ERISA & PPACA

The Employee Retirement Income Security Act of 1974 (ERISA), was passed on September 2, 1974 and went into effect January 1, 1976. The act applies to retirement and welfare plans.

ERISA is administered by the Employee Benefits Security Administration (EBSA). Along with EBSA several groups have the statutory and regulatory authority to enforce the provisions of ERISA, specifically the Department of Labor (DOL) and the Internal Revenue Service (IRS).

ERISA guarantees that employee benefit plans are established and maintained in a reasonable and financially sound matter, by setting uniform minimum standards. Most private-sector employee benefit plans are covered by the provisions of Title I of ERISA.

Plans that are covered by ERISA includes (1) an employee benefit plan (2) established or maintained by an employer or employee organization representing employees (3) engaged in commerce or in any industry or activity that involves commerce.

Plans that are excluded under ERISA include: (1) governmental plans (2) church plans (3) plans maintained solely for complying with workers’ compensation or disability insurance laws (4) plans maintained outside of the U.S. for the benefit of non-resident aliens, and (5) excess benefits plans. Other types of plans have been excluded by several ruling issued by the Department of Labor, while other types have been excluded from ERISA via statute. An example of this is certain payroll practices such as short-term disability or salary continuation benefits paid through payroll can be treated as an exemption under ERISA, but at the same time can be treated as an ERISA plan. Benefits such as holiday gifts, on-site facilities, hiring halls, remembrance funds, sales to employees, strike funds, unfunded scholarship programs or other benefits, can be addressed with labor regulations.

A definition for what constitutes a “plan” for purposes of Title I have not been provided by Title I of ERISA, or the regulations. Commonly a plan must cover at least one employee and must be established or maintained by an employer or employee organization. Welfare plans are classified as plans, funds, or programs that are established for the intention of providing medical, health, accident, disability, death, unemployment, vacation benefits, daycare centers, apprentice/training programs, scholarship funds, prepaid legal services, or any benefit described in the Labor Management Relations act. As previously described some of these benefits may be excluded

“Reporting and disclosure” is a key focus of Title I of ERISA. ERISA, ensures that each participant of a benefit plan is informed of information about their right and obligations under the plan. The SPD explains to employees what they have to do to receive benefits, the criterion by which they can receive or lose those benefits, how to file an appeal, claims for benefits and what happens when coverage terminates, as well as several other things.

SPD stands for Summary Plan Description, which is the vehicle used to explain the plan document to participants. ERISA states that the SPD must be written in language that is easy to understand and should not be include complex, or confusing sentences.

ERISA dictates what the plan participates must be told and how that information should be provided. Employees use the SPD to understand their plan and the benefits available to them.

So long as the information that is required to be in the SPD is included, a single document can be used as the Plan Document and SPD for simple welfare plans. Also there must be some verification that the company formally adopted the plan, this is usually achieved with a signature page signed by an Office of the company.

Since welfare plans are typically less technical than pension plans, the Plan document and SPD can be combined into a single document which the employer can use for both purposes.

A plan covered by ERISA is afforded a plan comprehensive federal oversight (Federal law preempts state law). Federal law limits punitive and other types of damages against the plan and the plans fiduciaries.

For plans that are not covered by Title I of ERISA, they do not have the above distinction, therefore plan participants then have the right to sue for damages under applicable state law.

In exchange for protections afforded by Federal Law, Title I of ERISA also imposes fiduciary standards as well as reporting and disclosure conditions on benefit plans.

The company or organization that establishes and maintains the plan is considered the plan sponsor. Usually, it is a named entity such as a corporation. In order to be a plan sponsor an employer tax-identification number (EIN) is required.

As of now courts use a 3-part test to determine whether an employer sponsors a plan. The court considers several factors including: (1) whether a plan exists; (2) whether the plan falls within the Department of Labor’s (DOL) safe- harbor provision as defined below: and (3) whether the plan was established or maintained by the employer with the intent to benefit employees.

ERISA includes the safe harbor exemption, which requires that 1) there must be no employer (i.e. pre-tax) contributions; 2) involvement by employees is voluntary; and 3) the employer’s role in the plan is limited to collecting premium through payroll deductions and remitting them to an insurer, and that the employer does not obtain any compensation for its services other than sensible compensation for administrative services.

