SPD Changes

[Guest cassynnc]

If the SPD was originally written with misleading information and needs to be modified - SMM; how long does the Fidiaciary have until the information must be in the employees' hands? Under current laws.

[Guest Form5500]

If the SPD was originally written with misleading information and needs to be modified - SMM; how long does the Fidiaciary have until the information must be in the employees' hands? Under current laws.

I'm not sure what the misleading information on the SPD is, but you need to correct it immediately and it needs to be done by correcting the original SPD and not by issuing an SMM.

Courts have held that where a SPD conflicts with the terms of an employee benefit plan, the SPDmay control. In Hooven v. Exxon Mobil Corporation, 2006 WL 2988116 (3d Cir. 2006), however, the Court of Appeals for the Third Circuit clarified that employers can avoid this unintended liability by distributing a corrected SPD before the rights vest or accrue or the employee relies to his or her detriment on the mistaken SPD.

In Hooven, the employer modified its severance plan to provide that no severance would be paid to certain employees if their business unit were sold and the acquiring entity offered them comparable employment. Unfortunately, as is sometimes the case with employee welfare plans, the SPD did not precisely match the plan document, since it failed to notify the employees of this change.

The employer discovered the omission before the sale was completed and issued a corrected SPD notifying the employees of this limit on their right to receive severance benefits. The employees still sued, claiming that the employer was bound by the original, misleading SPD. The court sided with Exxon reasoning that to rely on a misleading SPD to obtain benefits, the benefit must vest or accrue before the employer corrects the misleading SPD. Here, the benefits did not vest until the employees were terminated, and by then, the misleading SPD had been corrected.