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SPD Language for Tiered Plans


Lynn Campbell
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Of course participants read the SPD....

Anyway, most of the documents I've seen explain that the employer can make contributions as it determines to the different classes of employees and then go on to explain how the formula works, depending on the exact document language.

Personal opinion here - your thoughts about the employees are one of the downsides of cross-tested plans that tend to get glossed over in the sales pitch.

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I have had this discussion with a number of my clients who are TPAs and trying to figure out what to say in the SPDs they prepare for their plan sponsor clients.

In most cases, the SPD has been drafted to list/define the classes and then explain how the contribution will be allocated between the classes and within the class. The explanations are usually general, for example: "the contribution made by the employer to each class is allocated on a compensation ratio basis to the members of the class."

I have not actually done this, but some practitioners have suggested separate plans for each class (they would be aggregated for testing) so that you don't have to disclose to participants in any class what other classes are getting. This might be an issue if the document provides for an allocation of 25% to the class of big shots and an allocation of 3% to the little shots, but with the new IRS guidance, you don't have to put the %'s in the document so it probably is of less interest now.

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  • 1 month later...
Guest Bill Mulkern

ERISA Reg. 2520.102-4 "Option for different summary plan discriptions" answers this question. "In some cases an employee benefit plan may provide different benefits for various classes of participants... (...) In such cases the plan administrator may fulfill the (SPD requirement)by furnishing to each member of each class of participants...a copy of a(n SPD) appropriate to that class. (...) (The SPD) may omit information which is not applicable to the class of participants...to which it is furnished."

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