In order to avoid accidently creating a new ERISA plan when attempting to provide a new benefit to employees or changing an existing program, it is advised that employers consult with their benefits lawyer.

It is important to note, most employers do not wish to sponsor these types of plans since it creates liability in administering them. No plan document or SPD would be required if the plan is treated as a voluntary benefit plan.

Any named employee can be the plan administrator, but it recommended that a named title, or the name of the company or organization be used. The Board of Directors of the company then assigns the day-to-day administrative responsibilities of the plan administrator to a specific corporate officer, such as the VP of Human Resources, who has the authority to make decisions and interpret plan provisions on behalf of the company.

Under ERISA, the plan administrator has specific fiduciary rights and responsibilities; therefore by designating the company as the administrator, the company can ensure that the appropriate person is chosen to enforce and interpret those rights and duties. The plan administrator, in their own capacity, must have two opposing roles. As a fiduciary of the plan, they must act in the best interest of the participants and make all decisions in a fair manor on their behalf. At the same time, as an officer of the company, he or she must also take into consideration the company’s position. Depending on the complexity of the plan, this can be difficult position for any employee. A company can be named as both the Plan Sponsor and the Plan Administrator.

Anyone considered a participant or beneficiary of a plan must receive an SPD. It is the plan sponsor’s responsibility to provide it within 90 days of an individual becoming covered by the Plan or 120 days after becoming subject to ERISA. Every 5 years an updated SPD must be provided if any changes have occurred since the last issues date, or every 10 years if there have been no changes.

There are several methods of distribution of the SPD to plan participants. Please see the DOCUMENT DISTRIBUTION section for more detail.

Although there is no requirement for issuing an SPD in a foreign language, if an employer sponsors a plan that:

(a) Covers fewer than 100 participants the beginning of a plan year, and 25% or more of all participates are only literate in the same non-English language; or (b) Covers 100 or more participants at the beginning of the plan year and in which the lesser of (i) 500 or more participants, or (ii) 10% or more of all participants are only literate in the same non-English language

Then the plan administrator must provide a statement in the non-English language in which the participants are literate in, offering them assistance. This statement must also be prominently displayed in the SPD. The assistance is not required to be with written materials, it can be any medium of communication intended to provide them with information about their rights and obligations under the plan. An example of a method would be to designate an employee who is fluent in both languages available at specific hours to help employees with their questions. A third- party organization that offers multi –lingual services could also be hired as an alternative method.

It is required that an SPD contain the following information:

-The Plan name
-The Plan Sponsor/Employer’s name and address ( as well as whether the employer is a participating employer or a member of a controlled group)
-The Plan Sponsor’s employer identification number (EIN)
-The Plan administrator’s name, address, and phone number
-Designation of any Named Fiduciaries, if other than the Plan Administrator
-The Plan number used for ERISA Form 5500 purposes, e.g., 501,502,503, etc.
-Type of Plan or brief description of benefits, e.g., life, medical, dental, disability
-The Plan Year (used for maintaining the Plan’s fiscal records which may be different than the insurance policy year)
-The Trustee’s name, title, and address, if the Plan has a Trust
-The name and address of the Plan’s agent for service of legal process, along with a statement that service may be made on a Plan Trustee, Plan Administrator or Insurer
-The type of Plan administration, e.g., administered by contract, Insurer, or Sponsor
-Eligibility terms, e.g., classes of eligible employees, employment waiting period, and hours per week, and the effective date of participation, e.g., next day or first of month following satisfaction of eligibility waiting period
-The sources of Plan contributions, whether from employer and/or employee, and the method by which they are calculated
-How Insurer refunds (e.g., dividends, demutualization) are allocated to Participants
-Plan Sponsor’s amendment and termination rights and procedures, and what happens to Plan assets, if any, in the event of Plan termination
-Summary of any Plan provisions governing the benefits, rights, and obligations of Participants under the Plan upon termination or amendment of Plan or elimination of benefits
-Claims and appeals procedures—may be furnished separately in a Certificate of Coverage, provided that the SPD explains that claims procedures are furnished automatically, without charge, in the separate document (e.g., a Certificate of Coverage), and time limits for lawsuits, if the Plan imposes them
-A statement clearly identifying circumstances that may result in loss or denial of benefits (e.g., subrogation, coordination of benefits or other offset provisions)
-The standard of review for benefit decisions made by the Plan Administrator
-ERISA model statement of Participants’ rights
-Whether the Plan is maintained pursuant to one or more collective bargaining agreements, and that a copy of the agreement may be obtained upon request
-A prominent offer of assistance in a non-English language if applicable (depending on the number of participants who are literate in the same non-English language)
-Identity of Insurer(s), if any
-Additional requirements for Group Health Plans:◦Detailed description of Plan provisions and exclusions (e.g., co-payments, deductibles, coinsurance, eligible expenses, network provider provisions, prior authorization and utilization review requirements, dollar limits, day limits, visit limits, and the extent to which new drugs, preventive care, and medical tests and devices are covered) A link to network providers and a notice that a listing of network providers may be obtained at no cost to the participant
-Plan limits, exceptions, and restrictions
-Information regarding COBRA, HIPAA, and other federal mandates such as Women’s Health Cancer Rights Act, preexisting condition exclusion, special enrollment rules, mental health parity, coverage for adopted children, patient protection rights on selecting a health care provider, Qualified Medical Support Orders, and minimum hospital stays following childbirth, FMLA, USERRA,
-Description of the role of Insurers (i.e., whether benefits are insured by the Insurer)

