Are there penalties if an employer does not have an SPD or plan document?

Employers/plan administrators may be liable for serious penalties if they don't provide an SPD or have a current plan document:

  • Failure to provide an SPD or plan document within 30 days of receiving a request from a plan participant or beneficiary can result in a penalty of up to $110 per day per participant or beneficiary for each violation.
  • Lack of an SPD could trigger a plan audit by the U.S. Department of Labor (DOL).
  • Failure to furnish to the DOL any requested information relating to the employee benefit plan can result in a penalty of up to $161 per day (not to exceed $1,613 per request).
  • Having documentation in order protects against disgruntled employees if issues regarding coverage arise.

 Can I use Wrap360 to create a Summary of Material Modifications (SMM)?

Yes. To access Wrap360's SMM Generator, go to Notices & Tools > SMM Generator in the top navigation menu.

 Can the SPD be distributed electronically?

Yes, as a general rule, materials required to be furnished under ERISA may be provided electronically if the plan administrator takes necessary measures reasonably calculated to ensure that the system for furnishing documents results in receipt of the material. Ways to ensure receipt of an SPD include using return-receipt or notice of undelivered email features, or conducting periodic reviews or surveys to confirm receipt. In addition, in order to provide materials electronically:

  • The administrator must take steps reasonably calculated to ensure that the system protects the confidentiality of personal information relating to the individual's accounts and benefits;
  • The electronically delivered documents must be prepared and furnished in a manner consistent with the style, format and content requirements applicable to the particular document;
  • Notice must be provided to each participant, beneficiary or other individual, at the time the document is furnished electronically, that informs the individual of the significance of the document when it is not otherwise reasonably evident as transmitted (e.g., the attached document describes changes in the benefits provided by your plan) and of the right to request and obtain a paper version of such document; and
  • Upon request, the participant, beneficiary or other individual must be furnished a paper version of the electronically furnished documents.

Unless an individual has the ability to effectively access documents furnished in electronic form at any location where the individual is reasonably expected to perform his or her duties as an employee, and access to the employer or plan sponsor's electronic information system is an integral part of an individual's job duties, he or she must affirmatively consent to receive documents through electronic media. In the case of documents to be furnished through the Internet or other electronic communication network, consent must be given in a manner that reasonably demonstrates the individual's ability to access information in the electronic form that will be used to provide the information. Prior to consenting, the individual must be provided a clear and conspicuous statement indicating:

  • The types of documents to which the consent would apply;
  • That consent can be withdrawn at any time without charge;
  • The procedures for withdrawing consent and for updating the individual's address for receipt of electronically furnished documents or other information;
  • The right to request and obtain a paper version of an electronically furnished document, including whether the paper version will be provided free of charge; and
  • Any hardware and software requirements for accessing and retaining the documents. 

 Can you combine the Wrap SPD and Wrap Plan Document?

ERISA has separate and distinct legal requirements for summary plan descriptions (SPDs) and plan documents. Under the law, SPDs must be written in a manner "calculated to be understood by the average plan participant." In fulfilling this SPD requirement, the plan administrator is responsible for exercising considered judgment and discretion by taking into account such factors as the level of comprehension and education of typical participants in the plan and the complexity of the terms of the plan. Consideration of these factors "will usually require the limitation or elimination of technical jargon and of long, complex sentences." 

By contrast, the plan document must include specific items required under federal laws such as ERISA and HIPAA, regardless of their complexity. In addition, it must contain all technical and legal specifics that are not only required to sponsor and administer the plan, but also to withstand any legal challenges that may be brought against the plan or the employer.

Including the lengthy and often technical terms of the plan document in the SPD is likely to cause confusion for the average plan participant, rather than promote an understanding of plan benefits and eligibility requirements. Similarly, omitting these details from the plan document would result in a document that could be legally inadequate.

Therefore, separate documents are recommended to address these separate legal requirements.

 Do employers of all sizes need to provide Wrap SPDs?

ERISA requires plan administrators to give plan participants, in writing, the most important facts they need to know about their benefit plans. Participants are entitled to receive a summary plan description (SPD) automatically when becoming a participant of an "ERISA-covered employee benefit plan." (See ERISA-Covered Benefits Included in Wrap FAQs) The plan administrator is legally obligated to provide the SPD to participants free of charge. This requirement applies to most private sector employee benefit plans.

 If plan participants received their component benefit plan documents, can the employer just distribute the Wrap SPD or does everything have to be distributed at the same time?

The Wrap SPD and benefit plan component documents do not have to be distributed at the same time, as long as the plan participants receive all the required documents with the most current information that applies to plan benefits.

 Is there a Data Collection Booklet for the SMM Generator?


 Isn't distributing the plan booklets or insurance certificates enough to be compliant with government requirements?

No. While carriers do provide plan information, they typically will not provide all the required provisions that must be included in an SPD and plan document. So an employer/plan administrator will not be in compliance and faces the risk of penalties and other complications if participants only receive a benefits booklet, benefits summary, or certificate of insurance.

 Where will the SMMs I generate using the SMM Generator be archived?

Generated SMMs that have not been replaced by an SPD or another SMM will be archived in the “Generated Documents” section. SMMs that have been replaced by an SPD or another SMM will be in the “Archived” section.

 Who must provide the Wrap SPD?

The plan administrator (which is typically the employer) is the person specifically designated by the terms of the plan who is responsible for its management. If the plan does not make a designation, the plan sponsor (typically the employer that establishes or maintains the plan) is generally the plan administrator.

 Who must receive the Wrap SPD?

The SPD should be distributed to all plan participants. The employer/plan administrator also must furnish copies of the most current SPD and plan document to participants and beneficiaries upon written request and must have copies available for examination. Copies should be furnished no later than 30 days after a written request.

Please Note: Wrap360 and its employees and officers are not permitted to offer legal advice. These FAQs are provided for general information purposes only. As the answers to specific questions may vary based on federal or state law, as well as on company documents for the issues in question, it would be prudent to consult knowledgeable benefits counsel for individualized guidance.