Per the Employee Retirement Income and Security Act of 1974 (ERISA), all employers must have a written Summary Plan Description (SPD) for each separate welfare benefit plan (e.g., medical, dental, 125 plan, life, disability, etc.). The purpose is to inform participants of eligibility requirements, benefits, claims and appeals procedures, and rights under ERISA. How can an ERISA wrap document simplify meeting SPD requirements?
Let’s take a closer look at ERISA first.
What is ERISA?
The Employee Retirement Income Security Acts of 1974 (ERISA) protects individuals under voluntarily established pensions and health plans in private industries.
What ERISA Does Not Cover
ERISA does not cover group plans for government entities or churches. It also does not cover plans made only to comply with applicable workers’ compensation, disability, or unemployment laws and those maintained for the benefit of nonresident aliens outside America.
However, there is a difference between plan documents and summary plan descriptions. Plan documents explain the benefits participants are entitled to and provide guidelines to help administrators make informed decisions.
These consist of the following information:
Name of the fiduciary who holds the authority to administer the plan;
Process for amending and terminating the policy;
Source of plan contributions and the distribution of responsibilities between the employer and insurance carrier.
A summary plan description (SPD) contains the gist of the plan document, written in a way that beneficiaries will fully understand.
What does it regulate?
ERISA regulates fiduciary duties that cover retirement plans and employee benefits.
When a business fails to comply with the requirements stated by ERISA, this may result in penalties, lawsuits, and possible enforcement actions by the Department of Labor.
ERISA eSolutions provides a web-based Summary Plan Description (SPD) Wrap service that allows clients and their broker to create, store easily, and update summary plan description documents, as needed. With the SPD Wrap, it creates one document and overall SPD required for all health and welfare benefits such as medical, dental, life, disability, FSA, etc.
Although insurance providers may provide some information required for compliance, it is a common mistake for employers to think that the summary insurance information they receive from their insurance provider meets their summary.
SPD Plan description requirements
A common approach is to combine all SPDs into one overall SPD Wrap notice, tying in the required ERISA language and simplifying the SPD notice process. Use ERISA Solutions to create and manage your SPD Wrap, making sure you pass ERISA Audits.
The service includes Summary Material Modifications (SMM) anytime you need to create this notice related to material changes to any of your health and welfare benefit plans.
If you are a Broker, call for special partner rates and demo.
If you offer group health insurance, you are required to distribute an ERISA Wrap SPD document to all Plan participants within 120 days of the Plan’s effective date.
What happens if I don’t have one?
Failure to provide the ERISA Wrap SPD within 30 days of request could trigger a $110 a day fine per participant. It can also trigger an audit by the DOL.
• The SPD must be provided within 90 days after an employee first becomes covered by the plan.
• Common distribution methods include hand delivery, mail and electronic delivery.
• The sponsor of an insured plan (not the issuer) is responsible for providing the SPD.
• The insurance certificate typically does not meet all of ERISA’s requirements for SPDs.
• A compliance solution for insured plans is a “wrap document.”
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