ERISA (the federal Employee Retirement Income Security Act) requires employers who are plan administrators of their group health plans to maintain and distribute summary plan descriptions (SPDs) to plan participants. The SPD describes important information about the plan in language that can be understood by the typical participant. The SPD must accurately reflect the contents of the plan and must include specific information required under federal law, much of which is typically missing from the benefits summaries and insurance certificates distributed by insurance companies.

The Wrap SPD is designed to "wrap around" the existing certificates of insurance and benefit plan booklets for each fully-insured or self-funded benefit to provide the information necessary to comply with ERISA's reporting and disclosure requirements. To be compliant with ERISA, the Wrap SPD and accompanying benefit plan component documents must be distributed to plan participants.

All ERISA-covered benefit plans, including group health plans and other welfare plans, must, by law, be administered in accordance with a written plan document. ERISA, HIPAA, and other federal laws require the plan document to contain certain specified provisions. Many employers assume that insurance contracts for fully insured products are written plan documents. Insurance companies, however, draft their contracts to comply with state insurance laws and, as a result, the contracts do not contain many of the required or recommended provisions that protect the plan, the employer, and plan fiduciaries.

A Wrap Plan Document is designed to meet plan documentation requirements under ERISA and other federal laws and to incorporate all other welfare plans, insurance contracts, and other relevant documents into a single plan. These materials can be kept together for administrative ease. The Wrap Plan Document provides additional legal protection for the employer and plan fiduciaries and can simplify plan administration.

The agent for service of legal process would be the entity authorized to receive legal documents, such as a subpoena, on behalf of the employer. In almost every case this will be the employer itself, but it could also be a corporate title or officer.

Employers/plan administrators may be liable for serious penalties if they don't provide an SPD or have a current plan document:

• Failure to provide an SPD or plan document within 30 days of receiving a request from a plan participant or beneficiary can result in a penalty of up to $110 per day per participant or beneficiary for each violation.

• Lack of an SPD could trigger a plan audit by the U.S. Department of Labor (DOL).

• Failure to furnish to the DOL any requested information relating to the employee benefit plan can result in a penalty of up to $159 per day (not to exceed $1,594 per request).

• Having documentation in order protects against disgruntled employees if issues regarding coverage arise.

Yes, as a general rule, materials required to be furnished under ERISA may be provided electronically if the plan administrator takes necessary measures reasonably calculated to ensure that the system for furnishing documents results in receipt of the material. Ways to ensure receipt of an SPD include using return-receipt or notice of undelivered email features, or conducting periodic reviews or surveys to confirm receipt. In addition, in order to provide materials electronically:

• The administrator must take steps reasonably calculated to ensure that the system protects the confidentiality of personal information relating to the individual's accounts and benefits;

• The electronically delivered documents must be prepared and furnished in a manner consistent with the style, format and content requirements applicable to the particular document;

• Notice must be provided to each participant, beneficiary or other individual, at the time the document is furnished electronically, that informs the individual of the significance of the document when it is not otherwise reasonably evident as transmitted (e.g., the attached document describes changes in the benefits provided by your plan) and of the right to request and obtain a paper version of such document; and

• Upon request, the participant, beneficiary or other individual must be furnished a paper version of the electronically furnished documents.

Unless an individual has the ability to effectively access documents furnished in electronic form at any location where the individual is reasonably expected to perform his or her duties as an employee, and access to the employer or plan sponsor's electronic information system is an integral part of an individual's job duties, he or she must affirmatively consent to receive documents through electronic media. In the case of documents to be furnished through the Internet or other electronic communication network, consent must be given in a manner that reasonably demonstrates the individual's ability to access information in the electronic form that will be used to provide the information. Prior to consenting, the individual must be provided a clear and conspicuous statement indicating:

• The types of documents to which the consent would apply;

• That consent can be withdrawn at any time without charge;

• The procedures for withdrawing consent and for updating the individual's address for receipt of electronically furnished documents or other information;

• The right to request and obtain a paper version of an electronically furnished document, including whether the paper version will be provided free of charge; and

• Any hardware and software requirements for accessing and retaining the documents. 

The plan administrator (which is typically the employer) is the person specifically designated by the terms of the plan who is responsible for its management. If the plan does not make a designation, the plan sponsor (typically the employer that establishes or maintains the plan) is generally the plan administrator.

The SPD should be distributed to all plan participants. The employer/plan administrator also must furnish copies of the most current SPD and plan document to participants and beneficiaries upon written request and must have copies available for examination. Copies should be furnished no later than 30 days after a written request.

