ERISA Compliance: Wrap Plans and SPD Requirements

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ERISA, which is short for the Employee Retirement Income Security Act, is a set of federal laws designed to protect employees of private employers who provide pension, retirement, or profit-sharing plans; as well as private employers who provide insurance coverage.

Who is subject to ERISA?

ERISA applies to most all employers regardless of size or business type (corporations, S corporations, LLC, sole proprietors, and nonprofits).  If an employer does not offer any retirement and/or welfare plans subject to ERISA, the employer is not subject to ERISA.

Are there any exemptions from ERISA overall?

The only employers exempt from ERISA are governmental employers (i.e. village, town, city, county, public school district, state) and church plans.  A church plan is an employee benefit plan that sponsored by a church or a convention or association of churches that are exempt from taxes under IRS §501 and has not elected to be subject to ERISA. 

What compliance concerns does an employer have when they are subject to ERISA?

ERISA compliance for the employer that sponsors a plan subject to ERISA includes written documents and as well as reporting and disclosures.   Some examples of an employer’s ERISA compliance include:  written plan documents that include specific content, summary plan descriptions, procedures for processing claims, Form 5500 filing and Summary Annual Reports (SAR), etc.

Which plans are subject to ERISA?

Some common examples of plans subject to ERISA include:  group medical, health care flexible spending accounts (FSA), health reimbursement arrangements (HRA) dental, vision, short term and long term disability, group term life/AD&D insurance.

Which plans are not subject to ERISA?

Some examples of plans/accounts not subject to ERISA include: adoption assistance plans, dependent care flexible spending accounts, health savings accounts (HSA) and some voluntary individual plans.

Why do I need a Summary Plan Description (SPD) if I get the benefit booklets from the insurance carriers?

The benefit booklet or insurance certificate alone does not satisfy the Department of Labor (DOL) summary plan description requirement.

Why doesn’t my insurance carrier provide a Summary Plan Description?

Insurance carriers only are required to meet state insurance laws and are not responsible for providing the SPD.

How does a Wrap Plan help me satisfy the ERISA requirements?

A Wrap plan is a plan document/summary plan description that either wraps around a single benefit or bundles multiple benefits under one ERISA plan number. Wrap plans are an easy way to create the companion ERISA language to the insurance certificates so that when distributed to participants together the plan can remain compliant with ERISA plan document and SPD requirements.

If I have less than 100 employees, do I still need a Wrap plan?

Yes, there is no small employer exception from the ERISA plan document/SPD requirement.  The small employer exception is only applicable for Form 5500 filing requirements when the employer has less than 100 participants on the first day of the plan year and has an unfunded plan.

What are the penalties for not providing a summary plan description to plan participants?

Solely providing benefit booklets or insurance certificates for employer sponsored benefits will not satisfy the DOL SPD requirements. The DOL can assess a penalty for failing to provide the SPD in a timely manner. Failure to provide the SPD within 30 days of written request can be up to $110 per day, per request (as adjusted for inflation).  Failure to provide the SPD to the DOL can result in a penalty of up to $152 per day (as adjusted for inflation).  The DOL could tack on additional penalties for failure to act as a fiduciary in regards to plan compliance.

Why do you need a Wrap plan?

Wrap plans are a function of complying with ERISA’s plan document and summary plan description (SPD) requirements.  Keep in mind...Wrap plans are an easy way to create the companion ERISA language to the insurance certificates so that when distributed to participants together the plan can remain compliant with ERISA plan document and SPD requirements. Wrap plans also help streamline the Form 5500 process because multiple lines of coverage can be combined under 1 ERISA plan number and 1 Form 5500 (when applicable).

Employee Benefits Corporation can assist employers with ERISA compliance. We can provide Wrap Plan Document/SPD and Form 5500 preparation through our Compliance Services Products.





Categories: Benefits in General, Compliance | Tags: ERISA , DOL , Wrap Plans , SPD , Summary Plan Description , Plan documents , 5500 , Compliance Services | Return