With the exception of government and faith-based organizational plans, most employers that offer employee welfare benefit plans are required to provide a Summary Plan Description (or SPD) to plan participants and beneficiaries, yet many organizations either don’t provide one or have one that contains outdated information.
A SPD is a written document that gives information about the plan, a summary of the benefits available, the rights and responsibilities of participants and beneficiaries under the plan, and information on how the plan operates. Examples of employee welfare benefit plans that require written SPDs include, but are not limited to, health, dental, life, and long-term disability insurance.
Who Needs to Receive an SPD? When Do SPD’s Have to be Provided?
Each participant covered and each beneficiary receiving benefits under the plan must receive an SPD free of charge. Plan participants must receive an SPD at the time they enroll in the plan. Beneficiaries should receive an SPD at the time they become eligible to receive benefits under the plan. Participants and beneficiaries are also entitled to an SPD upon written request. Participants and beneficiaries receiving benefits under the plan must also receive a summary of any material modification in covered services or benefits provided by the plan. This can be accomplished by revising the SPD or providing a Summary of Material Modification (SMM). The SPD itself can be an electronic document that all plan participants and beneficiaries have access to or you can provide a printed copy when it’s requested.
What’s Covered in a SPD?
It’s a requirement that the SPD be written so that it will be easily understood by the average participant, and that it must include information on the following:
- Premiums, deductibles, coinsurance, and copay amounts
- Covered preventive services
- Medical tests, devices, and procedures that are covered and under what circumstances
- Conditions or limits on the selection of primary care or specialty care providers
- Any preauthorization or utilization review required to obtain a benefit
- Process for appealing denied benefits
- Annual or lifetime caps or other benefit limits
- What existing and new drugs are covered and under what circumstances
- Use of network providers and if coverage is provided for out-of-network services
- Conditions or limits for emergency care
- How benefits may be obtained
- Benefit claims procedure
Isn’t All of This Covered in the Brochures and Forms We Receive From Our Insurance Carrier?
While some (even most) of this information may be provided by your insurance carrier, the point of SPD is that information on the plan from the carrier AND information specific to your organization are all together in one document.
Which Regulation Governs SPDs and Which Agency Enforces the Regulations?
The Employee Retirement Income Security Act (ERISA) governs employer-sponsored welfare benefit plans. The Department of Labor, The Department of Treasury, the Pension Benefit Guaranty Corporation and the Office of Labor Management and Welfare Pension Reports enforce various ERISA provisions.
What Are the Consequences for Failing to Comply with ERISA’s SPD Requirements?
An employer that fails to comply with ERISA's minimum standards can lose its favorable tax status, resulting in adverse tax consequences. The employer can also be subject to civil action to correct the violation(s), civil penalties, and criminal penalties for willfully violating any provision. A willful violation of any disclosure provisions by a plan administrator can result in a fine of up to $5,000 and imprisonment for up to one year. For an employer, the penalty is a fine of up to $100,000.
Compliance with ERISA isn’t optional. Do all that you can to be compliant and keep your employees well-informed.