SPD provided to employees "eligible to participate" in plan

While I understand that plan participants are required to receive an SPD within 90 days of becoming a plan participant, where is the support under IRS or DOL regs. that employees eligible to participate must also receive the SPD even if they never become plan participants?

17 hours ago, Ananda said:

employees eligible to participate...they never become plan participants

Please clarify/give an example; I'm not following what you are describing.

If you are thinking of a 401(k) Plan with elective deferrals only where they choose to defer 0%, they are still participants, they just have a $0.00 balance. They still need to get a SPD.

Thank-you for the responses. My question is if an employee is eligible to participate in the plan by meeting the service requirements etc., but chooses not to participate or neglects to participate in the plan, does that individual need to receive an SPD when he or she  becomes eligible? ERISA Section 101 states that "each participant under the plan" needs to get the SPD so I read this to mean only plan participants get the SPD. However, I've seen some treatises that state employees eligible to participate also need to get the SPD, but I've found no support for this. Does anyone provide SPD's to employees who are not plan participants but eligible to participate?   

5 minutes ago, Ananda said:

 Does anyone provide SPD's to employees who are not plan participants but eligible to participate?   

The reason you are confused is this question makes no sense under retirement law or plan documents.    If a person is eligible to participate they are a participant 100% of the time. 

It doesn't matter if they did or didn't complete some form or decide to defer or whatever it is you are thinking of that makes a person a participant.   If  a person met the eligibility requirements and crossed an entry date per the plan document they are a participant- period full stop end of story.  

So if someone is eligible to participate you give them an SPD because they are a participant.  

OK Thank-you for your response. I did some quick research and the source for this is ERISA Section 3(7) which states that a participant is defined as someone "who may be eligible to receive plan benefits". However, regarding SPD's the confusion is ERISA Section 101(a) which doesn't just state a "participant" must receive an SPD but rather states "each participant covered under the plan" must receive an SPD. Arguably, if I'm eligible to participate in the plan but do not enroll in the plan I'm not "covered under the plan" and thus not required to receive an SPD. Despite the confusing language, its probably best to play it safe and provide SPD's to employees eligibile to participate, but who never enrolled in the plan. 

29 minutes ago, Ananda said:

Arguably, if I'm eligible to participate in the plan but do not enroll in the plan I'm not "covered under the plan" and thus not required to receive an SPD.

I wouldn't try using that argument when your completing the 5500 participant counts.

29 minutes ago, Ananda said:

Arguably, if I'm eligible to participate in the plan but do not enroll in the plan I'm not "covered under the plan" and thus not required to receive an SPD.

There is no arguing.  Those eligible but not contributing are still "covered" by the plan.

Consider these interpretive rules:

“[T]he plan administrator of an employee benefit plan subject to the provisions of part 1 [of subtitle B] of title I shall furnish a copy of the summary plan description . . . to each participant covered under the plan (as defined in § 2510.3-3(d))[.]”

29 C.F.R. § 2520.104b-2(a) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104b-2

“An individual becomes a participant covered under an employee pension plan” no later than “[t]he date designated by the plan as the date on which the individual has satisfied the plan’s age and service requirements for participation[.]”

29 C.F.R. § 2510.3-3(d)(1)(ii)(A)(2) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-B/part-2510/section-2510.3-3#p-2510.3-3(d)

If a statute is ambiguous, a court defers to the agency’s notice-and-comment rule if the rule’s interpretation is permissible.  Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (June 25, 1984).

On 10/18/2021 at 3:43 PM, Ananda said:

where is the support under IRS or DOL regs. that employees eligible to participate must also receive the SPD even if they never become plan participants?

Aside from the legal requirements explained by others, Ananda, how is someone who does not elect to contribute going to learn about the opportunity to contribute and what that might mean for his/her future retirement if they don't get an SPD?"

Side note:  I always thought it was silly to allow the SPD to be given up to 90 days AFTER becoming eligible.

My side note:   I have never understood the resistance to handing out SPDs.   I have a client that issues 26k W-2s/year.    They put it in everyone's on boarding package.  

I have clients with a few hundred to a few thousand employees and they all put it in the on boarding package or when they become eligible. 

I will admit most ESOPs want people to think like owner employees so they have a bigger motive to get people to understand the plan but even back when I did 4k plans I just don't remember a lot of push back on this issue like I read at times on this board.