ERISA requires plan administrators to give plan participants, in writing, the most important facts they need to know about their benefit plans. Participants are entitled to receive a summary plan description (SPD) automatically when becoming a participant of an "ERISA-covered employee benefit plan." (See ERISA-Covered Benefits Included in Wrap FAQs) The plan administrator is legally obligated to provide the SPD to participants free of charge. This requirement applies to most private sector employee benefit plans.

ERISA has separate and distinct legal requirements for summary plan descriptions (SPDs) and plan documents. Under the law, SPDs must be written in a manner "calculated to be understood by the average plan participant." In fulfilling this SPD requirement, the plan administrator is responsible for exercising considered judgment and discretion by taking into account such factors as the level of comprehension and education of typical participants in the plan and the complexity of the terms of the plan. Consideration of these factors "will usually require the limitation or elimination of technical jargon and of long, complex sentences." 

By contrast, the plan document must include specific items required under federal laws such as ERISA and HIPAA, regardless of their complexity. In addition, it must contain all technical and legal specifics that are not only required to sponsor and administer the plan, but also to withstand any legal challenges that may be brought against the plan or the employer.

Including the lengthy and often technical terms of the plan document in the SPD is likely to cause confusion for the average plan participant, rather than promote an understanding of plan benefits and eligibility requirements. Similarly, omitting these details from the plan document would result in a document that could be legally inadequate.

Therefore, separate documents are recommended to address these separate legal requirements.

The Employee Retirement Income Security Act (ERISA) is a federal law that covers most private sector employee benefit plans, and that sets forth uniform minimum standards to ensure that such plans are established and maintained in a fair and financially sound manner. Among other things, ERISA requires plan administrators—the people who run plans—to give plan participants in writing the most important facts they need to know about their health benefit plans including plan rules, financial information, and documents on the operation and management of the plan.

One of the most important documents participants are entitled to receive automatically when becoming a participant of an ERISA-covered health benefit plan, or a beneficiary receiving benefits under such a plan, is a summary of the plan called the summary plan description or SPD.

Accordingly, all ERISA-covered plans are required to be included in the Wrap SPD and Wrap Plan Document. However, even if a particular benefit is not ERISA-covered (i.e., it is exempt from ERISA's reporting and disclosure requirements and is therefore not legally required to be included in the Wrap SPD and Wrap Plan Document), it would be prudent to inform employees about the benefit in some manner.

ERISA covers plans that constitute an "employee welfare benefit plan," which is any plan established or maintained by an employer that provides any of the following through the purchase of insurance or otherwise:

• Medical, surgical, or hospital care or benefits;

• Benefits in the event of sickness, accident, disability, death, or unemployment;

• Vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services; and

• Any benefit described in section 302(c) of the Labor Management Relations Act (other than pensions on retirement or death, and insurance to provide such pensions).

Where there is an employer providing one or more of the described benefits, the U.S. Department of Labor has generally held that there is a "plan," regardless of whether the program or benefit is written or informal, funded or unfunded, or offered on a routine or ad hoc basis.

The following plans are excluded from ERISA:

• Governmental plans;

• Church Plans;

• Plans maintained solely to comply with workers' compensation, unemployment compensation, or disability insurance laws;

• Plans maintained outside the United States;

• Certain "payroll practices" listed below; and

• Certain group or group-type insurance programs under which employer involvement is minimal (see the FAQ "Are voluntary benefits ERISA-covered and do they need to be included in the Wrap documents?").

The following "payroll practices" are excluded from ERISA:

• Payments of compensation for work performed by an employee, including compensation at a rate in excess of the normal rate of compensation, such as:

  • Overtime pay;

  • Shift premiums;

  • Holiday premiums; 

  • Weekend premiums.

• Payments of normal compensation to employees out of the employer's general assets during periods of sickness, vacation, holidays, active military duty, serving as a juror, training, sabbatical leave, or while the employee is pursuing further education.

The information above should be used for general reference purposes only. The determination of whether a particular program may be excluded from ERISA is very complex, and therefore it is necessary to consult with qualified legal counsel for an analysis of the relevant regulations and case law.

