November 9, 2010

Plan Communication Important

In a recent case (Madhuri Kasireddy, Plaintiff, v. Bank of America Corporation Corporate Benefits Committee,No. 09C7940, US District Court, N.D. Illinois, Eastern Division, 10/13/10),the importance of diligence in plan communication is underscored. 

As background, both welfare benefit plans and retirement plans subject to ERISA are required to communicate the terms and conditions of the plan to plan participants; and in some instances, to plan beneficiaries.  Generally, this obligation falls on the plan administrator. 

An ERISA plan must have a written plan document.  Plan participants and certain beneficiaries must be given a summary of the plan document, known as a summary plan description (SPD); and, if the terms and conditions of plan change, a summary of material modification (SMM) must be provided.  These documents set forth the rules of the plan.  It is very important that plan participants receive these rules within the timeframes prescribed by ERISA; specifically: 

  • An SPD must be provided within 90 days of when a participant becomes covered under the plan.  In addition, any change in the SPD must be provided within 210 days following the close of the plan year in which the plan change takes place. 
  • A summary of a material reduction in benefits must be provided within 60 days of the adoption of the change. 
  • The health care reform law (Patient Protection and Affordable Care Act) requires a 60-day advance notice of any material change in benefits; the details of this requirement have yet to be defined by regulation. 

All of this being said, it is very prudent to provide the governing plan rules to plan participants, as soon as reasonably practicable, and not rely on these outside limits. 

It is also important to be mindful of the fact that both plan participants and beneficiaries have the right to request plan-related documents from the plan sponsor at any time, and that the request must be responded to within 30 days.  If information reflecting the current plan is requested, this is what must be provided, even if a general distribution of such information has not occurred.  This is the matter at issue in the above-referenced case.  The plan administrator did not provide the requested documents within the 30-day window.  It argued that, in fact, it had up to 210 days following the close of the plan year in which to provide the documents.  The Court imposed the maximum statutory penalty of $110 per day for the 96-day period in which that the plan administrator delayed in furnishing the requested plan information to the participant (total of $10,560 in statutory fines).

The lesson here is that, from both a practical and a legal perspective, it is very important that plan participants be given the information that they need to understand the terms and conditions of the plan; and that the requirements of ERISA must be scrupulously followed.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

Accelerated Recovery Resources

Access articles and tools to help your business generate cash, improve leverage, and align & transform as you recover from the pandemic.

COVID-19 Resources

Access all COVID-19 related articles to help your business respond to the pandemic.

Insights in Your Inbox