South Carolina Life and Health Practice Exam

What is the purpose of the Summary Plan Description (SPD) mandated by ERISA?

1. To outline the company's financial status

2. To disclose the plan’s benefits and rights

3. To detail investment strategies

4. To provide performance reviews for plan managers

The correct answer is: To disclose the plan’s benefits and rights

The Summary Plan Description (SPD) mandated by the Employee Retirement Income Security Act (ERISA) serves as a crucial document for participants in retirement and welfare benefit plans. Its primary purpose is to provide clear and comprehensive information about the plan's benefits, rights, and obligations. This means it must detail what benefits are available under the plan, including eligibility requirements, how to file claims, and the procedures for appealing denied claims. The SPD is designed to be easily understandable, ensuring that participants can make informed decisions regarding their benefits and understand their rights and responsibilities. It is essential for the SPD to be accessible to all participants, as it acts as a primary source of information regarding their benefits. This transparency is a key component of ERISA's goal to protect plan participants and ensure that they have the necessary information to navigate their benefits successfully. In this context, while outlining the company's financial status is important for corporate governance, detailing investment strategies could be relevant for investment orientated plans, and providing performance reviews pertains more to oversight rather than participant education. The SPD's focus is specifically on ensuring that participants are well-informed about their benefits and rights under the plan.