The Employee Retirement Income Security Act of 1974 (ERISA) requires most employers who offer health and welfare benefits to maintain and distribute Summary Plan Descriptions (SPDs) to all plan participants. This SPD must include certain disclosures and information, such as when the employer may amend or terminate the plan(s). Many employers think their insurance carrier will provide the necessary wrap document wording in the SPD’s and SBC’s, but in many cases this is no longer true.
Plan participants must receive an SPD within 90 days of enrollment or within 30 days of their request for one. SPDs must also be distributed to participants within 120 days of the effective date of any new plan. Employers who don’t provide an SPD in a timely manner may be subject to a penalty of up to $110 per day for each violation.
Many employers are either unaware of this requirement, or they distribute documents that do not meet the SPD requirements laid out by ERISA. Certificates of Coverage (COC), Summaries of Benefits and Coverage (SBC) or general contracts issued by insurance carriers are not the same as ERISA-compliant SPDs.
Typically, these types of documents do not include all the required SPD provisions and disclosures. Insurance companies write their certificates and booklets to be compliant with insurance laws. It is the responsibility of the plan administrator (which is almost always the employer) to comply with the SPD requirements of ERISA.
So, if the information provided by the insurance company does not satisfy the ERISA requirements, then how do employers stay compliant with the law? That’s where wrap documents come in.
A wrap document “wraps around” all ERISA health and welfare benefits and includes required disclosures that are not typically found in other documents. These include details like the allocation of duties and responsibilities between the employer and the insurer or the rights participants are entitled to under ERISA. Wrap documents become the SPD which ensures that the required ERISA language is available in writing.
Having a wrap document helps employers minimize the risk of financial penalties and lawsuits, and keeps them compliant. These documents also help save time and money . Employers can consolidate all health and welfare plans under the same wrap document, so there’s no need to update or amend multiple documents in response to legislative changes, regulatory changes or changes made by the employer with respect to the benefits they offer.
As a trusted benefits broker for nearly 30 years, ISU Insurance Solutions Group LLC offers a free solution to help our customers stay compliant with ERISA. Feel free to contact us today to get more information regarding the ERISA requirements and our wrap doc solutions. Next time we will look at solutions for our customers in terms of the Section 125 Premium Conversion Plans.