What is a Summary of Material Modifications (SMM)?

When it comes to managing employer-sponsored health or retirement plans under ERISA, clear communication with plan participants is critical. A Summary of Material Modifications (SMM) plays a key role in this communication. Simply put, an SMM is a document that informs employees of important changes to their benefits plan that differ from what was originally described in the Summary Plan Description (SPD) [1]. Whether it's an update to the benefits offered, eligibility requirements, or the procedures for filing claims, the SMM ensures that employees are kept in the loop.

The importance of an SMM lies in its ability to maintain transparency and trust between the employer and the employees. Whenever a material change occurs—one that significantly alters the benefits or operations of the plan—the employer is required by ERISA to notify plan participants [3]. These modifications could include changes in the types of benefits offered, adjustments to eligibility rules, amendments to the procedures for obtaining benefits, or alterations to cost-sharing mechanisms like premiums or copayments [2].

"A summary of material modification (SMM) is required anytime there's a 'material' change to the SPD. The guidance doesn't describe what changes are considered material, but some examples could include changes to the benefits provided (such as adding vision), carrier changes, changes in policy numbers, TPA changes, participating employer changes or changes in eligibility." [2]

Once a material modification is made, the clock starts ticking on when the SMM needs to be distributed. For changes that involve a reduction in benefits or services, the SMM must be provided within 60 days after the modification is adopted. For other changes, it generally must be provided within 210 days after the end of the plan year in which the change was made [1]. This timing is crucial because it ensures participants have adequate notice and can adjust to the new terms of the plan.

The SMM is not just about compliance; it's about making sure that employees understand how these changes impact them personally. For example, if an employer modifies the plan to require higher out-of-pocket expenses for certain medical services, the SMM should clearly outline what the new costs are, when they take effect, and how they compare to the previous costs. This helps employees make informed decisions about their healthcare and retirement planning [5].

"The Summary of Material Modification (SMM) describes changes to the plan or the SPD. The SMM or an updated SPD must be furnished automatically to participants within 210 days after the end of the plan year in which the change was adopted." [5]

In essence, the SMM serves as a bridge between the legal requirements of ERISA and the practical needs of employees to stay informed about their benefits. By clearly communicating changes, the SMM helps avoid confusion and ensures that both the employer and the employees are on the same page regarding the benefits plan. It's a small document with a big impact on how employees understand and interact with their benefits.

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References

 [1] U.S. Department of Labor. (n.d.). 29 CFR § 2520.104b-3 - Summary of material modifications to the plan and changes in the information required to be included in the summary plan description. Retrieved from https://www.law.cornell.edu/cfr/text/29/2520.104b-3 

 [2] Benefits Compliance Solutions. (2023, April 21). Summary of Material Modifications: What is it, who has to do it, and when is it due? Retrieved from https://www.benefitscompliancesolutions.com/post/summary-of-material-modifications-what-is-it-who-has-to-do-it-and-when-is-it-due 

 [3] U.S. Department of Labor. (n.d.). Plan Information. Retrieved from https://www.dol.gov/general/topic/health-plans/planinformation 

 [4] Rochester Institute of Technology. (n.d.). 2022 Summary of Material Modifications. Retrieved from https://www.rit.edu/humanresources/2022-summary-material-modifications 

 [5] U.S. Department of Labor. (n.d.). ERISA Fiduciary Advisor. Retrieved from https://webapps.dol.gov/elaws/ebsa/fiduciary/q4i.htm