The Importance of a Wrap SPD with Regard to ERISA

Before we talk about Wrap SPD, what exactly is an SPD?

An SPD (Summary Plan Description) is a reader-friendly document that informs ERISA welfare benefit plan participants about their plan and how it operates. It’s an extremely helpful tool for both employers and employees. It simplifies the administrative burden an employer is normally forced to carry. It also gives employees detailed information about their benefits which can prevent missteps in the future.

Which employers need an SPD and why?

Private sector employers of any size, unless exempt, who sponsor an ERISA welfare benefit plan are required to provide an SPD to all eligible employees who participate in the plan. A welfare benefit plan generally includes health, dental, vision, life, disability plan, FSAs, HRAs and employee assistance programs (EAPs), etc.

What makes an SPD special?

Often, employers believe that the master contracts, benefit summaries or insurance certificates 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 are subject to penalties for non-compliant SPDs. In addition, SPDs are typically the first item requested and reviewed during a DOL audit.

Why Wrap?

Many 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. By bundling all benefits that are subject together into one ERISA plan, especially for larger employers that are required to file a 5500, it requires only one 5500 for the bundled plan, making this process much easier.

Why do I need help with a Wrap SPD?

ERISA lays out very specific requirements regarding the content, formatting, delivery, and deadline of the SPD, and the Department of Labor recently increased their ERISA audit frequency to make sure these rules are being followed. These requirements are also subject to consistent changes, making it more difficult for employers to remain compliant on their own.

The most recent change came on April 1, 2018: a new regulation that requires employer sponsored disability plans subject to ERISA to provide a benefit contingent on a disability determination and to comply with new rules finalized by the Department of Labor. You don’t want to be left to make the necessary adjustments on your own – that’s when compliance mistakes are likely to occur.