance nor a compliance team, it said.

About half of the companies with a combined compliance and governance function or with one function or the other used their summary plan descriptions as plan documents, Buckey said.

"Fifty-six percent of those with both compliance and governance functions used their SPDs as plan docs or vice versa, as did 57 percent of those with only a compliance function and 50 percent of those with only a governance function," Buckey said.

Writing Teams

The number of employers with plan-document writing teams that consist of at least six people increased to 27 percent in 2013 from 19 percent in 2012, and the number of employers with two- to five-person writing teams dropped to 55 percent in 2013 from 71 percent in 2012, Buckey said.

In 18 percent of companies, the summary plan document writing team consists of one person who is "likely highly overworked," the report said.

Twelve percent of the employers surveyed in 2013 said that writing or updating their documents was their biggest challenge, up from 6 percent in 2012, but about the same as in HighRoads' 2011 survey, when 13 percent cited writing or updating of documents as the biggest challenge, Buckey said.

Updating Declines

Fewer employers planned to update their summary plan descriptions in 2013 than in 2012, the report said.

Sixteen percent of employers planned to rewrite their summary plan descriptions in 2013 for readability, compared with 33 percent in 2012, and 67 percent of employers planned content updates in 2013, compared with 87 percent in 2012, the report said.

Twenty-six percent of employers said that they annually updated and distributed summary plan descriptions to their active employees, the report said.

Sixty-seven percent of employers said they preferred informing participants about plan changes through summaries of material modifications, and 46 percent of employers preferred notifying participants about plan changes through annual enrollment material, the report said.

The report also found that 45 percent of employers are using or planning to use social media to communicate with employees and retirees.

The analysis is based on data from a range of industries that represent about 5 million plan participants, the report said.

By Sean Forbes  

To contact the reporter on this story: Sean Forbes in Washington at

To contact the editor responsible for this story: Phil Kushin at

The survey report is at

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