Recommended, but not required:

-For insured arrangements, reference to the Summary of Benefits or certificate of insurance or coverage
-Claims administrators
-Language that in the event there is a conflict between the Plan Document, the SPD, and a Certificate of Insurance, which document controls
-Rescission of Coverage
-Independent External Review Organization

The DOMA (Defense of Marriage Act) definition of “spouse” was annulled in 2013 by the Windsor decision, stating it was an unconstitutional violation of the Fifth Amendment’s equal protection clause. Due to this ruling, DOMA no longer limits the definition of “spouse”. ERISA had indicated that benefit plans must recognize legal spouses according to federal law, which recognizes same sex spouses as legal dependents, so long as the marriage was conducted in a State where same sex marriages are legal. We will provide you with a section entitled the “Compliance with Federal Mandates” to use to define “legal spouse”.

The definition of a dependent child was redefined by the PPACA. For health insurance plans (encompassing dental and vision plans that are part of a single plan), a dependent is usually any child up to age 26. The marital, employment or student status of the child does not affect their status as a dependent child. However, if a dependent child has coverage available to him or her under another employer’s health plan, a grandfathered plan can omit that dependent from coverage, until the plan year renewing on or after Jan 1, 2014 which is when the new definition of dependent child must be incorporated into all Plans.

If the plan is a stand-alone dental and/or vision plan, then the definition of a dependent child does not have to adhere to “until age 26” requirement. These plans may use the old method of defining a dependent child, which is based on student status, financial need and other factors, which are defined by the plan. Although this alternative method can create more of an administrative burden, it is still allowed.

For all plans, dependent children with disabilities are usually allowed to be covered at any age, based on financial need and when the child became disabled under the plan. Additionally, children covered by a Qualified Medical Child Support Order are required to be covered under the employee’s core health benefits.

An entirely different definition of a dependent is used for Dependent Care Flexible Spending Accounts. The different definition is based on Code Section 152.

It is important to note that the plan and SPD should clearly establish who is eligible as a dependent for each benefit and any restrictions that may apply.

With certain benefit plans, it is necessary to file an “informational” tax return for the plan with the IRS/DOL. All welfare plans with over 100 participants are mandated to do this, regardless of funding methods. Unless otherwise extended, the Form 5500 must be filed within 210 days of the end of the Plan Year.

The formal name of the form is Form 5500- Annual report for Employee Benefit Plan. A “summary” of the Report that was filled must be given to each employee. This Summary Annual Report or SAR provides the key information filed with the IRS/DOL. Refer to the Form 5500 instructions for any exceptions that may apply.

The plan can be treated as an ERISA plan so long as the programs are “sponsored” by the employer or if premiums are paid on a pre-tax basis by the employee (which caused the contributions to be employer-paid via salary reduction), since these plans would be treated as ERISA plans, they would require a Plan Document and SPD.

