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Guest Article

Deloitte logo

(From the March 26, 2012 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

DOL Releases New Guidance on SBC Preparation and Delivery


The Department of Labor released a set of "Frequently Asked Questions" to clarify some of the basic aspects of preparing and providing the new Summary of Benefits and Coverage. Notable in the release is the announcement of a "good faith" compliance standard for the first year the SBC requirement is applicable.

Group health plans (and group health issuers) are required to provide participants and beneficiaries with an SBC beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. Final regulations on this new disclosure requirement were issued last month. In response to questions received from the public about the new requirement, the Departments of Labor, Treasury, and Health and Human Services jointly prepared a set of FAQs to provide additional guidance. Among other things, the FAQs explain:

  • Temporary Good Faith Compliance Standard. During the first year of SBC applicability, the Departments will not impose penalties on plans and issuers that are "working diligently and in good faith" to provide the required SBC content in an appearance that is consistent with the final regulations. Q&A-2.
  • Combining Information on a Single SBC. Information can be combined on one SBC for different coverage tiers, for different cost-sharing elections (e.g., deductibles, copayments and co-insurance), and for add-on arrangements that impact major medical coverage (e.g., health FSAs, HRAs, HSAs and wellness programs) if the appearance is understandable. For different coverage tiers, the examples should use the cost sharing for the self-only coverage tier. For different cost-sharing elections, the examples should note the assumptions used. For add-ons, the effect can be denoted in the appropriate spaces for deductibles, copayments, coinsurance, and benefits otherwise not covered by major medical, and the examples should note the assumptions used. The FAQs encourage an examination of the coverage examples in the Departments' sample completed SBC. Q&A-3, -4, & -6.
  • Carve-Out Arrangements. Where the plan is insured and utilizes carve-out arrangements to manage certain benefits (e.g., pharmacy benefit managers and managed behavioral health organizations), responsibility can be delegated under a "binding contractual arrangement" for the service provider to: (1) complete the SBC, (2) provide information necessary to complete a portion of the SBC, or (3) deliver the SBC. In that case, the plan will not be subject to enforcement action if it monitors the service provider's performance under the contract and corrects a violation as soon as practicable. If the plan does not have the information to correct the violation, it must communicate with the participants regarding the lapse and begin taking "significant steps" as soon as practicable to avoid future violations. Q&A-5.
  • 7-Day Rule. In certain circumstances, the SBC must be provided within 7 business days — for example, where the plan receives a request for the SBC from a participant or beneficiary. The FAQs clarify that "provided" means sent. Therefore, an SBC would be timely provided if it was sent out within 7 business days even if it was not received until after that time. Q&A-6.
  • Electronic Delivery. Different rules apply to the electronic delivery of the SBC to those who are covered under the plan, and those who are eligible but not enrolled.

    • Participants or Beneficiaries Who Are Covered: For those who are covered under the plan, electronic delivery can be made under Labor Department Regulation Section 2520.104b-1 which allows e-delivery to participants who have the ability to effectively access documents furnished in electronic form at any location they are reasonably expected to perform duties as an employee and for whom access to the employer's or plan sponsor's electronic information system is an integral part of their duties. Other individuals may also opt into electronic delivery under these rules.
    • Participants or Beneficiaries Who Are Eligible but Not Enrolled: For those who are eligible but not enrolled in the plan, e-delivery can be made if: (1) the SBC format is readily accessible (e.g., in a html, MS Word or PDF format), (2) the SBC is provided in paper form free of charge on request, and (3) where the SBC is provided via an internet posting, the plan informs the individuals that the SBC is available on the internet and provides the internet address. Plans can make this disclosure (referred to as an e-card or postcard requirement) by email. Q&A-10.
  • Model E-Card or Postcard. A sample e-card is provided in the FAQs for use in advising eligible but non-enrolled employees of the availability of the SBC on the internet. Plans are free to tailor the sample. Q&A-12.
  • Cross-References to SPD. An SBC is not permitted to simply provide a reference to the Summary Plan Description or another document for any required content of the SBC. It may, however, include a reference to the SPD in a footer, or add a reference to the SPD in order to supplement the information in the SBC. Q&A-15.

Further, the FAQs include discussion of SBCs in the context of COBRA, the circumstances that trigger the obligation to provide an SBC (e.g., how the terms "application" and "renewal" apply to self-insured plans), the issuers in the individual market, satisfying the "culturally and linguistically appropriate" requirement, and modifying the prescribed SBC template.


Deloitte logoThe information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact:

Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955.

Copyright 2012, Deloitte.


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