What’s the Difference Between a Summary Plan Description and a Summary of Material Modifications?
If you offer benefit plans covered under the Employee Retirement Income Security Act (ERISA), you have many disclosure requirements. Two of the most important notices you must deliver to every employee participating in your plan are your summary plan description (SPD) and summary of material modifications (SMM).
Knowing the difference between the two and when you must provide them can help your employees benefit from your plan and keep you in compliance.
What is a summary plan description?
An SPD describes the plan’s benefits and eligibility requirements in easy-to-understand language. It must also include information about plan trustees, a statement of the participant’s ERISA rights, how the plan will be funded and the claims procedure.
If you are starting a new plan, you must provide an SPD to your employees within 120 days of the plan’s start. In addition, you must distribute an SPD to each new plan participant within 90 days of the date they become eligible to participate.
Finally, you must provide every participant with an updated SPD every five years if you have made any changes to the plan. If you haven’t made any changes, you must provide the SPD every 10 years.
What is a summary of material modifications?
You must provide an SMM to all eligible employees whenever you make a material change to the plan. Facts and circumstances determine if a change is considered material. Material modifications include amendments that create new benefits, remove existing benefits, change how benefits are paid, or terminate the plan.
Most plans distribute an SMM whenever they amend their plan to ensure compliance with SMM requirements. Like an SPD, an SMM must be written in easy-to-understand language and clearly describe the changes to your plan.
There are two different disclosure requirements for SMMs. If a material reduction in covered services or benefits is made to a group health plan, participants generally must receive notice within 60 days after the reduction is adopted.
For any other material changes to any of your ERISA-covered plans, you must provide an SMM within 210 days (approximately seven months) after the close of the plan year in which you made the modification. For example, if you have a calendar year plan and make a change in 2026, you must provide an SMM to your eligible employees by the end of July 2027. If you’d like, you can provide an updated SPD in place of the SMM.
Notice distribution may seem complicated, but it doesn’t have to be. Follow the timing requirements above to keep your plan compliant and provide your employees with the benefit information they need. Consult your benefits adviser if you have any questions.