Did you know … If you’re an employer – of a company of any size – that offers group health benefits to your employees, you must provide your employees with a summary plan description (SPD)? Hey, it’s not our rule – it’s a federal law!
An SPD is a document that explains in layman’s terms the insurance plan’s benefits, claim review procedures, and ERISA rights. It helps your employees understand what is included in their health care plan. Think of it as an owner’s manual.
ERISA is the Employee Retirement Income Security Act, a federal law from 1974 that governs how employers provide benefit plans to employees. It protects the interests of employee benefit plan participants and their beneficiaries by requiring that plan information gets to the plan participants. It also establishes standards of conduct (and enforcement provisions) for plan managers and other fiduciaries. If you want to know more about ERISA, the DOL website has a good explanation.
Providing health benefits to employees requires the employer to comply with ERISA, regardless of employer size, number of employees or whether the benefits are paid for by the employer or its employees. It should be noted that not all employers are covered by ERISA, such as government entities and churches, which are considered nonprofits.
The SPD must include specific items, such as plan eligibility information, a description of plan benefits and circumstances causing loss or denial of benefits, benefit claim procedures, and a statement of rights under ERISA.
The SPD must contain the following details of the benefit plan:
It must also include:
Here are some of the questions that an SPD should answer:
Pertaining to retirement plans:
The SPD must be furnished (for free) to participants when they become covered by the plan. A separate SPD does not need to be provided to beneficiaries, such as spouses or dependents.
Participants and beneficiaries may request copies of the SPD. Not to scare you, but failure to furnish an SPD within 30 days of the request may expose the ERISA plan administrator (typically the employer) to penalties of up to $110 per day, even if the document was already provided.
Like with most compliance regulations, there are time frames in which an SPD must be distributed:
And remember, as ERISA puts it, “the SPD must be written for the average plan participant and be sufficiently comprehensive to apprise covered persons of their benefits, rights, and obligations under the plan.” In other words, unlike the previous sentence, it must be written in plain language!
Don’t confuse an SPD with an SBC, or Summary of Benefits Coverage, which is often provided along with the SPD. An SBC tells employees what the plan covers, such as in-network and out-of-network copays, deductibles, and out-of-pocket limits. (Not familiar with these terms? Our acronym glossary spells them out.)
If you’re still wondering how to handle an SPD, call us, and we can get it taken care of for you! We even have an SPD checklist available through our HR partners at Mineral.