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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
from Spencer’s Benefits Reports: More than 70% of large companies surveyed do not know how much money they spend to create, store, and distribute summary plan descriptions (SPDs) to their participants, according to the annual SPD Trends Survey from management consultant HighRoads.
The 2010 survey, which included responses from Fortune 1000 companies, noted that the biggest change expected in the next few years is updating SPDs for plan design and health care reform changes, with 71% of respondents expecting to do so within the next year.
Need For Resources, Health Reform
According to HighRoads, 58% of employers felt the biggest challenge they faced in producing SPDs was resources, an 8% increase over last year. Approximately one in five, 21% (a 6% increase overlast year), indicated that managing the SPD review process was their biggest hurdle. HighRoads fully expected this result, as benefits and human resources staffs have been caught up in understanding the implications of health care reform and taking the steps to implement new plan designs and procedures required by the Patient Protection and Affordable Care Act (ACA), while dealing with resource cuts due to the struggling economy.
As was the case in the 2009 survey, the majority (72%) of employers had never asked—or did not know if they have asked—their employees about their SPDs. However, HighRoads reported that it had seen an “uptick in the number of clients and prospects who are interested in having the readability of their SPDs analyzed—perhaps looking to quantify the information they would otherwise receive anecdotally from their employees.”
With respect to health care reform, employers are taking a “global” approach to communicating changes to participants. Seventy five percent plan to address the impact of health care reform in their open enrollment materials: 63% are creating new communication materials just for this purpose; 56% are updating their SPDs and 38% are issuing Summary of Material Modifications (SMMs). (At the time the survey was conducted, in May 2010, 25% didn’t know yet how they were going to address communicating about the ACA.).
Also, HighRoads found that 46% of employers plan to rewrite their SPDs to make them more user-friendly. This is about the same percentage as last year, while slightly fewer (60%, down from about 65% last year) intend to streamline their SPD process within the next year. Still in the future is the shift to predominantly electronic distribution. Only 27% of respondents plan to make that change within the next year, and 46% expect it will be two years or more before the change occurs.
Updating, Costs
As was the case in 2009, half of the respondents continued to update the information in their SPDs by using SMMs, but 31%—up from 20% last year—are reissuing SPDs instead. In some cases, the respondents had begun using automation to expedite their SPD update and creation process, which enabled them to issue complete SPDs in lieu of issuing an SMM.
Employers appeared to be updating their SPDs more frequently than in the past—29% of respondents stated that they updated SPDs for their nonunion employees every year (up from about 12% last year), and 36% updated SPDs whenever the plan was updated. Most respondents issue new SPDS to union participants after a negotiation was completed (37%). According to HighRoads, “Retirees seem to get the short end of the stick—43% of respondents indicated that they updated and distributed SPDs to retirees ‘whenever there’s time or capacity.’”
Of increasing concern is the fact that 71% of respondents—up from 65% last year—have no idea how much money they spend to create, store and distribute SPDs to their participants. According to HighRoads, “With more and more employers issuing SPDs annually—and thus incurring related costs annually—this is going to become an important issue for human resources in the not too distant future. As the economy struggles to rebound, employers continue to look for ways to reduce hard and soft dollar expenditures. Getting a handle on current costs can arm human resources to make decisions about whether to insource or outsource SPD work—and provide a baseline as human resources quantifies the ROI of their decisions on process, productions and distribution.”
Distribution Of SPDs
While more employers are updating their SPDs annually, 50% or more also indicated that they distribute to all participants on “no particular schedule.” None of the respondents were targeting January 1 as a distribution date (down from about 15% last year); and the percentage of employers targeting open enrollment as their distribution timeframe remained about the same (around 19%).
While there was no clear “standard” time for new hires to receive their SPDs, the trend seemed to be moving towards getting SPDs to them as soon as possible. One third of respondents (up from 20% last year) distribute SPDs at orientation and 20% (up from 10% last year) sent them out after the employee accepted the position, but before the first day of work. Employers are actively exploring alternatives to printing as a way to reduce costs. Several respondents indicated that they were already distributing SPDs via CD; other suggestions included:
*According to regulations from the Department of Labor, the use of electronic information systems in common areas of the workplace (such as in information kiosks or computers available to all employees in an employee cafeteria) “is not an appropriate means by which to deliver documents required to be furnished to participants.” Common-area access may be an appropriate means by which to make plan information available for inspection, as a supplemental method of disclosure, or as a way to access additional nonmandated materials.
Employers that already have embraced electronic distribution as an alternative to print distribution typically post their SPDs to a portal site, notifying participants that a hard copy can be requested (67%). This approach was primarily used for active, non-union employees. Other approaches included a postcard mailer with instructions on how to access SPDs online, and mailing a CD.
Seventy nine percent of respondents did not distribute SPDs electronically to retirees and inactive participants, most likely because they are unable to determine if those participants have computer access.
“Regular” mail remains the preferred method of distribution to retirees and inactive participants; this is typically handled in house rather than by a vendor or plan administrator, according to the survey.
For those companies who have not ventured into electronic distribution, the main reason continues to be perceived lack of computer access by participants (50%, down from 65% last year), although legal departments’ lack of comfort with electronic distribution remains a prominent reason (25%, up from 15%). Interestingly, this year no respondents felt online distribution was too expensive or complicated, down 13% from last year. Those employers who do distribute online typically provide access through their intranet site (54%), with 23% providing access through a vendor’s portal.
For more information, visit http://www.highroads.com/.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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