OK to distribute SPDs that describe benefits not actually offered?

[Guest Brenda N.]

Is it a good idea to distribute SPDs that have benefits described in them that are not offered by the employer? For example, the employer offers a health FSA but not a DCAP. The TPA provides an SPD that includes information about health FSAs and DCAPs. On the front of the SPD it would indicates that the employer only offers the health FSA. Anyone foresee problems with this?

[Guest AEA]

I would be extremely concerned about misleading employees on what benefits are offered under the plan. I also don't see why you would want to tell them what benefits you could offer but dont.

[QDROphile]

Who cares what is a good idea? The TPA saved money by shoving an off-the-shelf product at the client. That allowed the TPA to bid low and win the work from a client who was shallow or unsophisicated about engaging the services.

[Guest kimb]

I find this so interesting because just this morning I had a client say they wish to restate their Plan Doc's because they've had 6 amendments since they implemented the plan many years ago. This client currently doesn't offer AFLAC but may in the future and wants to know if he should add it to the doc's now or wait. I have a call in to the company that prepares our doc's to ask if we can word them to allow this benefit if and when they add it to their list of benefits in the future.

I'm concerned about them simply including the AFLAC at this point without clarifing that it's not offered at this time. I can see employees wanting to elect it but being told it's not available. This can cause major problems if it's not worded correctly from the start. We may decide to wait and amend the doc's later when & if they decide to add the benefit.

I'm interested to see how others will respond to your question.

[david rigby]

Structuring a plan document to allow future administrtive flexibility is probably a good idea. But maybe not necessary; if they want to add a benefit later, an amendment at that time is not necessarily complex.

But defining "what ifs" in an SPD is much different, as stated above. Why invite confusion?

[Sandra Pearce]

The TPA for our 125 always provides a canned-version SPD when we restate or amend our plan. I always take that canned SPD and remove the items that we do not offer, and reword anything that I feel is confusing.

[Guest JerseyGirl]

I work for a TPA, and each SPD we provide for our clients is customized to exactly match the benefits plan it represents. In this age of computer technology it is something that we do as a matter of course, and don’t think much about it, but apparently, that is far from the norm. I am always amazed by how little real customer service people are willing to accept without question; what kind of service is really being provided by a TPA who produces a one-size-fits-none SPD that the client has to either edit and reproduce on their own or worry about the false information it contains?

[Guest jashendo]

Brenda -- hire JerseyGirl.

A summary plan description should (both as a practical matter and a legal matter) summarize the PLAN that it purports to describe -- not the "world of employee benefits that you could have but don't have." Using a "canned" SPD such as some TPAs provide risks (1) reporting/disclosure violation, since such a document will likely not satisfy ERISA 102, and (2) liability for the "non-benefits" described in the mock-SPD if, for example, a court were to conclude that the document distributed to the employees really were an SPD. Not even close to being worth it, IMO.

And, kimb -- don't provide in your plan that "benefits will include [X] if and when the plan is amended to so provide" (or something like that). At best, such a provision is absolutely meaningless; at worst, it will cause trouble (e.g., someone could establish that, by some act, the employer has "amended" the plan to add the benefit). The plan will provide [X] when it is amended -- not before -- whether you say so in the plan or not. The terms of the plan state the benefits that are being provided -- not the benefits that may or may not be provided in the future depending upon the employer's future decisions.

I agree 100% that providing flexibility to a sponsor to amend the plan in the future is great -- but you're talking about something else entirely. Unless what you mean to do is add the new benefit, to become effective at a particular future date, e.g., 1/1/04. That's okay to do (i.e., it makes sense), provided that you know the necessary details now.

[mbozek]

In todays world of electronic publishing why can the inappropriate language be edited out of the SPD before distribution?

[Guest FormsRmylife]

While the TPA is not editing the SPD, I wonder if it is not editing the cafeteria plan document?

Our company's document system produces the 125 plan document and the SPD from the same data. This creates a tailored document and a tailored SPD with ERISA compliance language appearing only for 125 plans that have portions subject to ERISA. Bet that untailored SPD says ERISA applies when it does not.

[GBurns]

FormsRmylife,

Other than for church and such exempt orgs .. When would ERISA not be applicable?

[g8r]

FormsRmylife raised something I was thinking about in reading these posts.

A cafeteria plan is not subject to ERISA. Many of the underlying benefits are subject to ERISA (although a DCAP isn't). Thus, while an SPD is needed for health benefits, technically an SPD isn't needed for the cafeteria plan (the cafeteria plan doesn't actually provide welfare benefits - it's just a tax vehicle used to exclude amounts from income).

I don't know if including ERISA language in a communication piece (such as a summary of a cafeteria plan) could now turn the summary into an ERISA SPD. In other words, could a participant raise the issue that the SPD seems to offer a benefit and therefore it controls over the plan document? That is an argument made under ERISA and neither the cafeteria plan nor the DECAP are subject to ERISA.

It's a gray area. The point is that as indicated in the prior messages, you can easily avoid this by providing a summary of just the benefits offered through the cafeteria plan.