Control Group, Plan Administrator, and SPD

[awnielsen]

I have an employer that has 2 companies that are part of a control group.

 

In reviewing their plan compliance (while doing something else), I saw that they had one SPD mega wrap that comprised the plans for both companies.  

 

Thing is, the "parent" company sponsors and administers the medical and dental for both companies.  The "child" company sponsored and administers some different benefits than the parent (pre-paid legal, etc.).  

 

Correct me if I'm wrong, but shouldn't the plans for the "child" company be in a different SPD wrap (or standalone SPDs) than the "parent"'s mega wrap?  I believe the code says that each administrator/plan sponsor has the requirement to furnish the SPD.  

 

If this is just going to the "child" company's employees, I guess it is only a technical violation.  Am I picking nits here?  

[Peter Gulia]

Before you analyze issues about arranging summary plan descriptions, have you found for each "different" benefit whether it is an ERISA-governed plan?

Might some not be a plan because there is nothing more than a payroll-deduction convenience for an employee to buy something, which the employer doesn't sponsor or endorse?

Might some not be an employee-benefit plan because the benefit is of a kind that ERISA does not define as a welfare benefit?

 

[Luke Bailey]

On ‎12‎/‎18‎/‎2019 at 3:43 PM, awnielsen said:

I believe the code says that each administrator/plan sponsor has the requirement to furnish the SPD.  

 

If this is just going to the "child" company's employees, I guess it is only a technical violation.  Am I picking nits here?  

If the SPD is incomprehensible to the child's employees because the SPD says that the covered employees are the employees of the parent, it's a problem. However, if the disclosure of relationship is good and a child employee reading it would have an understanding of his/her benefits, I think it should be OK. ERISA and DOL, not code, applies here, and I think assuming the content is good it is furnished by sponsor, through parent as agent. This is aside from controlled group issue that treats as a single employer.

So bottom line, I would ask whether the SPD is misleading to any group, and if it is, fix that.

[BreakfastForDinner]

If there's only one SPD... is it written as a single employer plan? Who is the listed employer whose employees are covered? Sounds like what's happening in practice might not be jiving with the SPD. I agree with Luke that the incomprehensible nature of the SPD could present a problem, keeping in mind that the SPD must be written in a manner calculated to be understood by the average plan participant. I'd consider running through an SPD checklist that includes the relevant applicable regs (e.g., 29 C.F.R. § 2520.102-3, etc.).

I also agree with Peter in that you'd want to look into whether the plans are all ERISA-governed. Even if the employer(s) say that they're not, I'd want to look into it myself. Sounds like you have a written document at the very least. Depending on what Circuit you're in, I'd probably run a quick Dillingham or related test. In particular, look out for an ongoing administrative scheme and the source of financing. Double check if the plans fall into a VB safe harbor.

The compliance risk may be evident, but the litigation risk should also be noted. A source of concern could be the disclosures of the SPD to the participants.

A separate concern could be the Form 5500 filings and the SARs. Are they potentially not filing/disclosing for a plan that they think is not ERISA-governed but is in fact ERISA-governed? Are they filing/disclosing properly as a legitimate controlled group or should each employer file/disclose separately? 

Just some thoughts. Good catch!