COMPLIANCE

Summary Plan Description Requirement

ERISA requires the administrator of an employee benefit plan to furnish participants and beneficiaries with a summary plan description (SPD). An SPD describe certain provisions of the written plan document in understandable terms. Among other information, an SPD must describe:

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• Cost-sharing provisions, including premium, deductible, coinsurance, and copayment amounts for which the participant or beneficiary will be responsible

• The extent to which preventive services are covered under the plan

• Whether, and under what circumstances, existing and new drugs are covered under the plan

• Whether, and under what circumstances, coverage is provided for medical tests, devices, and procedures

• Provisions governing the use of network providers, the composition of provider networks and whether, and under what circumstances, coverage is provided for out-of-network services

• Provisions requiring pre-authorizations or utilization review as a condition to obtaining a benefit or service under the plan

Many employers wrongly assume that documents provided by an insurance company for fully insured products satisfy the SPD requirements. As a result, employers must draft an entire SPD or create a "wrap" SPD to meet ERISA's requirements. A wrap SPD is designed to meet ERISA's requirements by incorporating and supplementing documents provided by insurance companies.   

SPDs must be provided to plan participants as follows:
 

• Within 90 days after the employee becomes a participant in the plan.

• Within 60 days of adopting a material reduction in covered services or benefits. A material reduction in covered services generally includes increases in premiums, deductibles, coinsurance amounts, and copayment amounts. Alternatively, you can provide notice of a material reduction in covered services via a Summary of Material Reduction in Covered Services or Benefits document during the same time period instead of a new SPD.

• No later than 210 days after the end of a plan year in which a material modification that is not a material reduction in covered services or benefits is adopted. Material modifications include a change in carriers, eligibility requirements, or participant contributions. Alternatively, you can provide notice of a material modification via a Summary of Material Modifications (SMM) document during the same time period instead of a new SPD.

• Every 5 years if changes are made to SPD information or the plan that are not material modifications or reductions in covered services or benefits.

• Every 10 years if no changes are made to SPD information or the plan.

An SPD generally may be distributed electronically if the plan administrator takes steps to ensure that the system for furnishing documents results in actual receipt of the material. Ways to ensure receipt of an SPD include using return-receipt or notice of undelivered email features, or conducting periodic reviews or surveys to confirm receipt. In addition, in order to provide materials electronically:

• The administrator must take steps reasonably calculated to ensure that the system protects the confidentiality of personal information relating to the individual's accounts and benefits;

• The electronically delivered documents must be prepared and furnished in a manner consistent with the style, format and content requirements applicable to the particular document;

• Notice must be provided to each participant, beneficiary or other individual, at the time a document is furnished electronically, that informs the individual of the significance of the document when it is not otherwise reasonably evident as transmitted (e.g., "The attached document describes changes in the benefits provided by your plan.") and of the right to request and obtain a paper version of such document; and

• Upon request, the participant, beneficiary or other individual must be furnished a paper version of the electronically furnished documents.

Unless an individual has the ability to effectively access documents furnished in electronic form at any location where the individual is reasonably expected to perform his or her duties as an employee, and access to the employer or plan sponsor's electronic information system is an integral part of an individual's job duties, he or she must affirmatively consent to receive documents through electronic media. In the case of documents to be furnished through the Internet or other electronic communication network, consent must be given in a manner that reasonably demonstrates the individual's ability to access information in the electronic form that will be used to provide the information. Prior to consenting, the individual must be provided with a clear and conspicuous statement indicating:
 

• The types of documents to which the consent would apply;

• That consent can be withdrawn at any time without charge;    

• The procedures for withdrawing consent and for updating the individual's address for receipt of electronically furnished documents or other information;

• The right to request and obtain a paper version of an electronically furnished document, including whether the paper version will be provided free of charge; and

• Any hardware and software requirements for accessing and retaining the documents.