- Posted by Jessica Waltman
- On August 16, 2018
As you prepare to make adjustments to your health plan for the coming year, schedule some time with your Kistler Tiffany Benefits’ Employee Benefits Consultant to talk about your company’s “plan documents.” Plan documents are materials that employers are responsible for creating, maintaining and distributing to eligible employees. While some plan document content may come from your health insurance carrier, carrier-provided information rarely, if ever, includes all of the written material needed to fulfill your plan’s legal obligations. Many employers do not have all of the documents they need, and many more businesses unknowingly have incomplete documents. Kistler Tiffany Benefits wants to make sure that all of our clients have sufficient plan documents in place for 2019.
There are three main document requirements group health plan sponsors should know about:
- The Summary Plan Description (SPD). The SPD is a comprehensive description of the plan required by Section 402 of the Employee Retirement Income Security Act (ERISA). Its purpose is to inform participants what the plan provides and how it operates in straightforward language. The SPD is different, and much more detailed than a summary of benefits and coverage (SBC), which is another document that provides an overview of plan benefits and likely created by your health insurance carrier or third-party administrator. Every group health plan subject needs to have both a SPD and current SBCs for every plan option offered, and it is the business owner’s responsibility to create and maintain the SPD.
- A Section 125 Plan Document. Any employer that wishes to offer their employees a “cafeteria plan” to pay for benefits on a pre-tax basis must have a written plan document that follows the rules outlined in Section 125(d)1 of the Internal Revenue Code. While there is some overlap between the SPD requirement and the Section 125 plan document requirement, they are distinct, and employers need to pay attention to both.
- A “Wrap Document.” A wrap document isn’t a standalone document, but rather a document that plan administrators can use to tie together multiple existing documents to meet ERISA requirements. It takes a company’s existing insurance policy or certificate of coverage and adds the information that needs to come from the employer or is required by ERISA to make one cohesive document. A wrap document can also tie various health benefit components (major medical plan, Section 125 plan, dental plan, employee assistance program, etc.) together into one comprehensive health plan with unified rules. Sometimes those documents are called an “umbrella document,” or a “mega wrap.”
There are content requirements for plan documents. The DOL has specific rules about what information must be in an SPD, so even if your company already has a plan document, you need to make sure it contains all of the required information. Also, an SPD must be up-to-date within 120 days, so any plan changes for 2019 need to be reflected in your new document or a modification to your existing SPD. Some of the critical things that must be in your SPD are:
- The official plan name, number, plan year dates and plan sponsor contact information.
- Detailed plan eligibility criteria and information about what might make someone ineligible for benefits under the plan.
- A description of the plan benefits, including a description of covered services including preventive care, prescription drugs, and other medical treatment and services and any relevant limitations or guidelines.
- Descriptions of premium and cost-sharing requirements, any preauthorization requirements, any coverage limitations or exclusions, information about plan networks and using in-network and out-network providers (if applicable), and information about the plan’s claims procedures.
- Specific information about COBRA or any continuation of coverage options.
- Required language about ERISA rights and notices about specific certain rights under the Health Insurance Portability and Accountability Act (HIPAA) and other health coverage laws.
Each company needs to write their SPD in a certain way. The Department of Labor (DOL) is explicit: each SPD must be readable, meaning it shouldn’t include technical jargon or long and complicated sentences. When crafting SPDs, employers should use examples whenever possible and clarifying graphics and illustrations as appropriate. The DOL also strongly suggests including cross-references and a table of contents.
There are specific rules on when SPDs must be distributed to employees. The required distribution times are:
- Within 90 days after an employee is covered by the plan
- To all plan participants every five years.
- To any plan participant within 30 days if the person makes a request.
- Whenever a SPD is modified or updated. If any plan changes necessitate a SPD update, the employer group must make them within 120 days, so the document is always current.
There also delivery rules about how the SPD may get to beneficiaries. The safest ways are by hand (such as in an enrollment packet) or via U.S. mail to the most current address. The DOL allows for electronic distribution, but only if a business meets certain requirements. Unfortunately, the electronic disclosure rules do not reflect current technology, and they are not appropriate for many workforces (every employee needs to have direct access to their own company-provided computer workstation) and/or beneficiary populations (they don’t work well if you have COBRA beneficiaries, children covered under child support orders, retirees on the plan and in other cases).
There are three key reasons why your business needs ERISA plan documents, and why you need to keep them up-to-date.
- They establish the governing procedures for your plan. Quality documents help both the business and employees resolve benefit questions and concerns.
- There is potential liability for noncompliance, and the Department of Labor is actively auditing health plans, including small employer plans.
- If an employee, former employee or another plan beneficiary ever gets into a dispute with your company over health benefits, the plan documents will be the overriding legal authority the court will look to for determination. Without adequate plan documents, you could wind up paying for large claims for services your business never intended to cover, along with damage awards and other legal fees.
Bottom line, every group health plan needs plan documents and the perfect time to create them or revise them is as you prepare for next year’s open enrollment. If you have any questions about developing or updating your company’s plan documents, then please contact your Kistler Tiffany Benefits’ Employee Benefits Consultant so that we may assist you.