Managing the complexities of employee benefit plans can raise questions you might hesitate to ask—whether they feel too basic or you’re unsure where to begin. In this series, “Employee benefit questions you didn’t want to ask (but should),” we tackle some of the most common questions about employee benefits to help you navigate the details with confidence. Whether it’s understanding plan documents, clarifying key terms or addressing compliance issues, we’re here to provide the answers you need.
Q: Are summary plan descriptions (SPDs) supposed to be easy to read?
A: Sort of.
An example might be helpful here. We can generally agree that furniture assembly instructions are typically designed to ensure that users can successfully assemble the furniture. However, some instructions are more user-friendly, while others are… not. While the first set of instructions is easier to understand, both sets are acceptable if they are written clearly enough for an average employee to assemble the furniture.
The same is true for an SPD. The official rule is that it must be “written in a manner calculated to be understood by the average plan participant.” It’s important to assess the education and comprehension level of your workforce and compare them to the complexity of your plan’s terms. Is your SPD written clearly enough to help your workforce understand the plan?
- Did you remove technical jargon that might be difficult to understand?
- Did you break long, complex sentences into shorter, more manageable ones?
- Did you provide plenty of examples to explain difficult topics?
In theory, if the SPD is written with these factors in mind, a typical participant should be able to understand it.
Before you start asking your employees if they understand the SPD, remember that the rule does not require every single participant to understand every single detail. It simply requires that the SPD be written in a way that helps a typical employee understand the plan.
