ERISA (the federal Employee Retirement Income Security Act) requires employers who are plan administrators of their group health plans to comply with two important requirements or risk potential penalties and possible audits:

  1. Maintain and distribute Summary Plan Descriptions (SPDs) to plan participants which accurately reflect the contents of the plan and which include specific information as required under federal law.
  2. Group health plans must be administered in accordance with a written Plan Document which must be made available to plan participants and beneficiaries upon request.

This requirement applies to all employer groups (except government and church plans) regardless of size.Many companies mistakenly assume that insurance contracts, certificates of insurance and benefit summaries fulfill the ERISA requirements for an SPD and Plan Document– but they do not include the required provisions that protect the plan and the employer.

Penalties for Non-Compliance

Employers and plan administrators may be liable for serious penalties if they don't provide an SPD or have a current plan document. Failure to provide an SPD or Plan Document within 30 days of receiving a request from a plan participant or beneficiary can result in a penalty of up to $110/day per participant or beneficiary for each violation. Lack of an SPD could trigger a plan audit by the U.S. Department of Labor (DOL).The DOL has increased its audit staff and national enforcement initiatives to investigate employers' compliance with Health Care Reform, resulting in companies of all sizes being audited and being required to provide an SPD and plan document.

The Solution

Typically, the cost to develop an SPD can be expensive. Benefit Solutions, Inc., has access to quality benefit administrators that can assist you with an economical solution to complying with federal requirements. Generally, they will provide you with a WRAP SPD which is designed to "wrap around" your existing certificates of insurance and plan booklets to comply with ERISA. They also provide guidelines on the distribution of these documents to help you keep your documents current.