The ERISA Wrap SPD requirement

The ERISA Wrap Summary Plan Description (SPD) requirement has been around for years. It is the Department of Labor’s document for communicating plan rights and obligations to participants and beneficiaries of employer-sponsored group health insurance plans.

It wasn’t until the Affordable Care Act added several new employee notification requirements, and stiff new $110 per day/per participant fines for non-compliance, that most employers became aware of and motivated to meet the requirement. Here, we answer common questions about this important document.

What is a Wrap SPD?

An employer must prepare an ERISA Wrap SPD plan document to supplement the Certificate of Insurance (benefit booklet).

As the name suggests, the ERISA Wrap SPD is a summary of the material provisions of the plan documents. However, in the context of health & welfare benefit plans, it is not uncommon for the SPD to be a combination of a complete description of the plan’s terms and conditions, such as a Certificate of Coverage (benefit booklet), and the required ERISA/ACA disclosure language. Together, the Wrap SPD and Certificate of Insurance (benefit booklet) comprise a proper Wrap SPD.

Wrap SPDs are typically not long or overly complicated documents, but they are valuable in the sense that they supplement the carrier booklet and fill in any necessary gaps, and must be drafted in language that is easily understandable to the average participant in the employer’s group health plan.

When is an employer required to have one?

If you offer group health insurance you are required to distribute a Wrap Summary Plan Description (SPD) to all Plan participants within 120 days of the Plan’s effective date.

Why is it called a “Wrap” SPD?

The term “wraparound” comes from old DOL guidance suggesting that the supplemental document had to be formally bound to the benefit plan booklet. The combination of the two documents would upon distribution to participants represent a joint, compliant SPD for a particular benefit plan. Obviously times have changed, and many of these documents are now provided electronically; thus, the “wraparound” concept no longer applies in the literal sense, but the concept remains.

Does this rule apply to small employers?

The requirement for a Wrap SPD applies to all employer sponsored group health insurance offerings, including a one-person plan.

For small employers not subject to the Form 5500 requirement, the Wrap SPDs has always been the best practice but not as commonly used … until the ACA $110 per day, per participant fines for non-compliance took effect.

For large employers (100+) subject to Form 5500 reporting, Wrap SPDs are largely a necessity. This is especially true for employers already filing a single Form 5500 for health and welfare plans, since those employers have represented to the Department of Labor that they have a consolidated, single ERISA plan.

Doesn’t my plan document package include a SPD?

Yes, but it is not the DOL- and ACA-required ERISA Wrap SPD document.

A Section 125 or HRA Plan Document and the SPD therein do not constitute an ERISA Wrap SPD Document for the employer group health insurance plan.

Also, the insurance company’s Master Contract, Certificate of Coverage, or Summary of Benefits may be part of but are not a formal and complete Wrap SPD.

What has to be in the ERISA Wrap SPD?

Here’s what ERISA SPD law requires:

  • The plan name
  • The plan sponsor/employer’s name and address
  • The plan sponsor’s EIN
  • The plan administrator’s name, address, and phone number
  • Designation of any named fiduciaries, if other than the plan administrator, e.g., claim fiduciary
  • The plan number for ERISA Form 5500 purposes, e.g., 501, 502, 503, etc. (Note—each ERISA plan should be assigned a unique number.)
  • Type of plan or brief description of benefits, e.g., life, medical, dental, disability
  • The date of the end of the plan year for maintaining the plan’s fiscal records (which may be different from the insurance policy year)
  • Each trustee’s name, title, and address of principal place of business, if the plan has a trust
  • The name and address of the plan’s agent for service of legal process, along with a statement that service may be made on a plan trustee or administrator
  • The type of plan administration, e.g., administered by contract, insurer, or sponsor
  • Eligibility terms, e.g., classes of eligible employees, employment waiting period, and hours per week, and the effective date of participation, e.g., next day or first of the month following satisfaction of an eligibility waiting period
  • How the insurer refunds (e.g., dividends, demutualization, and medical loss ratio (MLR) refunds) are allocated to participants. Note: This is important for obtaining the small plan (<100 participants) exception for filing Form 5500.
  • The plan sponsor’s amendment and termination rights and procedures, and what happens to plan assets, if any, in the event of plan termination
  • A summary of any plan provisions governing the benefits, rights, and obligations of participants under the plan on termination or amendment of the plan or elimination of benefits
  • A summary of any plan provisions governing the allocation and disposition of assets upon plan termination
  • Claims procedures—may be furnished separately in a Certificate of Coverage, provided that the SPD explains that claims procedures are furnished automatically, without charge, in the separate document (e.g., a Certificate of Coverage), and time limits for lawsuits, if the plan imposes them
  • A statement clearly identifying circumstances that may result in loss or denial of benefits (e.g., subrogation, coordination of benefits, and offset provisions)
  • The standard of review for benefit decisions (We recommend consideration of granting full discretion for the plan administrator or authorized fiduciary to interpret the plan and make factual determinations.)
  • ERISA model statement of participants’ rights
  • The sources of plan contributions, whether from employer and/or employee contributions, and the method by which they are calculated
  • Interim SMMs since the SPD was adopted or last restated
  • The fact that the employer is a participating employer or a member of a controlled group
  • Whether the plan is maintained pursuant to one or more collective bargaining agreements, and that a copy of the agreement may be obtained upon request
  • A prominent offer of assistance in a non-English language (depending on the number of participants who are literate in the same non-English language)
  • Identity of the insurer(s), if any
  • Additional requirements for Group Health Plan SPDs:
    • Detailed description of plan provisions and exclusions (e.g., copays, deductibles, coinsurance, eligible expenses, network provider provisions, prior authorization and utilization review requirements, dollar limits, day limits, visit limits, and the extent to which new drugs, preventive care, and medical tests and devices are covered) A link to network providers should also be provided. Plan limits, exceptions, and restrictions must be conspicuous.
    • Information regarding COBRA, HIPAA, and other federal mandates such as the 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.
    • Name and address of health insurer(s), if any
    • Description of the role of health insurers (i.e., whether the plan is insured by an insurance company or the insurance company is merely providing administrative services)

Recommended, but not required, provisions:

  • For insured arrangements, attach the Summary of Benefits provided by the insurance companies to help ensure you have provided an understandable summary of the Certificate of Coverage
  • For self-insured arrangements, provide the name, address, and phone number of any Third Party Administrator (TPA) paying claims or benefits.
  • Language that in the event there is a conflict between the plan document, the SPD, and a Certificate of Insurance, which document controls

Read 29 CFR 2520.102-3 – Contents of summary plan description here or on the Federal Register.


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The ERISA Wrap SPD is the main ERISA, DOL and now ACA mandated vehicle for communicating plan rights and obligations to employee participants and beneficiaries.

As the name suggests, it is a summary of the material provisions of the plan documents, and it should be understandable to the average participant of the employer. Get yours today from Core Documents, the Trusted Source in cost-effective benefit plan documents.

 

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Video: Executive Summary of the Wrap SPD Plan Document Requirement

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