On a cautionary note, when employers are establishing any employee benefits program, they may unintentionally create an ERISA plan or find themselves in a position where a common “ongoing administrative scheme” can be interpreted as an ERISA-governed benefits plan. Should this be the case, the employer may find itself with an ERISA plan that is not in compliance with ERISA requirements, which includes a written plan document.

As of now courts use a 3-part test to determine whether an ERISA plan exists. The court considers several factors including: (1) whether a plan document exists; (2) whether the plan falls within the Department of Labor’s (DOL) safe- harbor provision: and (3) whether the plan was established or maintained by the employer with the intent to benefit employees.

This is a facts-and-circumstances inquiry evaluating the specific facts and circumstances encompassed within the questioned plan.

ERISA contains a safe harbor exemption for certain types of voluntary benefits plans. The requirements for this exemption include, participation by employees is voluntary, there must be no employer (i.e., pre-tax) contributions, the employer’s role in the plan is limited to collecting premium through payroll deductions and remitting them to an insurer and the employer does not receive any compensation for its services other than sensible compensation for administrative services.

As previously stated, treating a plan as an ERISA plan requires adherence to stricter reporting and disclosure requirements for the employer, which includes a written plan document, SPD and the filing of an annual Form 5500. Should the employer chose not to sponsor a voluntary benefit, it is advised that they take a “hands-off” approach, to avoid employer-sponsorship.

On August 23, 2010 the DOL issued regulatory guidance, which set up interim enforcement safe harbor procedures for the federal external review processes (mandated by PPACA), which affect non-grandfathered, ERISA-covered self-insured group health plans (and specific other self-insured group health plans that are not subject to a state external review process). The DOL has also issued example notices for employers’ use which can be found on their website.

ERISA Documents Inc.  offers the inclusion of either the summarized version or a more detailed version to be added to the SPD. Currently, the notices are optional, and although they are not required to be in your SPD, they do inform the employee of additional rights so it may be beneficial to at least include the abbreviated notice.

Currently grandfathered group health plans are not required to comply. Non-grandfathered, self-insured group health plans (and certain other self-insured health plans not subject to a state external review process) do have to comply with the notice requirement.

Plan years beginning on or after September 23, 2010, are affected by the safe harbor provision (January 1,2011 for calendar-year plans). This will continue until future guidance supersedes it. An important note; during this safe-harbor period, the DOL and IRS will not take any enforcement action against a self-insured group health plan which adheres with either of the following interim compliance methods:

• Adherence to the procedures set forth in Technical Release 2010-01
• Voluntary compliance with a state’s external review process, if the state chooses to expand access to their external review process to plans that are not subject to the appropriate state laws such as self-insured plans

If either method shown above was adhered to by a self-insured group health plan, the plan sponsor would not be responsible for self-reporting any excise tax liability on IRS Form 8928, with respect to the external review process requirements.

This answer can vary. In order to be exempt from compliance the benefit must be an employer paid short-term disability or salary continuation benefits (one of the few benefits that can be treated as a payroll practice), and through a safe harbor in ERISA. No plan or SPD is required if the short-term disability benefits are treated as a payroll practice or income replacement. The benefits could be communicated to employees via an employee handbook or some other medium. If the benefit is insured or paid in part by the employee, the DOL safe harbor is NOT applicable. The benefit then will be an ERISA benefit plan, which requires a plan document and SPD.

The rules for reporting and disclosure, vesting, participation, funding, fiduciary conduct and civil enforcement are in Title I of ERISA. SPD requirements are clearly stated in 29 CFR 2520.102.2. The format and style of SPDs are discussed. The Plan document does not have any specific style or format regulations.

After being introduced under PPACA, the law stipulated that starting in 2014, for all plans, “essential benefits” could not have annual or dollar limitations imposed on them (although the number of provider visits could be limited).