According to the U.S. Department of Labor, a voluntary welfare benefit program, where the employee pays the entire premium, would not be an ERISA-covered plan if the employer has minimal involvement in plan operations and does not "endorse" the plan. Basically, this means the employer cannot urge or encourage employee participation in the program, or engage in activities that would lead an employee reasonably to conclude that the program is part of a benefit arrangement established or maintained by the employer. Such activities include, but are not limited to:

• Stating that the plan is part of the employer’s benefit package (e.g., "the ABC Company Life Insurance Plan");

• Generally being involved with selecting the insurer or coverage amounts; or

• Stating in communications that the employer is "enthusiastic" about the program.

However, the following employer activities are not considered an "endorsement" of the plan:

• Permitting the insurer to publicize the program to employees;

• Collecting premiums through payroll deductions and remitting them to the insurer.

The information above should be used for general reference purposes only. The determination of whether a particular program may be excluded from ERISA is very complex, and requires an analysis of whether the employer’s specific activities exceed the limitations set forth in the relevant regulations, case law, and U.S. Department of Labor Advisory Opinions.

Whether or not an Employee Assistance Program (EAP) is ERISA-covered depends, in large part, upon the type of EAP and the specific goods and services provided. In general, an EAP is not covered by ERISA unless it actually provides medical services. Benefits for the treatment of drug and alcohol abuse, stress, anxiety, depression, and similar health and medical problems generally constitute medical benefits within the meaning of ERISA. However, if the program provides only referrals and does not provide any benefits which are in the nature of "medical" benefits or "benefits in the event of sickness" to the employees, it typically is not considered ERISA-covered.

It is necessary to consult knowledgeable benefits counsel for specific guidance on the type of EAP you are providing. Please note that, even if your EAP is not required to be included in the Wrap templates, it would be prudent to inform employees about the terms and conditions of the benefit in some manner. In addition, non-ERISA benefits are sometimes included in the Wrap templates by employers who choose, for administrative convenience, to communicate all benefits to which a participant may be entitled in a single document. Determining which non-ERISA benefits to include in the Wrap is ultimately at the employer's discretion.

ERISA sets uniform minimum standards to ensure that employee benefit plans are established and maintained in a fair and financially sound manner. In addition, employers have an obligation to provide promised benefits and satisfy ERISA's requirements for managing and administering welfare benefit plans.

The U.S. Department of Labor (DOL) has the statutory and regulatory authority under ERISA to ensure that workers receive the promised health and welfare plan benefits. ERISA requires persons and entities that manage and control plan funds to:

• Manage plans for the exclusive benefit of participants and beneficiaries;

• Carry out their duties in a prudent manner and refrain from conflict of interest transactions expressly prohibited by law;

• Fund benefits in accordance with the law and plan rules;

• Report and disclose information on the operations and financial condition of plans to the government and participants; and

• Provide documents required in the conduct of investigations, or from requests by plan participants (including Wrap SPDs and Plan Documents).

Information relating to retirement and pension plans (including SIMPLE IRAs and 401(k) plans) should not be included in the Wrap Plan Documents and Wrap SPDs for welfare benefit plans. These benefits should have their own, separate Plan Documents and SPDs to comply with ERISA. While there are some permissible combinations of retirement plan and retiree health care coverage, these are extremely rare, and employers with these types of arrangements should consult with knowledgeable benefits counsel for individualized guidance.

If the number of participating employees is close to meeting the threshold for filing Form 5500, the Wrap SPD and Wrap Plan Document can create a situation where the plan may meet the threshold requiring a Form 5500 (which is generally where 100 or more participants are covered). The key here is that you are wrapping all the benefits into one Welfare Benefit Plan. So before this point, if you have a series of benefits and each had less than 100 participants, the company would not have to file a Form 5500. Once all the benefits are wrapped together into one Welfare Benefit Plan, the number of participants can change because they are all added together rather than having the benefits treated as separate benefit plans with their own unique participants as was done previously. The example below illustrates this principle:

An employer has a Wrap plan that has only medical and dental. The medical plan portion of the Wrap plan has 80 participants. The dental plan portion has 70 participants of whom 40 are also signed up for medical. That would mean the employer would have 80 participants from the medical portion and 30 more individuals who are only participating in the dental plan (the other 40 are already getting the medical portion). This would mean that the Wrap plan has a total of 80 plus 30, or 110 individual participants. This plan would have to file a Form 5500.

By contrast, if the number of unique participants does not equal 100, the plan would not have to file a Form 5500. For this reason, employers are strongly advised to consult with their benefits counsel and/or their TPA/Carrier for guidance on the creation of a Wrap SPD and Plan Document.

