Wrapping existing Plan Document w/ Ancillary Benefits

[IhrtERISA]

Plan sponsor has an existing ERISA plan document for its self-insured medial and RX drug plan. Plan sponsor endorses multiple fully-insured ancillary benefits (LTD, STD, AD&D, etc.) and never adopted a wrap document for such benefits. 

It has come to our attention that plan sponsor had been filing one Form 5500 for its "welfare program" (combining self-insured plan with fully-insured benefits) without a plan document properly "bundling" all benefits. 

As I see it, Plan sponsor has the following options:

1. Maintain 1 plan: Adopt a mega wrap document that bundles both the existing self-insured medical plan with the fully-insured ancillary benefits 

2. Maintain 2 Separate Plans: Wrap the fully-insured ancillary benefits under one mega wrap document and maintain the existing self-insured medical plan as a separate document. 

3. Amending the existing plan document for the self-insured medical plan to include the fully-insured ancillary benefits. 

My gut tells me to go with option #2 (thereby maintaining two separate plans...the existing self-insured medical plan document and a wrap for the fully-insured benefits) as I feel there could be complications with bundling an existing ERISA plan document with ancillary benefits under one plan. 

Any pros/cons to either of these approaches? Thank you! 

[Luke Bailey]

It would seem to me 3 is a nonstarter b/c the plan documents are group insurance policies and the insurance companies will change them from time to time. The only "plan document" you can practically have for them is a wrap document. So it narrows to 1 and 2.

I think most companies would prefer to use just one wrap document for all of it so would only file one 5500. I assume since the medical is self-insured that this is an employer with > 100 participants for each of these benefits. I say that because I have seen situations where a small employer was fully insured for everything, no "plan" had 100 participants, but when they wrapped them the single "welfare plan" had > 100 so had to file 5500 for first time.

[IhrtERISA]

20 hours ago, Luke Bailey said:

It would seem to me 3 is a nonstarter b/c the plan documents are group insurance policies and the insurance companies will change them from time to time. The only "plan document" you can practically have for them is a wrap document. So it narrows to 1 and 2.

I think most companies would prefer to use just one wrap document for all of it so would only file one 5500. I assume since the medical is self-insured that this is an employer with > 100 participants for each of these benefits. I say that because I have seen situations where a small employer was fully insured for everything, no "plan" had 100 participants, but when they wrapped them the single "welfare plan" had > 100 so had to file 5500 for first time.

Luke - Thank you very much for your input. I shared a similar about option 1. And yes, this is an employer with > 100 participants for each of these benefits

With respect to option 2 (wrapping the existing self-insured plan with the fully-insured ancillary benefits), would you agree that it's fair to say that a disadvantage to doing so would be a lack of flexibility in terms of administration? For example, if the plan sponsor wishes to terminate the ancillary benefits plans and maintain the health plan, it would be more cumbersome to do so under one plan document? Any other disadvantages that you could think of?

[Luke Bailey]

IhrtERISA, yes. More plans, more plan amendments.