The following are identified as non-essential: acupuncture, chiropractic care, vision exams, hearing aids, hospice care, obesity surgery, infertility treatments, TMJ, orthotic braces, wigs (following chemotherapy), food supplements, and ostomy supplies. Non-essential services can have dollar limitations (either annual or per visit) placed on them, under PPACA. Benefits not listed are considered “essential benefits” and cannot have dollar limits- including home health care, durable medical equipment, etc. Some of the non-essential services are not encompassed under Covered Services (such as acupuncture).

An EAP is necessary to have an SPD, if it is part of an ERISA Plan. The stipulations for an SPD are the same for an EAP, as they would be for other ERISA Benefits. If the EAP provides participants or beneficiaries with direct counseling services relating to their mental (or physical) health, such as in person visits or sessions with a counselor over the phone, then it is likely to be classified a “welfare benefit plan” and would be subject to ERISA compliance.

It could be considered a fringe benefit and exempt from ERISA, IF the EAP offers referral only services and is not providing direct mental health or medical services. The EAP section of the SPD references the program materials provided by the EAP insurer or program administrator.

Flexible Spending Accounts require an SPD. An SPD is still required, in order to describe the benefits, even though there would not be a Form 5500 filing requirement so long as the plan is maintained separately from the welfare benefits and does not exceed 100 participants. As with any other health care SPD, ERISA language and claims procedures are necessary because the health FSA is classified as a medical plan under ERISA.

Third-party administrators of many Flexible Spending Accounts automatically furnish a plan document and SPD to the employer. The employer can choose to adopt and use this plan, but it should have a separate Plan Number from the health and welfare plan, as it would be treated as a separate plan. Likewise, the employer can choose to ignore the separate plan/SPD and create a single plan that encompasses all benefits, one of which would be the FSAs. As long as the employees are provided with an SPD for the FSA benefits, either method is acceptable.

On 9/18/2013 the Department of Labor issued a guidance, which amended the definition of spouse under ERISA. Plans can use the “Compliance with Federal Mandates” which is shown below, and featured in our documents.

For self-funded docs:

Compliance with Federal Mandates

The Plan is designed to comply to the extent possible with the requirement of all applicable laws, including but not limited to: ERISA, COBRA, USERRA, HIPAA, the Newborns’ and Mothers’ Health Protection Act of 1996 (NMHPA), WHCRA, FMLA, the Mental Health Parity and Addiction Equity Act of 2008, PPACA, HITECH, Michelle’s Law, and Title I of GINA.

For fully insured docs:

Compliance with State and Federal Mandates

Each Benefit Program will comply to the extent possible with the requirement of all applicable laws, including but not limited to: ERISA, COBRA, USERRA, HIPAA, the Newborns’ and Mothers’ Health Protection Act of 1996 (NMHPA), the Women’s Health and Cancer Rights Act of 1998, FMLA, the Mental Health Parity and Addiction Equity Act of 2008, PPACA, HITECH, Michelle’s Law (if applicable), and Title I of GINA (prohibiting the use of genetic information to discriminate with respect to health insurance premiums, contributions or other restricted purposes).

There are many services a 3rd party administrator of Flexible Spending and Commuter Spending Accounts can provide for a plan. These services can include COBRA administration and direct billing. Typically, they will provide a Section 125 wrap plan for the FSA, which usually uses a Plan number of 501, as well as an SPD for the FSA to guarantee that participants have the required documents.

As previously stated, plan documents issued by FSA administrators typically only apply to the Section 125 pre-tax premiums and the Health Care FSA. If the plans do not know the names of health and welfare benefits, they will sometimes try to tie them in via reference. If the employer were to receive this type of plan and subsequently “adopt” it, then the employer would have to sponsor the flex plan that was created by this. The plan number is generally a 501 number that is assigned by the 3rd party administrator. The majority of employers do nothing with these plans when they receive them. If no action is taken for the plan, your new document may have a replacement for the Section 125 and cafeteria plan provisions.

Even if the Section 125 is replaced, the FSAs will still require an SPD. Some options that the employer can choose from include, adding the FSA to your new document and using the SPD provided by the 3rd party administrator as a “benefit summary”, alternatively they can issue the SPD separately as a stand-alone SPD. Depending on what action the employer has taken, several different courses of action are available.

