ERISA Plan Docs: Are You Doing What the Law Requires?

Among the more head-spinning laws HR has to grapple with, the Employment Retirement Income Security Act (ERISA) ranks near the top of the list.

ERISA, which sets federal rules for health and retirement plans, lays out specific requirements about what documents covered employers must provide to their employees regarding their health plans.

The precise requirements under ERISA can get a bit tricky to follow, and it can be costly for employers to make a mistake.

These documents can be prepared by legal counsel, third-party administrators, or employers – who may be assisted by software and DOL-provided guidance. But the buck stops with the plan administrator: It’s their job to make sure everything is in order.

Let’s take a brief tour of what’s required.

1: The ERISA plan document

This is the formal written document that lays out the rights, benefits and obligations of participants in the plan. It may have insurance contracts or trust agreements. The plan document identifies the plan administrator, which can be the employer or someone hired to perform that function. Among other things, the plan document typically includes:

• Eligibility rules
• Included benefits
• A funding description
• Procedures for claims filed under the plan
• The name of the fiduciary who will administer the plan.

This is by no means an exhaustive list.

This document is a must-have, but employers do not have to distribute it to their employees unless it is requested.

Once requested, the plan document must be provided within 30 days. If it is not, the plan administrator can be fined $110 per day.

2: The summary plan description

The summary plan description is essentially a simpler, more digestible version of the plan document. It explains what is provided by the plan and how the plan operates.

Federal regulations set specific rules relating to the summary plan description’s content, style and format.

Because it is a summary of the plan document, it will repeat much of the same information – usually in easier-to-understand terms.

As to style and format, the regulations specifically suggest eliminating technical jargon and “long, complex sentences.”

The summary plan description must be distributed free of charge to employees. New employees must be given a copy within 90 days after they first become covered by the plan. If the plan is brand new, that period is extended to 120 days.

The plan must be distributed using “measures reasonably calculated to ensure actual receipt.” If it is distributed electronically, confidentiality should be protected, affirmative consent should be obtained, and measures should be taken to make sure the document is actually received.

A plan participant who receives an electronic copy is still entitled to a paper version on request. It is the plan administrator’s duty to make sure this plan is provided. If a summary plan description is not provided on request, employers face fines of $110 per day. Additional penalties may be imposed if it is not provided upon request by the DOL as part of an enforcement action.

3: The benefits summary

This document, also known as the summary of benefits and coverage, helps employees choose which coverage is best for them.

It is provided to employees enrolling or re-enrolling in health plans, when open enrollment begins. It must also be provided upon request.

This document defines terms, describes different coverages, and provides coverage examples. It also specifically distinguishes itself from the plan document, and it provides contact information for those with questions.

It is very important to remember that his document does not replace the summary plan description; instead, it is a separate document that must be provided separately.

The DOL provides help with this document here.

Helpful tips

Here are some important tips to keep in mind when organizing ERISA plan materials.

• Understand that the plan administrator is ultimately responsible for making sure all materials comply with ERISA requirements.
• Remember that each of these documents exists independently of one another and serves its own purpose.
• Don’t assume that an insurance carrier’s certificate of coverage or summary of benefits meets ERISA requirements. It is the plan administrator’s responsibility to provide the required information.