Employers are often confused about what a wrap document / summary plan description is and whether they need to offer one and why. MEDSURETY provides HSA, FSA, DCAP, TRANSIT, VEBA, HRA, COBRA-CONTINUATION, RETIREE BILLING, ELIGIBILITY MANAGEMENT Administration and compliance documents for employers, such as Section 125 Cafeteria Plans and WRAP Documents / Summary Plan Description documents. This article provides the 101 training on WRAP DOCUMENTS.
WRAP DOCUMENT – SUMMARY PLAN DESCRIPTION 101
The ERISA Requirement
Most “health and welfare” benefit plans must comply with specific requirements set forth by ERISA (the Employee Retirement Income Security Act of 1974). Most fully insured policies comply with ONLY SOME of those requirements. The following are a few of the ERISA requirements that employers need to comply with:
Employers must establish and maintain, for each benefit plan, a written plan document that includes specific elements described in/by ERISA.
Employers must provide a summary plan description(SPD) that explains the key terms and conditions of the plan document to each plan participant.
Form 5500, the Annual Return/Report of Employee Benefit Plan, needs to be filed with the Department of Labor (DOL) and the Internal Revenue Service (IRS) for each benefit plan.
The Wrap document is a shortened plan document and/or summary plan description that incorporates all required language to meet the ERISA guidelines. This document “wraps around” existing insurance policy language, and self-insured plan language, to create a fully compliant plan document and summary plan description. The Wrap document is a single document that can fully incorporate multiple plan documents for the different employee benefits that an employer offers. It can also be a combination of fully-insured and self- insured plans or any variation thereof. More importantly, only ONE summary plan description and ONE Form 5500 filing is required for all the plans that fall under the Wrap arrangement.
Why is it called a Wrap Document?
It is technically called a Summary Plan Description, or SPD. However, the industry has informally coined the name Wrap Document. Employers are supposed to have an SPD prepared for each benefit they offer (e.g. health, dental, life). Many employers have found it easier and more beneficial to have a single SPD prepared that applies to multiple benefit plans. In essence, the SPD “wraps around” all benefits that an employer offers, hence the nickname Wrap Document.
Doesn’t the insurance company prepare these documents?
Documents that are provided by insurance companies do not include all the disclosures that ERISA requires. The documents that are provided by insurance companies are usually standardized and not specific to the customized information that must be disclosed to employees.
Do I need an ERISA Wrap Document?
If you offer group health insurance, you are required to distribute an ERISA Wrap SPD document to all Plan participants within 120 days of the Plan’s effective date.
Is there a minimum number of employees before required?
The Wrap SPD requirement applies to all employer sponsored group health insurance offerings, including a one-person plan.
For large employers (100+) subject to Form 5500 reporting, Wrap SPDs are largely a necessity. This is especially true for employers already filing a single Form 5500 for health and welfare plans, since those employers have represented to the Department of Labor that they have a consolidated, single ERISA plan.
For smaller employers not subject to Form 5500 reporting, it is more a matter of best practices. Still, with that looming penalty, no employer should ignore it.
Can other documents serve as a Wrap Document?
No. Other documents such as your Section 125 POP or HRA Plan documents do not constitute an ERISA Wrap SPD for the employer group health insurance plan. Nor does your insurance company’s Master Contract, Certificate of Coverage, or Summary of Benefits. Any or all of these may be required plan documents for the plan but they do not constitute the required ERISA Wrap SPD that must be prepared by the employer.
What information must be included in a Wrap Document?
|Name or common name of the plan||Name and address of the plan sponsor||Employer identification number (EIN)|
|Plan year||Plan number||Type of welfare plan|
|How the plan is administered||Name, address & phone number of the plan administrator||Agent for Service of Legal Process and relevant contact information|
|Eligibility requirements||Statement of when benefits may be denied or forfeited||COBRA statement of rights|
|FMLA procedures||Source of contributions||Schedule of required participant contributions|
|Qualified Medical Child Support Order (QMSCO) procedures||Statement regarding the right to access documents for adverse benefit determinations||If applicable, a statement that the plan is collectively bargained|
|Statement of ERISA rights||HIPAA special enrollment rights and privacy procedures||Newborns’ and Mothers Health Protection Act disclosure|
|Women’s Health and Cancer Rights Act (WHCRA) disclosure||Terms by which the employer may amend the plan||Terms by which the employer may terminate the plan|
|CHIPRA special enrollment rights disclosure||For insured plans, contact information of the health insurer and administrative services provided||Funding medium of the plan (e.g. general assets of the employer or a trust)|
|Deductibles, coinsurance or other cost-sharing details||Procedures to follow for submitting claims||Summary or schedule of benefits|
How does a Wrap Document impact Form 5500 filing?
Employers may file a single Form 5500 for every benefit identified in the Wrap Document. This saves time and money. Without a Wrap Document, a separate Form 5500 must be filed for each health and welfare benefit.
What happens if I don’t have a Wrap Document?
Failure to provide the ERISA Wrap SPD within 30 days of request could trigger fines per participant. It can also trigger an audit by the DOL.
What are the Penalties for Non-compliance?
Failure to meet ERISA’s requirements can result in significant penalties imposed by the DOL:
- Employers may be charged a penalty of $152 per day for failing to furnish documents requested by the DOL.
- Employers may also be charged a penalty of $110 per day for failing to provide a Wrap Document to employees in a timely manner.
- Participants have the right to file a lawsuit against an employer if certain plan disclosures aren’t met. The following scenario is an example of an instance where this may apply.
- If an employer changes a plan in the middle of the year, but there was no document which suggested the employer could take such action, an employee who was adversely affected could file a lawsuit against the employer to pay for damages and legal fees.
- Failure-to-file penalties of up to $2,140 per day, per plan
MEDSURETY provides Wrap Document Services to help employers remain compliant.
Contact us to request your document today!