If the SBCs are saved as PDF’s you will be unable to upload them into the SPD, as it is typically a MS word doc. Also, it is advised to keep the SBC and SPD separate, ie in two different documents. If joining the two is necessary, the SBC must be prominently displayed in front of the document. Many clients have chosen to maintain the documents unattached as the SBCs are distributed with open enrollment materials.

Currently our self-insured plans document provides two descriptions for preventive care: benefits provided in adherence with AMA age-based guidelines or benefits provided in accordance with the Patient Protection and Affordable Care Act. When benefits provided in accordance with the Patient Protection and Affordable Care Act is the description used, the SPD states that routine preventive care encompasses those services and procedures recommended to comply with PPACA. These services include well baby/child care and immunizations. The language is currently being updated for women’s preventive care under PPACA.

With the AMA age-based guidelines, more tests and procedures are listed, because they are easily defined but we do not define them by age group (by choice). Regardless of the group, the benefits are considered voluntary in terms of the patient. We hope to enable the patient and their physician to decide which tests and procedures are appropriate or necessary, by not creating a mandatory list of procedures, which would only be used because they’re available.

Many employers, who have asked that the SPD not list all of the procedures and exams, have found this to be a concern over the years. If this is an issue for an employer, they have the option of furnishing a separate summary of preventive-care benefits via PPACA to an employee if requested. The Department of Labor website for preventive care services available under PPACA is also encompassed in your SPD.

Language will be added to non-calendar year plans. Traditionally cafeteria plans must be changed prospectively, but the transition relief would give employers until December 31, 2014 to amend their plans to reflect the transition rules. As long as the amendment is effective retroactively to the first day of the 2013 cafeteria plan, the plan can be amended. Alternatively if no further guidance is issued during the first quarter of 2013, an amendment is usually prepared based on the information available, for release at the end of the first quarter of 2014.

Two options are available for a company that has adopted a plan that affects tax liability and obligates the company to pay benefits. The first is if they have a Board of Directors who has approved adoption or amendment of the plan through board action, they are not technically required to have an adoption page, but this is not applicable to smaller companies so an officer must approve the adoption of the plan or amendments to an existing plan.

Typically during audits, the adoption page is requested. In the context of the company committing itself to providing benefits and taking pre-tax deductions, an officer of the company is required to agree to it. The adoption page can be excluded for the documents distributed to employees, but it should be signed, dated, and maintained with the original document with other company records.

Large companies rarely use adoption pages as the Board of Directors has authorized it and the signatures are on file via the board minutes.

If all their Health and Welfare Benefits were encompassed in one plan, they would only be required to file one 5500, but all lines of coverage including those with less than 100 participates would still have to be reported. If the SPDs have not been combined then only the plans with more than 100 participants would require the filing of a 5500.

The Department of Labor does provide a program for delinquent filers, which is of voluntary compliance, and reduces the penalties, accrued for the delinquent filing. Please refer to the link below for more information about Delinquent Filer Voluntary Compliance program.

HTTP://WWW.DOL.GOV/EBSA/FAQS/FAQ_DFVC.HTML

IRC Code Section 105 covers HRA, while Code Section 125 does not. The main difference is how the IRS can look at the plan and reimbursement features, as well as what can and cannot be excluded from taxable income. This is all connected to the taxability of benefits.

Alternatively, FSAs are covered under Code Section 125. Depending on the type of expense being reimbursed, an employer can use an FSA covered under Code Section 125, as well as Code Section 105, so long as it is treated as a medical plan. Coverage under the Code Section 125 allows for the reimbursements to be non-taxable. It is important to note that a medical plan under Code Section 105 is not always an FSA under Code Section 125. Code Section 125 implements the “use it or lose it” rule, which is more restrictive. Generally any Section 125 plan will also be covered under Section 105, but only flexible spending arrangements under Section 105 are covered plans under Section 125.

