What’s a Wrap Plan?

Wrap plans are documents that bundle health and welfare benefits into a single plan document and summary plan description (SPD). These documents help fill in the gaps of required information by wrapping around the insurance certificates, benefit summaries and booklets that describe the full details of the plan. Wrap plans simplify an employer’s compliance efforts and reduces the amount of documents they have to maintain.

A wrap plan is valuable to employers because:

• It’s the simplest way to comply with Employee Retirement Income Security Act of 1974 (ERISA) document and SPD requirements, and it limits the number of documents that employers are required to maintain.
• Wrap plans can be used to streamline Form 5500 filing and reduce the number of Form 5500s that employers may be required to file.

Let’s dive into some more details about the benefits of wrap plans.

Satisfying ERISA Requirements

All employers (with the exception of governmental entities and church plans), regardless of size, are subject to ERISA. Employers who are subject to ERISA and sponsor insured and/or self-funded health and welfare benefit plans (such as group health, dental, vision, group term life, group short term and long term disability, etc.) are required to have plan documents and distribute SPDs for ERISA benefits. Wrap plans are a simple way to help meet the plan document and SPD ERISA requirements. There is no small employer exception for these requirements, as there may be for Form 5500 filings and other regulatory requirements.

It’s important to note that remaining compliant with ERISA and providing participants with plan information is the responsibility of the employer, not the insurance provider. Failure to comply with ERISA leads to violations that can lead to hefty financial penalties for employers of any size.

These penalties are why it’s important to be proactive with ERISA compliance. Wrap documents cannot retroactively fix compliance challenges so it’s important to make sure employers are compliant before an investigation or audit occurs. If an employer identifies areas of noncompliance, correcting it as soon as possible may avoid or reduce their penalties.

Ultimately, wrap plans help fill the gaps in insurance documents, which typically don’t include all of the ERISA required language. Wrap plans act as a companion to the insurance certificates/booklets and are used to satisfy the ERISA SPD requirement when distributed along with the insurance information. Employers who only provide insurance certificates will likely fail to meet the SPD distribution rules and may be subject to daily penalties for noncompliance.

Streamlining Form 5500 Requirements

Employers with 100 or more participants on the first day of the plan year also benefit from wrap plans because it streamlines Form 5500 filing. By combining your various plan documents, insurance certificates and SPDs into one ERISA-compliant bundle, employers are only required to file one Form 5500 opposed to filing one for each individual ERISA plan offering of 100 or more participants. This helps save time and reduces administrative costs for the employer.

EBC’s Promise

Wrap plans are an effective way to meet ERISA requirements and simplify the benefits administration process. Employee Benefits Corporation provides wrap plan services, and guarantees that our documents will meet ERISA requirements in the event of a Department of Labor (DOL) audit, so employers never have to worry about being noncompliant. Contact us if you have any questions on wrap plans or would like additional information.