Jump to content

Do the summary of benefits and coverage regulations require 60-day advance notice of a group health plan termination?


Recommended Posts

An employer wants to terminate its group health plan in connection with a sale of all of its assets.

Do the summary of benefits and coverage regulations at 54.9815-2715(b) ("Notice of modification") require a 60-day advance notice of same?

It sure appears that way, because, arguably, the plan's termination is a reduction in coverage, and coverage is one of the topics to be addressed in a SBC, and the plan's termination is a "material modification" under ERISA section 102, and the regulations at 2520.104(b)-3(d)(3).

Note that under the ERISA regulations, notice of a plan termination type fo material modification may be provided up to 60 days AFTER the modification takes effect. (Of course, the fiduciary duty rules require advance notice of a plan's termination . . . so that participants don't incur claims/expenses that are no longer covered under the plan.)

In the past, prior to the SBC requirements, I've had the employer issue an SMM notifying participants of the plan's termiantion at a reasonable time prior to the plan's termination.

If the SBC regulations apply, I guess the notice will have to be provided at least 60-days in advance, and an updated SBC provided.

I've found no guidance on this particular issue. Any thoughts are appreciated. Thanks.

Link to comment
Share on other sites

  • 10 months later...
  • 1 year later...

Curious if anybody had seen any guidance on this issue? In looking at the general SBC rules and particularly the requirements for notice of material modification, it would sure seem like a termination of the plan altogether would constitute a material modification thus requiring 60 days advance notice to terminate.

We see such advance notice requirements in other contexts (state law) and they can create real problems in sale situations because the target does not generally have a clear timeline in place until deal is signed and announced and doesn't want to provide any advance notice prior to that out of fear of disclosing the company is in play.

We also see this come up in cases where a company is insolvent or otherwise forced to shut down without significant lead time. In those cases the company is often working right up until the end to save the company / right the ship, etc. so doesn't know when / if the plan will shut down until just before it does. They are willing to give participants as much notice as they can--it's just not usually 60 days.

Curious what position the regulators have taken (may take) in these situations. I know there is a "willful" component here but I'm not sure that is likely to get anyone much quarter.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...