PHR practice question 10 of 25

Your organization has a retirement benefits plan that is covered by ERISA . Under ERISA, which of the following is your organization required to do for the plan participants?

Answer options

A: Provide each participant with plan information, specifically about the features and funding of the plan through a summary plan description at a cost of no more than $7 per participant, per year.

B: Provide each participant with plan information, specifically about the features and funding of the plan through a summary plan description at no cost. Correct answer

C: Provide each participant with monthly plan information, specifically about the features and funding of the plan through a summary plan description at no more than $7 per participant, per month.

D: Provide each participant with monthly plan information, specifically about the features and funding of the plan through a summary plan description at no cost.

Correct Answer:

B. Provide each participant with plan information, specifically about the features and funding of the plan through a summary plan description at no cost.

Explanation

The Employee Retirement Income Security Act (ERISA) of 1974 mandates that plan administrators provide participants with a Summary Plan Description (SPD). This document clearly communicates plan features, funding, and participant rights. According to the U.S. Department of Labor, which enforces ERISA, the plan administrator is legally required to furnish the SPD to participants free of charge. While a reasonable charge may be assessed for requests for additional copies of the SPD, the initial copy and any required updates must be provided at no cost. The SPD is not distributed monthly.

Why Incorrect

A. ERISA requires the SPD to be provided free of charge, not for a fee. A fee is only permissible for extra, requested copies.
C. The SPD is not distributed monthly, and it must be provided for free, making both aspects of this option incorrect.
D. The SPD is not distributed on a monthly basis; it is provided upon enrollment and updated periodically as required by law.

References

1. U.S. Department of Labor, Employee Benefits Security Administration. (2021). What You Should Know About Your Retirement Plan. Section: "Summary Plan Description (SPD)". The publication states, "The plan administrator must give you a copy of the SPD free of charge when you become a participant." (p. 6).

2. U.S. Department of Labor. (n.d.). ERISA § 104(b)(1). 29 U.S. Code § 1024 - Filing and furnishing of information. This section of the statute mandates the furnishing of the summary plan description and other documents to participants and beneficiaries. The associated regulations (29 CFR 2520.104b-1) clarify that no charge may be imposed for documents required to be automatically furnished.

3. Martocchio, J. J. (2020). Strategic Compensation: A Human Resource Management Approach (10th ed.). Pearson. Chapter 10, "Legally Required Benefits," discusses ERISA's communication provisions, including the requirement to provide an SPD at no charge (p. 301).

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