Welfare combined plan document and SPD

[Flyboyjohn]

More employers are finally trying to comply with the ERISA plan document and SPD requirements for their welfare benefit plans.

I've encountered several law firms that are preparing a single document that they represent is BOTH the ERISA welfare plan document and Summary Plan Description (maybe the law firms are using the same 3rd party welfare document vendor?).

Seems to me this approach is fundamentally flawed, that ERISA requires they be 2 separate documents with different purposes. In the qualified plan arena I can't imagine trying to use the plan document as the SPD or vice versa.

Interested in what others think of this approach.

 

[Peter Gulia]

If there was doubt before, recent years’ court decisions recognize one document may state a plan’s provisions [ERISA § 402] and describe the plan to participants and beneficiaries [ERISA § 102].  (For many other kinds of contracts, many people would consider it strange to express a contract in two forms.)

 

The challenge is to think and write carefully so the one document is “written in a manner calculated to be understood by the average plan participant, and [is] sufficiently accurate and comprehensive to reasonably apprise [the] participants and beneficiaries of their rights and obligations under the plan.”

 

Some believe this approach reduces risks that a “plan document” fails to state the provisions the plan’s creator intends, and reduces risks that an “SPD” fails to describe a provision that ought to be communicated to participants (or beneficiaries).

 

In my experience, this method gets improvements if the writer is skillful and the client will pay for the time it takes to do this right.  And if either (or both) of those conditions is not met, writing a combined plan-and-SPD might get results no worse than what would have happened with two writings.

 

[ERISAAPPLE]

I seem to recall a few years ago the DOL put out something that said the DOL's position is you must have two documents.  As Peter mentioned, courts have clearly allowed one document.  If a client wants one document, I give them one document and explain how the the DOL might bug them about it.    

[Luke Bailey]

Using one document for both is common practice. If the verbiage is going to be the same (which it typically will be, because employers are very wary of presenting medical benefits in language that in anyway departs from the plan language, and the "plan" language, which typically comes from an insurer (whether as insurer or ASO) is often opaque, but written conversationally), why have two documents?

[Flyboyjohn]

Very helpful and informative, comments much appreciated thanks.

[Michael DeFelice]

This discussion is all well and good and the information given is good.

However, this concern is:

1. Most employers and their representatives do not know what a SPD is and do not distribute it to their employees as ERISA law demands. They probably are not even familiar with it so an employee who uses a SPD might fight an ardous battle with their HR department. As a result, the employees/public are not informed on their SPDs or the importance of the document.

2. Alot of SPDs, like alot of law documents, are dense and incomprehensible, writers should definitely make it more 'user-friendly' but as someone who has read alot of SPDs, I don't see that happening..

 

Just some comments.

[Ryan Moulder]

Great discussion particularly in light of the ACA as I have been telling clients for years about the importance of an SPD.  The cookie cutter SPDs I have reviewed fall woefully short of the ERISA regulations clear standards.

One area I have almost universally seen SPDs fall short is in the area of eligibility conditions.  The regulations require the SPD to "include a statement of the conditions pertaining to eligibility to receive benefits..." Almost no SPD I have seen is doing this in a thorough manner particularly if the employer has adopted the look back measurement method.  I discuss why this is such a problem in this article https://accord-aca.com/articles/synchronizing-spd-and-look-back-measurement-method

If the DOL ever decided to start enforcing the rules and regulations for plan documents and SPDs, almost every employer would be in trouble.

[TPApril]

I've seen 2 documents in use wherein the Plan Document is relatively generic and the SPD will be more specific and the only document that references actual insurance carriers, actual contribution amounts etc. 

In the two types of arrangements, say a sponsor changes carriers or the contribution amounts between ee and er, in which case is an amendment required?