With the introduction of the Affordable Care Act, ERISA SPD requirements are receiving new attention and enforcement. Employers are required to provide a SPD for each plan or they can use an SPD Wrap document to include all welfare benefit plans. Most insurance companies and welfare organizations may supply materials that include much of the required information for a SPD. Unfortunately, they do not generally include all of the provisions required under SPD regulation.
A SPD document explains the fundamental features of an employer's welfare benefit plans, including eligibility requirements, contribution formulas, vesting schedules, benefit calculations, and distribution options. A welfare benefit plan includes any of the following group benefits: health, life, dental, vision and disability insurance plans, flexible spending accounts (FSA's), health reimbursement accounts (HRA's), employee assistance plans (EAP's), and other fringe benefit plans where the employer contributes to the cost.
ERISA requires that a SPD be easily understood and distributed to covered participants within 90 days after becoming newly covered by a plan, or within 120 days of a new plan being established. An updated SPD must be furnished to all covered participants every five years, and every 10 years even if the SPD has not changed.
An employer should be prepared to furnish an SPD to participants in a way that is reasonably calculated to ensure actual receipt. Acceptable methods of delivery include: first-class mail, hand-delivery, and electronic distribution, if the employees have access to computers in the workplace and can print a copy easily. Any change in your plan that materially affects the design or pricing must be communicated to participants in a Summary of Material Modifications (SMM). The SMM must be distributed to covered participants within 210 days after the end of the plan year in which a material modification has been made. If the material modification is a reduction in group health plan benefits, the SMM must be distributed to participants within 60 days of the adoption date.
Examples of SMM include: the elimination of benefits payable, reduction of benefits payable, increases in premiums, deductions, co-payments or coinsurance, or a new requirement (i.e., preauthorization) to obtain services under the plan.
There is a penalty of up to $110/day for not delivering a SMM within 30 days after a Participant or Beneficiary requests it.
ERISA further requires employers with 100 or more participants to report certain information to the DOL annually on Form 5500. Form 5500 returns ask for information about the plan, including the plan name, plan year, plan sponsor, plan number, participants, insurance costs, and financial data. Late filing of form 5500 can result in fines as high as $1,100 per day.
Once a Form 5500 is completed and filed, you must prepare a Summary Annual Report (SAR) for each of your welfare benefit plans subject to ERISA reporting. The SAR summarizes the Form 5500 information and notifies participants that the Form 5500 has been filed and a copy is available to participants who request a copy. SARs must be distributed to covered participants within nine months after the end of the plan year. A sample SAR format is available from the Department of Labor.
