Court Weighs in on Importance of Plan Documents and SPDs

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The recent Mull v. Motion Picture Industry Health Plan case (No. 15-56246 (9th Cir. August 1, 2017) illustrates the importance of complying with ERISA’s Plan Document and Summary Plan Description (SPD) requirements. In early August, the Ninth Circuit Court of Appeals held that a summary plan description and trust agreement, when read together, constituted a written plan document.

Issue: Motion Picture Industry Health Plan was unable to enforce reimbursement and recoupment rights in the SPD against a plan participant who recovered damages from a 3rd party as a consequence of injuries sustained in a car accident.

Original Ruling: Plan could not enforce it subrogation rights because the reimbursement and recoupment rights were found only in the SPD.

Appellate Ruling:  On appeal, the Ninth Circuit noted that the plan was established by a trust agreement that directed the plan’s board of directors to specify by written resolution the basis on which payments were to be made to and from the plan. According to the court, the board carried out that directive by adopting the plan’s SPD, which specified payment provisions. Thus, the trust agreement and SPD together constituted the official plan document. 

The Court concluded that the SPD was part of the plan, and for that reason its recoupment provisions were enforceable as terms of the plan. The Court vacated the trial court’s decision and sent the case back for further proceedings.

Background: ERISA requires that every employee welfare benefit plan be established and maintained according to a written plan document and this is often misunderstood by employers who sponsor ERISA benefits. The requirements include the following information:

  • Named Fiduciary: Who will have the authority and responsibility to administer the plan?
  • Plan Changes: Procedures for amending and terminating the plan.
  • Plan Funding: The source of plan contributions.
  • Who is Responsible for the Plan? The allocation of responsibilities for the operation of the plan between the employer and the insurance carrier or third-party administrator.

The contents of a summary plan description can be found in a Department of Labor regulation (29 CFR 2520.102-3) that includes a list of the required items.

“Wrap” plan documents can be used to satisfy the ERISA plan document and SPD requirement and are often used to bundle several ERISA benefits under one ERISA plan number.

Whereas, there are no specific penalties under ERISA for failing to have a plan document and SPD; however, when participant disputes arise, failure to have the ERISA required details of the plan outlined in a SPD and/or failure to provide a SPD to plan participants can prove costly.

Employee Benefits Corporation can help employers develop a “Wrap” plan document and Summary Plan Description (SPD) which will act as a companion to the insurance booklets and insurance certificates, ensuring compliance with ERISA’s plan document and SPD requirements.

Categories: Benefits in General, Compliance | Tags: ERISA , DOL , Wrap , Plan Document , SPD , Summary Plan Description , Mull v. Motion Picture Ind. Health Plan | Return