Wrap plan

[Guest qualified plan]

I would appreciate any opinions as to whether a wrap plan (i.e., a plan that allows the plan sponsor to make one Form 5500 filing for all of its health plans) should be a separate plan document, or whether a company's cafeteria plan can serve as both a 125 plan and the wrap plan document.

Which approach do you generally take?

What are the pros and cons of each approach?

Thanks in advance.

[Guest carsca]

I have generally seen wrap plans as a separate document, but don't see any reason why you couldn't have it combined with a cafeteria plan document.

I am interested in hearing the opinion of others on this too.

[401 Chaos]

I cannot provide a definitive answer but would agree a combined plan should be possible. However, a well-written Wrap Plan will likely require the addition of extensive provisions beyond a typical cafeteria plan document (e.g., HIPAA Privacy provisions, detailed COBRA discussions to comply with the new COBRA rules, etc.). In addition, a Wrap Plan will very likely cover a number of welfare programs beyond the pre-tax programs covered by the cafeteria plan. As a result, drafting (and using and interpreting) a combined wrap / cafeteria plan can be tricky and could prove potentially problematic. I also wonder what advantages it provides if you have to create the plan from scratch rather than using existing stand-alone prototypes, particularly if you use different TPAs for your cafeteria and flex plan work that may be used to working with their standard prototype plan documents and able to help with ongoing amendments.

I have seen some general cafeteria plan documents that were intended to serve as a Wrap Plan but were basically just a cafeteria plan document. The plan sponsors and TPAs felt that because the cafeteria plan basically pulled the various other plans together for section 125 purposes that it was the same thing as a wrap plan which is not the case.