Do you have an ERISA compliant Summary Plan Desription document? If that question only generates more questions, don't worry, you are not alone.
Many employers are unaware of the SPD requirements under the Employee Retirement Income Security Act of 1974 (ERISA). And many who have SPDs don't have all of their bases covered either.
Preparing an ERISA compliant SPD requires a great deal of time and resources and it can be incredibly costly. But if you fail to comply with U.S. Department of Labor (DOL) regulations, you can be subject to fines for non-compliance as well as greater exposures during an audit.
As you prepare to renew your welfare benefits plans, be sure to add SPD compliance to your to-do list.
A Summary Plan Description document must accompany each welfare benefit plan that an employer maintains. ERISA states that plan administrators (employers) are required to provide plan participants—in writing—the most important facts and procedures about their retirement and health benefit plans. In other words: the SPD.
SPDs are one of the most important documents employers are legally obligated to maintain and provide to their employees. The SPD must explain to plan participants the benefits, rules, claims and appeals procedures, participant rights and other compliance notices.
Plan participants must receive a SPD free of charge within 90 days of enrollment or 30 days of a request to receive one. In addition, SPDs must be distributed to participants within 120 days of the effective date of any new plan. Compliance with the DOL’s Summary Plan Description requirements is no laughing matter; penalties from $10,000 to $18,000 have been levied upon employers for failing to provide an SPD within 30 days of a request.
Newsflash: Certificates of Coverage (COC), Certificates of Insurance (COI), or general insurance contracts issued by insurance carriers are not SPDs. Typically, COCs and COIs are not ERISA compliant and are meant to be supplemental to a plan’s SPD. Insurance companies write their certificates in order to comply with insurance laws; complying with ERISA regulations is the job of the plan administrator.
If you have been content knowing that your employees are receiving insurance certificates from the insurance companies, it might be time to sound the alarm. Without a carefully crafted ERISA compliant SPD, you might be subject to some serious fines.
Beyond the doom and gloom, there is good news. The DOL allows employers to prepare SPD wrap documents to help minimize the amount of time, money and resources spent on preparing and updating individual SPDs. Ordering the “wrap” is a healthy option for your organization and bottom line.
A wrap document “wraps” around the insurance policy or coverage certificate, ensuring that employees receive all of the information that is required by ERISA. The insurance policy still governs the plan, and the wrap document allows it to also be ERISA compliant. In addition, employers can consolidate several individual SPDs under a single wrap document.
A SPD wrap document can ultimately reduce the time and money employers spend complying with ERISA regulations. How’s that for tasty and less filling?
SPDs and other compliance issues can be confusing. We typically conduct a compliance review for new benefits clients to ensure that all of the “Ts” are crossed and…you know the rest.
Are you ready to test your Summary Plan Description compliance? We'll give it a once-over and tell you where you stand.
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