NEWSLETTERS

The Employee Retirement Income Security Act requires a number of disclosures of plan and benefit information to participants and beneficiaries. The most important disclosure is the Summary Plan Description (SPD), which summarizes plan provisions in understandable language. This description is given to all plan participants and beneficiaries.

The purpose of the SPD is to inform the participant and beneficiary about the terms of the plan, the requirements of federal pension law, and the requirements to earn a pension under the plan. The SPD must be written in understandable language, with jargon explained.

Failure to distribute SPDs carries no monetary penalty. However, where an SPD has not been provided, a court may construe provisions strictly against the sponsoring employer. If an administrator fails to comply with a participant or beneficiary's request for information, however, a court may require the administrator to pay the requesting individual up to $110 per day from the date of the request, and may order any other relief. If the failure to comply is reasonably beyond the control of the administrator, then the court will not impose the penalty.

The SPD must be distributed within 120 days after a new plan has been adopted. New participants in an existing plan must receive the SPD within ninety days of becoming eligible to participate in the plan. If there have been no material modifications to the plan, then the SPD must be updated at least every ten years. That time is shortened to five years for plans with material modifications.

A foreign language notice of assistance to improve the understanding of foreign language employees must be included in the SPD if a specified part or percentage of the participants is literate only in a foreign language.

While the entire SPD does not have to be translated into the foreign language, the notice of assistance should clearly state that assistance is available, and note when and where that assistance may be obtained.

The foreign language assistance notice is required if 25 percent of participants are literate only in the same non-English language.

The special notice is required if 500 participants or 10 percent of all plan participants, whichever is less, are literate only in the same non-English language.

Modifications to the Plan and thus, the SPD, require the use of a Summary of Material Modifications (SMM). Material modifications include changes in the plan's terms, such as change in plan sponsor, collective bargaining agreement, vesting and benefit accrual provisions, or circumstances causing loss of future benefits.

The SMM must be sent to participants or beneficiaries within 210 days after the close of the plan year in which the change was made or adopted. If the change is withdrawn before 210 days have elapsed, no SMM is needed. Changes incorporated into the SPD within the time period do not need a separate SMM.

The summary plan description must be accurate in reflecting plan provisions. The following provides a summary of what must be included in the SPD.

• Formal and common names of the plan (i.e.; the "Administrative Retirement Services, Inc. 401(k) Plan," that is commonly called the "ARS Plan"),

• Name and address of the plan sponsor,

• Employer identification number,

• Type of plan (i.e.; defined benefit plan, defined contribution plan, etc.),

• Type of plan administration (i.e.; in-house, insured, third-party, etc.),

• Name, business address, and business telephone number of the plan
• administrator,

• Name of the person designated as agent for service of legal process, and the address at which process may be served on the person, as well as a statement that service of legal process may be made upon a plan trustee or the plan administrator,

• Name, title, and address of the principal place of business of each plan trustee,

• A statement, if applicable, that the plan is maintained under a collective bargaining agreement, a copy which may be obtained from the plan administrator upon written request,

• Plan's requirements for eligibility for participation (age and service requirements), statement of normal retirement age, and amount and description of benefits,

• Statement of joint and survivor benefits available under the plan, including the required election to select or reject survivor benefits,

• A statement clearly identifying circumstances which may result in plan disqualification, ineligibility, denial, loss, forfeiture, or suspension of any benefits that a participant or beneficiary might expect the plan to provide,

• A statement that the plan is or is not insured under ERISA Title IV, under the Pension Benefit Guaranty Corporation's (PBGC) insurance program,

• If insured by PBGC, a statement about guaranteed benefits and a source for further information

• A description and explanation of the plan provisions for determining the number of years for eligibility to participate, vesting, and breaks in service, and years of participation for benefit accrual, including the service required to accrue full benefits and the proration of benefits for failure to complete a full year of service,

• Sources of plan contributions and the method by which they are calculated,

• Identity of any funding medium, such as insurance company, trust fund, or other institution,

• Date of the end of the plan year for fiscal record purposes,

• Claims procedures,

• A statement of ERISA rights.

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