What Is a 401(k) Summary Plan Description?

A 401(k) Summary Plan Description (SPD) is a comprehensive, plain-language guide for individuals participating in an employer-sponsored retirement plan. This document distills complex legal and technical details of the 401(k) plan into an accessible format. Its purpose is to inform participants about their rights, benefits, and responsibilities, helping them understand their retirement savings. The SPD serves as a central resource for employees to grasp the fundamental aspects of their retirement benefits.

Core Components of a 401(k) SPD

A 401(k) Summary Plan Description contains specific information legally mandated by the Employee Retirement Income Security Act (ERISA) to ensure transparency for plan participants. This document states the plan’s official name and type, along with the identifying information of the employer sponsoring it. It also includes contact details for the plan administrator.

The SPD details the eligibility requirements for participation, outlining conditions like age minimums or length of service. It explains the rules for contributions, specifying how employee deferrals are made and any applicable limits. Information regarding employer contributions, such as matching contributions or profit-sharing allocations, is also included, detailing how these amounts are determined.

A significant portion of the SPD explains the vesting schedule for employer contributions. This section clarifies when an employee’s right to employer-provided funds becomes non-forfeitable, often presented as a graduated schedule. The document also outlines how participants can direct their investments within the plan, typically providing information on available investment options and associated fees.

Rules governing distributions, including withdrawals, rollovers, and loans from the 401(k) account, are explained. This includes procedures for hardship withdrawals or understanding the terms for plan loans. The SPD also details the procedures for making claims for benefits and the process for appealing any denied claims. A statement of participants’ rights under ERISA is a required inclusion.

Receiving and Understanding Your SPD

Plan participants typically receive a Summary Plan Description at specific intervals and under certain circumstances. New employees eligible for the 401(k) plan must receive an SPD within 90 days after becoming a participant. For newly established plans, the SPD must be distributed to all participants within 120 days of the plan’s effective date.

The SPD is updated and redistributed periodically. If the plan has undergone changes, an updated SPD must be provided to participants at least every five years. If no changes have occurred, a restated SPD must still be distributed at least every ten years.

Delivery of the SPD can occur through various methods, including traditional mail or electronic delivery. Employers are responsible for ensuring the chosen delivery method results in actual receipt by the participant. Upon receiving the SPD, participants should review it carefully and keep it for personal records. Participants can ask the plan administrator or human resources department for clarification on any unclear provisions.

Distinguishing from Other Plan Documents

The Summary Plan Description serves a distinct purpose compared to other official 401(k) plan documents. While the SPD is a plain-language summary designed for participants, the official plan document is the comprehensive, legally binding instrument that governs the plan’s operations. It contains intricate details, rules, and provisions, often written with technical jargon.

In the event of any discrepancy or conflict between the SPD and the official plan document, the terms of the official plan document take precedence. The SPD is an easily digestible overview, whereas the official plan document is the definitive legal reference.

Another document often provided to participants is the Summary Annual Report (SAR). The SAR differs significantly from the SPD as it provides a summary of the plan’s financial information, derived from the annual Form 5500 filing with the Department of Labor. Unlike the SPD, which outlines plan rules and participant rights, the SAR focuses on the plan’s financial health, including assets, liabilities, and income.