What You Need to Know About Summary Plan Descriptions

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ICCF—Summary Description Plan

From health insurance to retirement plans, sometimes you don’t read the fine print as closely as you should.

If you ask most Americans about the key benefits in their insurance plan or about the finer points of their employer-sponsored retirement plan, it’s unlikely they’d be able to recite them verbatim — if at all.

Fortunately, that’s why Summary Plan Descriptions, or SPDs, exist. The Affordable Care Act (ACA) has put SPDs back in the spotlight, because with 20 million more Americans now getting health care, some through their employer, these plan participants need to understand what’s covered by their policy and what isn’t. Here’s what you need to know about SPDs.

What are SPDs?

First, it’s important to understand that the ERISA, the Employee Retirement Income Security Act, governs both employee welfare benefits and retirement plans. ERISA applies to all organizations (except government agencies and churches) regardless of group size.

A welfare plan includes any of the following group benefits: health, dental, life, vision, disability insurance, FSAs, HRAs and EAPs (Employee Assistance Program). Under ERISA, each employer must have an SPD for each separate benefit plan, which contain certain ERISA and ACA language to make the document compliant.

What’s in an SPD?

An SPD must be comprehensive and provide plan participants with knowledge about their rights and plan obligations. An SPD is not an insurance certificate or booklet. SPDs have specific content requirements, including an explanation of plan benefits, information on participants’ rights and claims review procedures. These details may or may not be covered in a booklet or plan certificate.

When Should Employees Receive an SPD?

Each employee should receive his or her SPD within 90 days of joining the plan, within 120 days of a new plan being implemented or within 30 days of requesting an SPD. Employers also should provide an SPD every five years if they make significant changes within that timeframe or every 10 years if there aren’t any modifications. However, ERISA requires that if significant changes are made (what it calls “material modifications”), then employers have 210 days after the close of that year’s plan to give employees an SPD. If it reduces services, it must inform employees within 60 days before these changes go into effect.

How does the Affordable Care Act (ACA) affect SPDs?

All plan administrators must provide plan participants with a Summary of Benefits and Coverage (SBC) along with a SPD. The basic difference is that an SBC is just additional information about plan benefits and coverage employers are now mandated to provide. It’s meant to ensure compliance, since there’s a $1,000 a day penalty for each employee who does not receive an SBC and a daily penalty of $110 for not providing a SPD.

What is a WRAP document?

An ERISA WRAP is created when a plan administrator adds any required ERISA language to an insurance carrier’s certificate. An employer also can use a WRAP document to bundle all their plans into one plan, which streamlines the filing process required by the Department of Labor.

Unfortunately, almost all groups currently are out of compliance. Employers should ensure they’ve provided an SPD and SBC to all individuals who have an employer-sponsored retirement or insurance plan. If you’re an employee and are unsure of your benefits or never received an SPD, contact your plan administrator as soon as possible. They are required to provide you with this document within 30 days. Do your due diligence now so that a misunderstanding of benefits doesn’t cost you later.



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