The Importance of the Plan Document

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

It is important to understand how your Plan works.  Those responsible for the management and oversight of the retirement plan must follow certain rules for operating the Plan, handling the plan’s money, and overseeing the firms that manage the money.  One area that is crucial to the operation of any Plan is knowing and following the Plan Document.

Each retirement plan is required to have a formal, written plan document that details how it operates and its requirements.  There is also a booklet that describes the key plan rules, called the Summary Plan Description (SPD), which should be much easier to read and understand. The SPD also should include a summary of any material changes to the plan or to the information required to be in the SPD. In many cases, you can start with the SPD and then look at the plan document if you still have questions about how the plan should operate.

As laws change due to Congressional or regulatory action, employers are required to update their plan document to conform to new laws.  In between required restatements, employers may be required to adopt interim amendments to keep their 401(k) plan document current.

Those responsible for the management and oversight of the Plan should follow the Plan Document for all Plan related decisions.  If you fail to follow the Plan Document throughout the operation of the Plan, there can be some costly consequences.  Especially if you get selected for a Department Of Labor audit.

Ryan Wojdacz