Inadequate plan summaries leave companies vulnerable

DOL audits are on the rise: Are you in compliance?

Employers who sponsor group health plans should be aware of the various reporting and disclosure requirements under the Employee Retirement Security Act (ERISA).  ERISA, which was enacted in 1974, is not a new law, but employers are often unaware of the documents that they need to provide to employees in order to remain compliant with this law.  Private sector employers of any size who sponsor an ERISA welfare benefit plan can be subject to a U.S. Department of Labor (DOL) audit, and it is important to provide the auditors with the correct information and documentation.

Typically, the first item requested and reviewed during the DOL audit is a document called a Summary Plan Description (SPD).  The SPD is reader-friendly document which informs plan participants about their plan and how it operates. Often, employers believe that the master contracts, benefit summaries or insurance certificates provided by their insurance carriers have the language required by ERISA. This is not the case, and ERISA places the burden of satisfying the SPD requirement on the plan administrator, which is generally the employer.  Employers could be subject to certain penalties if they only distribute the documents issued by the insurance carriers.

Complying with disclosure guidelines of ERISA can cause confusion with employers.  While some employers may choose to prepare a SPD for each of their employee welfare benefit plans, other employers may choose to “wrap” or bundle their benefits into one plan.  Wrap plan documents are designed to supplement the existing insurance carrier certificates with the required ERISA language. Whether an employer decides to wrap their benefits into one single plan may depend on multiple factors, including size and structure of their company. 

A Wrap SPD can be advantageous to employers, simplifying their administrative burden and also simplifying the Form 5500 filing process.  Instead of filing multiple Form 5500s, an employer would only have to file one Form 5500.  Also, in the ever changing regulatory landscape of compliance, making the necessary changes that may occur due to a change in law or regulation to multiple SPDs might become quite time consuming and costly.  It is advised that employers evaluate their employee welfare benefit plans and consult with their benefits counsel or TPA/carrier to determine how to structure their SPD.  

Written by Colleen Gole, JD

Colleen Gole, JD, is BASIC’s Director of Compliance working directly with companies to ensure that they are up-to-date and in compliance with applicable laws and regulations. 



Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.