Benefits packages represent a two-edged sword – they’re incredibly important in providing for and protecting yourself and your family, while they also can be rather challenging to read and fully understand.
That’s why the U.S. Department of Labor requires employers to provide each employee with a Summary Plan Description (SPD). This key compliance document for virtually every Employee Retirement Income Security Act (ERISA) plan “is the primary vehicle for informing participants and beneficiaries about their rights and benefits under the employee benefit plans in which they participate,” according to the DOL.
The SPD must be written so as to be understood by the average plan participant and must be sufficiently comprehensive to inform participants about their rights and obligations under the plan. Also, ERISA and underlying DOL regulations include strict requirements for the content and delivery of SPDs.
The SPD must be automatically distributed to plan participants by certain deadlines. It also must be provided upon a participant’s request. The SPD must include specific types of information, such as the plan’s eligibility rules. Virtually all group health plans subject to ERISA must provide participants with an SPD, regardless of size.
ERISA does not require that a plan document be in any particular format. However, the plan document must address:
- Benefits and eligibility;
- Funding of benefits;
- Procedures for allocating and delegating plan responsibilities;
- Plan amendment and termination procedures;
- Designation of named fiduciary; and
- Required provisions for group health plans, such as COBRA rights and HIPAA compliance.
ERISA does not require plan administrators to provide a new SPD booklet every year. An updated SPD must be provided every five years if material modifications are made to the SPD’s information during that time period. If no changes are made, then an updated SPD must be provided every 10 years. It is typical, however, for plan design changes to be made each year, particularly for group health plans.
A “wrap” document supplements existing documentation to fill in the missing ERISA-required provisions. When a wrap document is used, the ERISA plan document comprises two pieces: 1) the insurance certificate or benefits booklet; and 2) the wrap document itself.
Employers who fail to prepare an SPD may face serious penalties. Contact the Benefits team at The Reschini Group to learn more and to set up a meeting.
Copyright 2020 The Reschini Group
The Reschini Group provides these updates for information only, and does not provide legal advice. To make decisions regarding insurance matters, please consult directly with a licensed insurance professional or firm.