SPDs rule: employers beware.(summary plan descriptions)

Employers have tended to treat summary plan descriptions (SPDs) as an afterthought. While their attorneys labor over drafting a highly detailed plan document, the job of preparing the plan summary is left to the folks in HR and an English major at a consulting firm. The resulting SPD can be a slick model of simplicity that is free of arcane legal jargon--unfortunately, however, it can also leave the employer wide open to a lawsuit.

The SPD is supposed to be just as the name suggests--a summary. Yet, it is the law of the land that in a conflict over the terms of a plan, the SPD trumps the plan document. In recent court cases, plan participants who did not even read the SPD have won extra benefits based on a mistaken or even vague summary plan description. How did we get to this odd state of affairs?

Under the Employee Retirement Income Security Act (ERISA), employers must provide each participant in a retirement plan with a "plain english" summary of its material terms within 120 days of the plan's adoption. (Interestingly, ERISA does not impose a specific penalty for being late or even not having an SPD at all.) Plan amendments must be described to participants in a summary of material modification within 210 days after the end of the plan year in which the amendment takes effect. The idea behind these documents …