Cyber for Plan Sponsors

Summary Plan Description?



A proper SPD is mandatory for compliance of the company sponsored retirement plan with ERISA. Importantly, a good, solid SPD is also helpful in the administration of the retirement plan and can even be useful for plan participants. Experts share advice about what to include in an effective summary plan description.


Detailed and Specific Language

Cornell Law School reminds us that Section 102 of ERISA specifies what must be included in the summary plan description and provides an outline here. Additionally, Amy Ciepluch and Leigh Riley of Foley & Lardner LLP encourage plan sponsors to pay attention to the questions participants ask routinely about the 401k plan and point out that these are signs of what your SPD “is not properly explaining.” Be sure to address those plan provisions in an update to the SPD and follow best practices, such as:


Make sure you discuss the plan administrator’s discretionary authority. Your SPD should specifically state that “the plan administrator has the discretionary authority to interpret and administer, in its sole discretion, the terms of the plan, and to make factual determinations.” The important word in that sentence is “discretionary.” This language, coupled with adherence to ERISA’s claims and appeals procedures, generally allows the plan administrator’s decision to receive a preferential standard of review in court….


The SPD should clearly state the rules for filing claims and appeals.The SPD should state that the claims and appeals process applies not only to claims for an immediate benefit but also to clarification of rights to future benefits.Consider stating that participants must exhaust the claims and appeals procedures not only for claims for specific benefits but also for claims relating to breach of fiduciary duty. Include a time limit for filing a lawsuit.


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Seize The Opportunity

Legal experts at JD Supra encourage plan sponsors to include information in the SPD that is helpful to plan participants—and corresponds to Department of Labor priorities. For example, include a statement about cybersecurity and even remind participants to use the DOL’s specific online security tips. Similarly, the SPD should address plan protocols for missing participants and uncashed checks: “Explain, at least in general terms, the plan’s process for addressing missing participants and uncashed checks (e.g., uncashed checks will be forfeited and if later reinstated at participant’s request, will be reissued without interest). Also, state the importance of participants and beneficiaries keeping the plan administrator informed of their address.”


Overall, it’s advisable to make the SPD as user friendly as possible for participants. For example, experts suggest:


Use cross-references and other shortcuts to help participants.Use a table of contents so that participants can identify all sections that may be relevant to their issue. Consider a one-page quick guide at the front with key terms.If language in one section is impacted by another, make sure to refer to that other section. Similarly, read the entire SPD to ensure consistency (that one section doesn’t say one thing and another something different).


For additional examples of what to include in the SPD—and specific language that will be particularly useful in the event of fiduciary allegations, plan sponsors can review this advice from ERISA legal experts Amy Ciepluch and Leigh Riley. Remember, only fiduciary liability insurance protects plan sponsors in the event of mistakes carrying out their duties. Absent coverage, even a mere accusation of a fiduciary breach can prove ruinous, with defense typically costing over $600 per hour. Insurance is critical: Fiduciary-Cyber Liability Insurance HERE.


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