ERISA is a federal law that sets standards and regulations for private sector employee benefit plans, such as retirement plans, health insurance plans, and other welfare benefit plans. ERISA aims to protect the interests of employees and ensure the financial integrity and security of their benefit plans.
ERISA requires group health plans to have a written plan document in place, and to provide a summary plan description (SPD) to plan participants upon enrollment in the plan, among other times. The written plan document is the instrument by which the plan administrator must operate the plan. The SPD, on the other hand, is the instrument by which the plan notifies the participants of the plan’s terms, such as plan eligibility, funding, contributions and benefits. While the plan document and the SPD should be consistent, they are two separate documents and are both separately required by ERISA.
ERISA places the burden of satisfying the plan document and the SPD requirements on the plan administrator which is generally the employer. With respect to the SPD, fully insured plans may think that they can rely on the insurance carrier’s contract, policy or certificate booklet (collectively, the certificates) with the plan sponsor to satisfy the SPD requirement. However, while the carrier certificates may contain much of the information that is required to be contained in the SPD, most certificates will not likely satisfy the SPD requirement in and of itself.
The employer may contract with the carrier or a third-party administrator (TPA) to provide the SPD. However, unless the carrier or TPA has been designated as plan administrator (and even then, it’s not entirely clear), the employer as plan administrator is still liable if the carrier or TPA fails to furnish an adequate SPD. While a carrier or TPA that contracts to provide SPDs and/or become “plan administrator” may be liable to the employer as a matter of contract law for failure to do so, the employer will remain liable under ERISA for the carrier or TPA failure. A plan administrator may draft an SPD by itself or engage an outside entity to assist.
Coordinating with the carrier certificates, the plan administrator will use a “wrap” document, which basically means that the employer will take the insurance carrier’s certificate and add (or “wrap”) any required ERISA language (and any additional items that are needed) to the certificate.
The wrap document is used solely to wrap the required ERISA language around a single policy or plan. This would be used by both self-funded and / or fully insured client that simply wants to wrap the ERISA language around a medical certificate of coverage (or dental, vision, disability, life). Carriers often include state-mandated provisions regarding coverage, but do not always include the required federal ERISA requirements.
Based on the above, while carrier contracts, policies and certificate booklets may function as the written plan document, such documents will usually not include required ERISA language and specifics about the plan itself. When this happens, adding a wrap document or mega-wrap document will be necessary for compliance with the written plan document and SPD requirements under ERISA.