By: Sharon Jeffries, Human Resources Manager
The Employee Retirement Income Security Act (ERISA) requires plan administrators (employers) to give plan participants in writing the most important facts they need to know about their health benefit plans.
One of the most important documents participants are entitled to receive automatically when becoming a participant of an ERISA-covered health benefit plan is a summary of the plan, called the Summary Plan Description or SPD. The plan administrator is legally obligated to provide to participants, free of charge, the SPD. The summary plan description is an important document that tells participants what the plan provides and how it operates. It provides information on when an employee can begin to participate in the plan, how service and benefits are calculated, when and in what form benefits are paid, and how to file a claim for benefits. If a plan is changed, participants must be informed, either through a revised summary plan description, or in a separate document, called a Summary of Material Modifications, which also must be given to participants free of charge.
A Wrap Plan Document is designed to meet plan documentation requirements under ERISA and other federal laws and to incorporate all other welfare plans, insurance contracts, and other relevant documents into a single plan. These materials can be kept together for administrative ease. The Wrap Plan Document provides additional legal protection for the employer and plan fiduciaries and can simplify plan administration.
What Does That Mean?
In the past, much of the regulatory focus was on the retirement side of the ERISA legislation. However, with the implementation of the Patient Protection and Affordable Care Act (PPACA), that has changed. Much of the current government monitoring, oversight, and auditing relates to the health and welfare side of the ERISA regulation.
ERISA now requires employers who are plan administrators of their group health plans to comply with two (2) critical requirements or they will risk potential penalties and possible government audits.
Those requirements are:
- Maintain and distribute SPDs to plan participants which accurately reflect the contents of the plan and which include specific information as required under federal law.
- Group health plans must be administered in accordance with a written Plan Document which must be made available to plan participants and beneficiaries upon request.
Are You at Risk?
Yes, and the reason is this: Many banks will mistakenly assume that insurance contracts, certificates of insurance, and benefit summaries fulfill the ERISA requirements for an SPD and Plan Document, but they do not. And, the primary reason is that they do not include the required or recommended provisions that protect the plan and the employer.
What Should You Do?
- Failure to provide an SPD or Plan Document within 30 days of receiving a request from a plan participant or beneficiary will result in a penalty of up to $110/day for each violation.
- Lack of an SPD could trigger a plan audit by the United States Department of Labor (DOL).
- The United States DOL has increased its audit staff and national enforcement initiatives to investigate employers’ compliance with Health Care Reform, resulting in companies of all sizes being audited and being required to provide an SPD and Plan Document.
Do not try to create these documents in house. Allow experts in the areas of benefits and benefits regulations assist you with this monumental effort. Young & Associates, Inc. has partnered with The Alpha Group Agency, Inc. to offer our clients this unique service. The Alpha Group Agency, Inc. is a highly skilled, reputable organization involved in the management of health insurance services as well as other related subjects.
The Alpha Group Agency, Inc. has been an advisor to Young & Associates, Inc. for almost fifteen (15) years in the management of its group health insurance plans. For additional information on how you can become compliant with these critical ERISA regulations and also lower the risk of a DOL audit, contact Sean Nehlsen, The Alpha Group Agency, at 1.800.886.3315 or [email protected].