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Updating Plan Documents Often Overlooked

Tuesday February 17th 2015

New benefit plans for 2015.  Check.  Open enrollment.  Check.  Updating payroll deductions.  Check.  Plan for ACA compliance and reporting.  Check.  Updating plan documents.  Che … wait, what?

In the frenzy of open enrollment and year-end, it’s easy to overlook the plan documents that make your plan legitimately exist.  These plan documents are not just required at the time of origination of your plans, but must be kept up to date to reflect the way your plans exist currently.  The DOL is actively auditing group health plans for compliance with ERISA (Employee Retirement Income Security Act of 1974).  At the top of the lengthy list of documents that employers are asked to provide to the auditor is a copy of all current plan documents.  Getting caught without current, compliant plan documents could trigger fines, penalties or even lawsuits.  Let’s review the ERISA requirements for plan documents:

  • Plan documents are the plan sponsor’s responsibility, not the insurer’s responsibility.
  • All ERISA plans must have a written document and provide a Summary Plan Description (SPD) to plan participants.  Standard insurance documents such as a policy, certificate of insurance, benefits-at-a-glance or the Summary of Benefits and Coverage do not satisfy this requirement.
  • A plan document should have several legal protections such as discretionary authority and the ability to amend or terminate the plan, must identify the fiduciary and address how the plan is funded, among other things.
  • The SPD rules have specific content requirements that usually are not included in standard documents provided by carriers.  There is no specific format required, but more than 20 content elements are required, including plan limitations, claims procedures and ERISA and COBRA statements.
  • Employers may use a wrap document to incorporate various benefits and insurance policies into one comprehensive plan.
  • A Summary of Material Modification (SMM) must be provided to all participants and beneficiaries within 60 days of a material reduction in covered services or benefits.  For all other changes, the deadline is no later than 210 days after the end of the plan year in which the modifications or changes take effect.

So, the question is – do your plan documents accurately reflect the specific details of the benefits currently offered?  Have you:

  • Changed carriers or added or removed a plan from your employee offering?
  • Had plan limitations or claims procedures changed?
  • Changed eligibility rules or classes of employees?
  • Amended your plan year?

If the answer is yes, then you need to review your documents and, if necessary, amend/restate your plan document and/or SPD and provide a SMM to participants and beneficiaries.  Maintaining current documents not only keeps you in compliance, but could avoid those unwanted fines and penalties.

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