Nothing strikes fear into the hearts of employers like an audit notice from the Department of Labor (DOL). Would you be ready if the DOL came knocking at your door to audit your employee benefit plan?
Many employers take their health plan documentation for granted; assuming the insurer or HMO paperwork that’s provided is all they need to meet the responsibilities under the Employee Retirement Income Security Act (ERISA). That’s usually an incorrect assumption.
The plan document
In fact, one of the most basic ERISA rules is that all employee benefit plans must be detailed through a plan document. The plan document governs the plan and its administration. Certain terms, as described in ERISA §402, are required to be in the document, including what benefits are covered, eligibility requirements, claims procedures and more. It’s not required to distribute a plan document, unless requested by a participant. However, the plan document will be among the first documents asked for in the event of a DOL audit.
Summary Plan Description (SPD)
As opposed to the plan document, an SPD is a document employers are required to distribute to participants in retirement or health benefit plans covered by the ERISA. The SPD is a summary of the plan document and must be written in a way that participants can easily understand.
Nearly all group health plans subject to ERISA must provide participants with an SPD, regardless of size. Fully and self-insured groups must comply with ERISA’s SPD requirements. While an exception exists for small employers in the Form 5500 filing requirement, this does not apply to SPDs.
SPDs must be distributed to plan participants within 90 days of enrollment, or within 30 days if requested by a participant. Plan sponsors have 120 days from the effective date of any new plan to distribute an SPD. If a plan is changed a revised SPD is required or a summary of material modifications must be given to participants.
Many employers don’t realize there are serious consequences for not complying with ERISA’s requirements for plan documents and SPDs. For example, a plan sponsor can be fined up to $110 per day if they don’t provide a plan document or SPD within 30 days of a participant’s request – notably in recent years, the government has issued penalties upwards of $18,000 for noncompliance.
To avoid these crippling penalties, employers need to take necessary precautions to assure they’re ERISA compliant. Many employers may think brokers or carriers provide all required benefits documentation; however, the obligation to comply with ERISA rests exclusively with the plan administrator.
While your Bukaty benefits consultant may provide you with regulatory templates, or conduct informational webinars on remaining ERISA compliant, insurance brokers are not authorized to provide legal advice.
Learn from an expert
The good news is we’re holding a seminar on Wednesday, November 7, to review the importance of an SPD. This workshop will focus on the who, what, when and why of an SPD and its critical importance for your company’s health and welfare plans. We will also discuss the importance of having a general welfare benefits plan document, also known as a “wrap plan,” which will assist in remaining ERISA compliant.
If you have any questions, please call your Bukaty benefits consultant at 913.345.0440. If you’re interested in registering for the seminar, click here.