ESOP Administration: When was the last time you updated and distributed your SPD?
ERISA §101(a) requires the plan administrator to furnish the Summary Plan Description (SPD) to each participant covered under the plan and to each beneficiary who is receiving benefits under the plan. The SPD informs participants of the material provisions of the plan, how to make a claim for benefits, and what their rights are under ERISA.
While most plan administrators understand new participants should receive an SDP no later than 90 days after becoming a participant, the periodic SPD distribution requirement may be accidentally overlooked.
An updated SPD should be delivered to all participant and beneficiaries every 5 years if there have been amendments made to the plan that would affect the contents of the SPD. Regardless of whether amendments were made to the plan, an updated SPD must be distributed to all participants and beneficiaries at least every 10 years. Title 29 of the Code of Federal Regulations § 2520.104b-2 requires the administrator of an employee benefit plan provide an updated SPD no later than 210 days following the end of the plan year for which the SPD is updated.
While ERISA does not impose penalties related to the disclosure rules of SPDs, penalties of $100 per day (with a $1,000 maximum) can be assessed by the DOL for failure to produce an SPD within 30 days of their request. In addition, fines up to $5,000 or imprisonment up to one year can be sentenced to any person who willfully violates the disclosure requirements.
ERISA attorneys that draft and maintain ESOP documents would be a good source in preparing and updating your SPD. If you need assistance locating an attorney that is well-read in ESOPs, please feel free to contact us for a referral.