Wrap plans are used to comply with ERISA’s plan document and SPD requirements. The wrap plan can bundle one or more employee benefits under one ERISA plan number and provide supplemental wording often not found in insurance certificates or booklets. The wrap plan acts as a companion to insurance certificates and/or booklets and, together, they satisfy ERISA’s plan document and SPD requirement.

Generally, no. The certificate of insurance/benefit booklets are provided by the insurance carrier and are based upon state insurance regulations. This information alone generally does not satisfy the ERISA plan document and SPD requirements, which is a Department of Labor (DOL) requirement under federal law. 

No, an SPD is required for all ERISA benefits. It is important to understand that most employers (with a few exceptions) are subject to ERISA regardless of the number of employees they have or the number of employees who participate in the plans they offer. There is a common misconception that only employers over a certain size have obligations under ERISA, which is not true for all compliance obligations. Not all ERISA compliance requirements are driven by size. For example, if an employer sponsors benefits that are subject to ERISA, the employer must have a plan document and provide plan participants with an SPD, regardless of whether they have 2 or 2,000 employees.

Failure to provide plan participants with an SPD within 90 days of the start of their plan participation or within 30 days upon request may result in financial penalties for the employer.

ERISA applies to most employers (i.e. corporations, S corporations, LLC, sole proprietors, and nonprofits) regardless of size.

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

Employers, unless exempt, have certain compliance obligations when they sponsor employee benefits that are subject to ERISA. Examples of some of these obligations include: written plan documents, summary plan descriptions that contain specific content, and in some instances, record retention, annual Form 5500 filing, and Summary Annual Reports (SAR) to name a few.

Yes, remember there is no small employer exception for this requirement. An employer that sponsors ERISA benefits, regardless of the number of employees or participants, is required to have a plan document and SPD for ERISA benefits.

An employer that sponsors employee benefits that are subject to ERISA will need to have a plan document and SPD for each of their health and welfare plans. A wrap plan can help an employer streamline this requirement by including several ERISA benefits under one plan. Some examples of more common employer-sponsored plans that are subject to ERISA include:

• Group health
• Dental
• Vision
• Group term life
• Group short term and long term disability
• Some voluntary plans and employee assistance plans (EAP)
• Health care flexible spending accounts
• Health reimbursement arrangements (HRA)

An employer does not need a wrap plan if they are not subject to ERISA or if they don’t offer employee benefits that are subject to ERISA. Some examples of plans/accounts that might be available through an employer that are not subject to ERISA include:

• Adoption assistance plans
• Dependent care flexible spending accounts
• Health savings accounts (HSA)
• Transportation plans (transit and parking)
• Some voluntary individual plans

Some may think that the plan document and SPD requirement is a result of the Affordable Care Act (ACA), which is not true. Although the ACA elevated the attention on group health plans and imposed new compliance obligations, the need for a plan document and SPD has actually been a longstanding DOL requirement for employers whom offer benefits that are subject to ERISA. As a result, the attention placed on health plans in recent years may expose non-compliance with the DOL requirement.

The advantages of using a wrap plan to meet the document and SPD requirements is that the employer only has one document and SPD to maintain for compliance updates. In addition, combining all benefits in a wrap plan under one common ERISA plan number will streamline Form 5500 filing obligations for employers that have 100 or more participants. This may reduce the number of Form 5500s that an employer is required to file.

Employers are required to distribute SPDs to plan participants within 90 days of enrollment and within 30 days upon request. Failure to provide an SPD can result in significant penalties if it’s discovered by through an audit, investigation of an ERISA complaint, or as a result of a lawsuit filed by a disgruntled employee.

Employers who do not have an SPD may face the following penalties:

• $110 per day per participant for failure to provide an SPD or plan document within 30 days of request.
• $184 per day [1] (not to exceed $1,846 per request) for failure to provide the DOL any requested information relating to the employee benefit plan.

Employers should be aware that discovery of a SPD failure could trigger a larger plan audit by the DOL, which could result in additional penalties for noncompliance. Learn more about SPD distribution requirements at www.ebcflex.com/SPD.

[1] Penalty for 2023. This penalty is assessed annually and is subject to inflation adjustments.