Plan document: the summary plan description

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

plan document, 401(k), employee benefit plans, retirementAll 401(k) Plans have a plan document which contains a comprehensive detail of all the rules surrounding the Plan. This plan document can be lengthy and overwhelming and therefore, 401(k) Plans also have a Summary Plan Description (“SPD”) document. The SPD is a concise summary of the Plan’s key features, some of which include the following:

  • Description of the employees that are eligible to participate in the Plan, when they become eligible to participate in the Plan and how they enter the Plan upon reaching eligibility.
  • The types of employee and employer contributions that are allowed under the plan.
  • The types of compensation that are used to calculate the Plan benefits.
  • The limitations of the amount of compensation that can be used in benefit calculations.
  • The limitations of the amount that can be contributed to the Plan.
  • The administrative expenses associated with the Plan, as well as to how those expenses are funded.
  • The Plan’s vesting schedule.
  • The types of distributions allowed under the plan, and the timing of when those distributions can be taken.
  • The rules and requirements surrounding Plan loans, including interest rates and repayment periods.

The SPD is a great reference for both the employer and the employee as it addresses the most common questions participants have regarding the Plan. Ultimately, the SPD is a helpful document that can be used to supplement and facilitate discussions regarding the Plan.

Michael Guido, CPA