An employee comes into your office and requests a copy of the plan document for the medical plan. What document do you give to the employee?

One of the basic ERISA rules is that all employee benefit plans must have a written plan document. Under ERISA Section 402, a plan document must include these elements:

  • Provide a procedure for a funding policy and method;
  • Describe any procedure under the plan for the allocation of responsibilities for the operation and administration of the plan;
  • Provide a procedure for amending the plan and for identifying the persons who have authority to amend the plan; and
  • Specify the basis on which payments are made to and from the plan. What is a formal plan document? For a retirement plan, the plan document is usually provided by the record keeper or your legal counsel, and the employer has a detailed plan document on hand. Defining the “plan document” for a welfare benefit plan can be more difficult. For a fully insured plan, many plan sponsors rely on the insurance policy. Although the policy will outline the eligibility rules, benefits, exclusions and claim procedures, it doesn’t usually comply with the ERISA Section 402 standards. A self-funded plan may rely on a benefit booklet, administrative service agreement, SBC or other collection of less formal documents, which also may not satisfy the ERISA Section 402 standards.What should the plan document include? A formal written plan document protects both the employer and the participants by outlining each party’s rights and responsibilities. It can delegate administrative functions to another party, such as designating a third party administrator as the claims fiduciary. It can also include such protections as:
  • Specifying a statute of limitations that may be shorter than the otherwise applicable statute of limitations;
  • Specifying venue where a lawsuit may be filed, which is helpful for a multi-state employer; and
  • Providing procedures for collecting when benefits are overpaid, for example, if the employer discovers that an employee has been covering an ineligible dependent.

Having a formal plan document also meets ERISA’s reporting and disclosure standards so that the employer can furnish a copy of the plan document to participants on request or to the DOL in connection with a plan audit.