Although the following are variable (due to the DOL failing to write many of the required regulations as of yet) the key features of PPACA to take effect in 2014 are:
1. All U.S. citizens will be mandated to purchase a minimum level of health insurance or they will receive a tax penalty (the “individual mandate”). For an individual, the tax starts at $95 a year or up to1% of income, whichever is greater. For families, the tax is capped at $285 in 2014.
2. Coverage cannot be denied by insurers due to pre-existing conditions; also the charge cannot be changed based on gender or health condition.
3. Essential Health Benefits cannot have an annual dollar limit applied to them. Also all health insurance plans must have Essential Health Benefit coverage.
4. A waiting period of more than 90 days cannot be imposed on Group health plans.
5. Insurers will be barred from dropping or reducing coverage due to an individual’s voluntary participation in a clinical trial.
6. Americans who earn less than 133% of the poverty level (approximately $14,000 for an individual and $29,000 for a family of four) will be eligible to enroll in Medicaid.
7. Small business owners will be able to shop for health insurance using online federal and state health insurance exchanges (or “marketplaces”). These are expected to be in effect by October 2013 with coverage going into effect January 1, 2014. States must choose whether to build their own exchange or partner with the federal government. NOTE: The DOL has delayed the release of model language for the Notice of Exchanges, which will inform employees about their choices with the new exchanges.

All health and Welfare Plans must be maintained according to a “written instrument” under ERISA. This instrument is the Plan Document. For each plan maintained there must be a separate ERISA Plan number, such as 501, 502, etc. Any and all welfare benefits can be combined into one plan. Alternatively, the plans can be maintained separately but each plan maintained requires the filing of a 5500. Each plan must provide each participant with a Summary Plan Description, which is summarized version of the Plan Document. All benefits can be combined into a single plan document, which would require one plan number for all benefits and the filing of one 5500, as opposed to multiple.

Since welfare plans are simpler than other plans such as pensions, the Plan document and SPD can typically be combined into a single document. Although there are no specific requirements for what has to be included in welfare Plan Document, the DOL has a large list of what must be incorporated in the SPD, which is the reason why these documents are usually combined.

Generally, employers base their decision on the type of benefit (fully insured vs. self-funded). Fully-insured plans have their claims and appeals procedures handled by the Insurer who makes all decisions. Self-insured benefits usually have the claims administrator make the initial determination and the Plan Administrator is responsible for the 2nd level decisions. Again this is why many employers choose to combine all of their insured benefits into a single document, also the claims procedures and funding are identical for all the benefits and it is easily described within the SPD. For clients who also have an FSA, it may be beneficial to leave the benefit as a stand-alone plan, meaning it would have its own plan number and SPD, since the claims procedure and funding are different. Additionally, with Flexible Spending Accounts there are frequently less than 100 participants, so filing a Form 5500 would not be required.

During an audit, the DOL/IRS look to see that the SPD has the required language, which are detailed in the Regulations. If applicable, they check to see that a Form 5500 has been filed, as well as verifying the proper distribution of the SPDs. The combined Plan Document/Summary Plan Description that ERISA Documents Inc. provide adheres to the current SPD requirements. Employers are allowed to issue separate plans with seperate SPD’s, but because the language is repetitive, a single document is typically the popular method.

If the benefit plan of the single employer, was adopted by affiliate companies (via adoption agreement or board action) the benefit plan would still be treated as a single employer plan requiring only one filing for Form 5500.

After the document is generated, minor alterations would be needed. Primarily the definition of Employer would need to be amended to include the employer and “any affiliate of the controlled group who formally adopts the plan”. Secondly a separate Appendix would have to provided which would list all of the affiliate companies, by name, that have adopted the plan and any exceptions such as if the adopting employer can pick and choose benefits. Finally a section, describing how the affiliate companies will be charged back to pay for their plan participation, should be added.

Aside from these changes, the plan itself is still treated as a single employer plan. Usually the employer acting as plan sponsor designates the eligibility rules and similar rules for all participating employers. The employer can provide the affiliate with several options in regards to the plan benefits such as opting out of certain coverage’s, or an “all or nothing” approach.

Yes, you are required to include a description of the cost sharing provision within your SPD. ERISA requires a description of any cost sharing provisions, which include premiums, deductibles, coinsurance, and copayment amounts, which are considered as employee responsibility. Since the specific premiums change annually, it is common practice for employers to choose not to include them within the SPD. Instead the enrollment materials are referenced for actual premiums. For example, ERISA Documents Inc. provides an SPD that states that any required premium will be shown on the employee’s enrollment materials. By stating this, the premium was described by reference in your SPD.