The plan document describes the plan’s terms and conditions related to the operation and administration of the plan. It is required for each welfare benefit plan an employer maintains which is subject to ERISA, and it must be in writing. An insurance company’s Master Contract, Certificate of Coverage, or Summary of Benefits is not a plan document or Summary Plan Description (SPD). An ERISA plan may exist even without a written document—it is simply out of compliance.
The plan document should contain:
- Name of the plan administrator
- Designation of any named fiduciaries other than the plan administrator under the claims procedure for deciding benefit appeals
- A description of the benefits provided
- The standard of review for benefit decisions
- Who is eligible to participate, e.g., classes of employees, employment waiting period, and hours per week
- The effective date of participation, e.g., next day or first of the month following satisfaction of an eligibility waiting period
- How much the participant must pay towards the cost of coverage
- The plan sponsor’s amendment and termination rights and procedures, and what happens to plan assets, if any, in the event of plan termination
- Rules restricting and regulating the use of Personal Health Information (PHI), if the plan sponsor uses PHI
- Subrogation, coordination of benefits, and offset provisions
- Procedures for allocating and designating administrative duties to a TPA or committee
- How the plan is funded, whether from employer and/or employee contributions, only if it has assets
- How insurer refunds (e.g., dividends, demutualization) are allocated to participants
- For group health plans, information regarding COBRA, HIPAA, and other federal mandates such as Women’s Health Cancer Rights Act, preexisting condition exclusion, special enrollment rules, mental health parity, coverage for adopted children, qualified medical support orders, and minimum hospital stays following childbirth
Note: It is important to remember that non-ERISA plans should also have a separate written plan document.
“Wrap” Plan Document—the typical way of supplementing an insurance company’s Certificate of Coverage with the missing ERISA provisions. It is a wrapper, or supplement to a Certificate of Coverage. The “wrap” document should make clear to the participants that the “wrap” document and the carrier’s documents together constitute the SPD for the plan. If a Master Contract is not issued to an employer, the Certificate of Coverage may suffice. In our experience, most “wrappers” do not fully satisfy the requirements of ERISA. If a “wrap” plan document is used, it should wrap around the Master Contract or insurance policy if the plan is insured.
Wrap-Tightsm Plan Document—a single umbrella plan document and SPD provided exclusively by ERISA Pros, through which several welfare benefit plans are provided. The DOL acknowledges the use of a “wrap” document, which covers more than one plan in one document.
There are several advantages to ERISA Pros’ Wrap–Tightsm Document. The Wrap–Tightsm Document establishes a common umbrella plan and plan year for all of its component benefit programs, allowing you to file a single Form 5500 and avoid the often significant costs of preparing separate Form 5500s for each plan This also saves the time and expense of preparing a plan document and an SPD for each separate plan that may be due at different times of the year. It may also save costs on independent audit fees. Importantly, a Wrap–Tightsm plan provides consistent information for all of its covered plans and reduces the chances of forgetting to file a Form 5500 for any one of them. A potential disadvantage of using one document to wrap around several component benefit plans is that it may require you to report information on a plan which would have otherwise fallen into the small plan exemption from reporting (having fewer than 100 participants). We believe that our Wrap–Tightsm plan document approach is the best way to meet the ERISA document compliance requirements for most companies.
Summary of Material Modification (SMM)—must be furnished automatically in the same manner and to the same individuals as an SPD when a plan is amended, or “materially” modified. Examples of material modifications are changes to deductibles and eligibility, and the addition or deletion of a line of coverage. An SMM is a simple way to disclose just the changes to participants rather than drafting a new SPD. It must conform to the same understandability standards as an SPD. The SMM must be delivered within 210 days after the end of the plan year, or within 60 days after a “material reduction” in benefits of a group health plan. There is a penalty of up to $110/day for not delivering an SMM within 30 days after a participant or beneficiary requests it, and there is also the potential for employer liability described above, especially if a material reduction has occurred.
Special rule for group health plans — A Summary of Material Reduction in Covered Services or Benefits must be furnished in the same manner and to the same participants as an SPD when there is a material reduction in covered services or benefits for a group health plan. This summary must be provided within 60 days after the date of the adoption of the change. Alternatively, the plan administrator may furnish this summary within 90 days by a system of communication that it maintains to provide participants information about their plan and that also otherwise meets the ERISA disclosure requirements. A “material reduction” generally means any modification that would be considered by the average participant to be an important reduction in covered services or benefits. Examples include any reduction or elimination in benefits, formulas, methodologies, schedules, or service area (e.g., HMO); increase in deductibles, coinsurance, or copays; or establishment of new conditions or requirements (e.g., prior authorization).
A plan administrator must also make its documents available for inspection at his or her principal office. Upon request, the documents must also be available for inspection within 10 days at the location of the company’s principal office (if different than the administrator’s principal office) and at each location where at least 50 participants work. Our Wrap–Tightsm approach provides you with a branded system to harness these important documents and ensure they are available when needed.