Complying with the Employee Retirement Income Security Act of 1974 (ERISA) is not an option for most private-sector employers who sponsor an employee welfare benefit plan. ERISA provides a number of protections to ensure plans are managed in the interest of plan participants. A requirement that is often misunderstood or overlooked is the plan sponsor’s obligation to give plan participants a written summary of the plan benefits, eligibility rules and more. There are two ways plan sponsors can meet this obligation.
Summary Plan Description
This document, often referred to as an SPD, is a concise and digestible summary of a single benefit plan. It includes details such as plan obligations and participant rights. SPDs must be distributed to employees within 90 days of a participant’s enrollment in the plan. If there are material plan changes from one plan year to the next many employers will provide an updated SPD. If there have been material changes (e.g., carrier change, policy change, network change) every five years, otherwise every 10 years.
A Wrap Plan is a more comprehensive document containing information for all welfare benefit plans available to employees. This will contain all ERISA-required disclosures for each type of benefit offered and ensure employees can easily access them. For example, health plan disclosures are different from cafeteria plan disclosures, but if both are offered, both must be included. Wrap plans also streamline the Form 5500 process because information on multiple benefits can be reported under a single ERISA plan number.
To learn more about correctly creating and distributing the required documents above, register for our free Better Your Business seminar covering the importance of SPDs.