A 401k Summary Plan Description

What is a summary plan description and why should I have one for my 401k? Glenn A. Rivera, Harvey, IL 60426

Glenn, a summary plan description is the document that tells your employees about the 401k plan you offer for their benefit. This document has to explain the plan to the participant employees in a clear and comprehensive manner. You need this document to educate your employees about the 401k you are offering and to ensure that they do not sign up for participation harboring any misunderstandings.

The SPD generally covers the following aspects of the plan:

  • Eligibility criteria to participate in the plan- includes when and how employees become eligible
  • Information about contributions
  • Vesting schedule
  • How and when employees can start getting benefits
  • Process of filing claims for benefits
  • Withdrawal/ loan eligibility, process and interest rates
  • Rollover procedures
  • Description of the employee’s rights and responsibilities with respect to the plan as specified by the ERISA
  • The expenses that will be incurred and paid by the plan

Every employee participant should be given a copy of the plan’s SPD. You also need to ensure that the SPD is given out at periodic intervals to all employees of your business. The employees will also receive a copy when they start getting their first benefits from the plan.

The SPD is different from the 401k’s plan document. While the SPD contains a brief outline of the plan’s key features, the plan document is a long winded full description of the plan. Consider the SPD a reference document for your employees when they need to clarify a doubt about a 401k feature, process or a procedure.

A clearly written SPD is a very helpful document for your employees because it acquaints them with the basics of your 401k. Once they have read and understood this document they can easily track and manage their 401k plan with a DIY plan like http://401k-easy-online.com/.

About Elliot Earl, Director, Pension Trade Association
Director, Pension Trade Association Founded in 1982, the Pension Trade Association [California Domestic Nonprofit Corporation #C1629080] is dedicated to helping workers save for their retirement through expanded coverage of 401k -type defined contribution pension plans.

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