Many companies mistakenly believe that their fully-insured group medical insurance carrier provides them with the appropriate plan documents in order to be in compliance with the plan document and summary plan description requirements under applicable federal law. Although insurance carriers will typically provide a master contract and a certificate of insurance, these documents do not normally meet the legal requirements and must be "wrapped" with various missing provisions in order to be in compliance.

Plan Document: In accordance with ERISA Section 402, every employee benefit plan must be established and maintained pursuant to a written instrument that provides for one or more named fiduciaries who have the authority to control and manage the operation and administration of the plan. Additionally, the plan must provide a procedure for establishing and carrying out a funding policy, describe any procedures for the allocation of responsibilities for the plan's operation and administration, provide a procedure for amending the plan, identify who has the authority to amend the plan, and specify on what basis payments are made to and from the plan. Because the group insurance carriers provide a system-generated document, many of these requirements must be met by means of a separate document that "wraps-around" the insurance company's contract, thereby creating an acceptable and compliant plan document.

Summary Plan Description (SPD): Similarly, an insurance company's certificate of insurance must often be "wrapped" to include several required provisions. The SPD is the primary vehicle for informing employees about the plan, its operation, and its requirements. As such, it must be written in a manner calculated to be understood by the average plan participant and must be sufficiently comprehensive to inform participants of their benefits, rights and obligations under the plan. Group insurance carriers provide a system-generated certificate of insurance that may not include the provisions required in an SPD. In such cases, additional provisions must be added by means of a separate document that "wraps-around" the insurance company's certificate to create an acceptable and compliant SPD.

To create a compliant SPD from an insurance company's certificate of insurance, the plan sponsor must often add several additional provisions in a wrap document, including but not limited to:

  • The plan name
  • The plan sponsor's name and address
  • The plan sponsor's employer identification number
  • The type of welfare plan
  • The type of administration of the plan (contract, insurer)
  • The name, business address and business phone number of the plan administrator
  • The name of the person designated as agent for service of legal process
  • The plan's requirements respecting eligibility for participation and for benefits
  • The plan sponsor's termination rights.

A complete SPD must automatically be provided to participants within 90 days of becoming covered under the plan and generally must be furnished every five years if changes have been made to the SPD information or the plan is amended.

Because some plan documents must be furnished automatically (SPD) or upon written request (plan document, latest Form 5500s) within 30 days, we recommend that all employers review their compliance posture with regards to these required documents. Certainly, we can assist clients in preparing these wrap documents or reviewing those created by outside brokers and consultants to ensure legal compliance before adoption.