Understanding Your Retirement Summary Plan Description

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Jun 2021

Investing in an employer-sponsored Retirement plan is a powerful tool to boost your retirement readiness. But did you know that all Retirement plans are not created equal?


While they all share certain features, such as the ability to lower your taxable income by deferring and investing pretax dollars to save for retirement, plans can differ in terms of how quickly you become fully vested, whether you’re able to take a loan against your Retirement balance and whether your company will match some of your contributions.

 

The “Retirement plan” derives its name from the section of the IRS tax code that applies to it, and the official plan documents are quite complex for the average investor to understand. Luckily, your employer is also required to provide you with a document called a Summary Plan Description, which details many important features of your Retirement in plain English so that they’re easier to understand.

 

If you don’t have this document in your possession, simply contact your HR department or benefits manager to request a copy. You can find very helpful information inside it, including:

 

How to qualify for the plan. This might include an age requirement as well as a minimum duration of service within your organization.

 

Employer match. Your employer may match a certain percentage of your Retirement contributions up to a certain amount. For example, they might match 100% of your first 3% of contributions and then 50% of the next 3%. If you have this benefit, your Summary Plan Description will specify the details.

 

How long it will take to be vested. Each Retirement plan has a specific vesting schedule, and this refers to how long it takes you to own a percentage of your employer’s contributions.

 

Whether you can take a loan against the money in your Retirement. If loans are permitted, you’ll be required to pay back the loan with interest to your account. The terms and conditions of these loans, if available, will be outlined.

 

How to access your account balance and make changes to your investments. You can look up how to access your Retirement information online or by phone — and learn who your point of contact for your Retirement is within your organization.

 

The Summary Plan Description is a great starting point for understanding the features and benefits of your Retirement plan. But if you have additional questions, set up an appointment to meet with your financial adviser, who can explain the plan in greater detail an answer your questions.

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