With the ongoing implementation of health care reform, many employer groups have missed the obligations set forth in the Employee Retirement Income Security Act of 1974 (ERISA).
“The federal government has started systematic audits of group health plans, primarily for compliance with health care reform. They will also include compliance for ERISA. A key provision requires plan participants to be provided with a Summary Plan Description (SPD),” says Chuck Whitford, a client advisor at JRG Advisors.
A SPD is a document that is provided to plan participants to explain the plan’s benefits, claims review procedures and participants’ rights. ERISA contains standards for distribution and the information that must be included.
Smart Business spoke with Whitford about what you should know about your SPD obligations.
What are big misconceptions about SPDs?
The two biggest misconceptions among employers are 1) only large employers are required to provide SPDs and 2) the benefit booklet issued by the insurance company fulfills the obligation to provide participants with a SPD. In fact, all group health plans subject to ERISA must provide participants with a SPD, regardless of size. Both insured and self-funded group plans must comply with ERISA’s SPD requirements.
The insurance company booklet will contain detailed information regarding the plan benefits and coverage. In many cases, however, the plan sponsor (typically the employer) will need to provide additional information not contained within the insurance booklet to comply with the SPD content requirements.
What are employers’ SPD responsibilities?
Employers are responsible for providing a SPD within 120 days of starting a group health plan; within 90 days of enrollment for new participants; within 30 days of a participant’s request for a SPD; every five years if material modifications are made during that period; and every 10 years if no changes have occurred.
The plan sponsor also must provide a SPD to the Department of Labor within 30 days of the request. Failure to do so can result in a civil penalty of up to $110 per day for each day such failure continues, subject to a maximum penalty of $1,100 per request. Multiple requests for the same or similar documents are considered separate requests.
A companion document, a Summary of Material Modifications, must be provided within 210 days after the close of the plan year in which a change was adopted. If benefits or services are materially reduced, participants must be provided notice within 60 days from adoption.
In addition to the SPD, the Affordable Care Act requires plan administrators and issuers to provide a Summary of Benefits and Coverage 60 days in advance of any change in plan terms or coverage that takes place mid-plan year.
The plan administrator is required to provide the SPD to participants in a manner reasonably calculated to ensure actual receipt of material by the participant.
Employers may deliver the document by hand or send it by U.S. mail. First class is preferred, but second or third class is acceptable if return and forwarding postage is guaranteed and address correction is requested. If the SPD is sent electronically, it must follow the Department of Labor’s safe harbor provision applicable to the electronic delivery of SPDs.
How can employers streamline their efforts?
For the sake of simplicity, rather than having a separate SPD for each benefit offered, an employer can combine all ERISA-covered benefits under a single document that includes the SPD. It can function as both the plan document and the SPD.
Rather than being another paperwork burden, use this document to streamline compliance efforts. Besides the required plan provisions, there are many administrative functions that are not required to be in the plan document, such as filing creditable coverage certifications and distributing various notices. When the government audits, it asks the employer to prove it met all additional requirements, such as showing the notices or certifications and producing evidence they were provided as required.
It makes sense for employers to review what and how they communicate ERISA-required information to plan participants. You will want all documents in order when the Department of Labor comes calling. ●
Chuck Whitford is a client advisor at JRG Advisors. Reach him at (412) 456-7257 or [email protected].
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