March 29, 2013
Authored by: benefitsbclp
ERISA requires that all plans have a written plan document and summary plan description. In addition to describing the benefits, the written plan document must also establish: a funding policy, a procedure for allocating administrative and management responsibilities, a procedure for amending the plan, and the scheme for payment of contributions and benefits.
For welfare plans, plan sponsors have customarily relied on the benefit booklets prepared by the insurer (for insured plans) or the third party administrator (for many self-insured plans) as both the plan document and the summary plan description. The benefit booklets and the schedules of benefits usually provide a full and detailed description of the benefits that are covered and excluded as well as requirements for preauthorization of treatment, filing claims and appeals, and the costs (deductibles, co-pays, out of pocket maximums) that participants pay. But, the booklets, which are not prepared by the plan sponsor, generally do not include certain required ERISA provisions such as identification of fiduciaries, allocation of responsibilities, funding, claim procedures, or provisions that protect the employer such as those provisions that reserve the plan sponsor’s right to amend or terminate the plan, provide for subrogation and recovery of overpayments, address lost participants, and stipulate the absence of any guarantee of employment. Similarly, the benefits booklets do not typically include all of the information that the DOL regulations require to be included in a summary plan description (e.g., name, address and employer identification number of the plan sponsor, name and address of the plan administrator and others who have fiduciary and administrative responsibilities, plan number, agent for service of legal process).
Plan sponsors can fill in the gaps in the benefit booklets by adopting a wrap plan document that contains the missing information required for both the plan document and the SPD. The wrap plan document also incorporates by reference the detailed terms of the benefit booklets and certificates, which are included attachments. In this way, the wrap document can satisfy both the plan document and summary plan description requirements. If the document is intended to serve as both the plan document and the SPD, it is advisable to state clearly that the wrap document is intended to be both the plan document and the SPD.
A wrap document can also be used when a plan sponsor wants to treat several welfare benefit plans or programs as a single plan. Many plan sponsors treat different welfare plans, such as group health (medical, dental and vision), long and short-term disability, group term life insurance, as a single plan and file one Form 5500 although each program has a separate insurance policy or contract. A wrap document permits the sponsor to incorporate the several contracts and certificate into a single plan document and establish that it has a single plan for Form 5500 reporting purposes.
Plan sponsors should review their documents to determine whether they need a wrap document to satisfy ERISA’s plan and summary plan description requirements.