Under ERISA, a controlled group is seen as a single employer. So, if the entities in the controlled group have different benefits the group would have a choice to create: one Wrap Plan Document with multiple Wrap SPDs, or separate plans, each with its own Wrap Plan Document and Wrap SPD.

If you choose one Wrap Plan Document and multiple Wrap SPDs, ERISA requires that each SPD clearly identify on the first page of the text the class of participants and beneficiaries for which it has been prepared and the plan's coverage of other classes. You may wish to use the following sample language:

"This SPD has been prepared especially for the [describe class of employees—e.g., workers at the New York Plant]. The Plan also covers [list all other classes of employees covered by the Plan]."

If you have multiple employers under common control, the additional employers should be listed as Participating Employers when entering your general plan information. There is no need to include the EIN numbers of the Participating Employers under common control. However, should you wish to include this information, the templates can be customized in Microsoft Word.

For plans maintained by one employer or a group of employers under common control who have multiple EINs and are creating one Wrap Plan Document with multiple Wrap SPDs, you should simply pick one EIN to use and use this employer as the Plan Administrator. Typically, it is the EIN of the parent company, but it can generally be any of the EINs.

For employers creating separate Wraps, each entity's EIN would be used for each corresponding Wrap.

ERISA requires plan administrators to notify plan participants of material plan changes by either amending the SPD or preparing a Summary of Material Modifications (SMM) describing the change and distributing it to plan participants.

Under the ACA, group health plans and health insurance carriers are required to provide at least 60 days' advance notice to participants before the effective date of any material modification to the plan that would affect the content of the Summary of Benefits and Coverage (SBC) and that is not reflected in the most recently provided SBC. However, if the change occurs in connection with a renewal or reissuance of insurance contracts, then the 60-day rule is not applicable. 

If the 60-day advance notice rule does not apply, but there is a change that results in a "material reduction in covered services or benefits" for a group health plan, then participants have to be notified within 60 days after the modification is adopted.

If neither of the two above rules apply, the plan administrator has until 210 days after the end of the plan year to notify participants of the change. (While notification within 210 days after the end of the plan year would satisfy the legal requirements in this instance, it is generally not a good idea to wait this long when it comes to health and welfare benefits—it would be prudent to provide notification of any material modification as soon as possible.)

If you have specific questions regarding the nature of the changes being made, please consult qualified legal counsel.

Employers are required under the Internal Revenue Code to have a written PCP Plan Document, and should also have some kind of enrollment form or some specific documentation that shows that employees have elected to participate in the plan and have agreed to contribute a portion of their salaries on a pre-tax basis to pay for benefits. An election is generally binding for the current plan year. The election may not be modified or revoked unless such modification or revocation is on account of and corresponds with certain legally specified events. Please note that, as an alternative, some employers may have an automatic enrollment process that enables participants to be automatically enrolled into the PCP plan without submitting an enrollment form. In such a case, employers must still inform employees of the automatic enrollment process and of their right to decline coverage and have no salary reduction. To accomplish this, employees should be provided with a notice that includes: the salary reduction amounts for all available levels of coverage; procedures for exercising the right to decline coverage; information on the time by which an election must be made; and the period for which an election is effective. The notice must also be given to each current employee before the beginning of each subsequent plan year, except that the notice will also include a description of the employee's existing coverage, if any. (Note: This type of information is typically communicated to employees in open enrollment materials. Therefore, it would be prudent to check with employers to determine if their employees have previously been informed of the automatic enrollment process.)

According to the U.S. Department of Labor, a voluntary welfare benefit program, where the employee pays the entire premium, would not be an ERISA-covered plan if the employer has minimal involvement in plan operations and does not "endorse" the plan. Basically, this means the employer cannot urge or encourage employee participation in the program, or engage in activities that would lead an employee reasonably to conclude that the program is part of a benefit arrangement established or maintained by the employer. Such activities include, but are not limited to:

• Stating that the plan is part of the employer’s benefit package (e.g., "the ABC Company Life Insurance Plan");

• Generally being involved with selecting the insurer or coverage amounts; or

• Stating in communications that the employer is "enthusiastic" about the program.

However, the following employer activities are not considered an "endorsement" of the plan:

• Permitting the insurer to publicize the program to employees;

• Collecting premiums through payroll deductions and remitting them to the insurer.

The information above should be used for general reference purposes only. The determination of whether a particular program may be excluded from ERISA is very complex, and requires an analysis of whether the employer’s specific activities exceed the limitations set forth in the relevant regulations, case law, and U.S. Department of Labor Advisory Opinions.