Saturday, February 01, 2003
by Richard D. Weber, J.D.
MDA Legal Counsel
Published in the February 2003 issue of the Journal
Question: I understand that revised Department of Labor regulations regarding Summary Plan Descriptions are now in effect. Do I need to do anything to comply with these new regulations? What are the consequences if I do not comply?
Answer: The answer is provided by my Partner, Curtis DeRoo. Curt is an expert on ERISA and the new Department of Labor regulations.
A Summary Plan Description ("SPD") is a plain-English description regarding fringe benefits that are given to each fringe benefit plan participant. On Jan. 22, 2001, the U.S. Department of Labor issued final regulations regarding new SPD disclosure requirements for group health, life, disability and retirement plans. These new requirements were made effective as of the first day of the second plan year beginning on or after Jan. 22, 2001 (i.e., Jan. 1, 2003, for calendar-year plans).
Under the new regulations, the following must be included in the SPDs (some provisions are specific to group health plans only):
- general information regarding the plan, including the type of plan (i.e., pension, welfare, etc.), the name, address and employee identification number of the employer, the type of administration, the name and address of the plan administrator, the agent for legal process, and the plan year;
- the plan's requirements respecting eligibility for participation and for benefits;
- the circumstances which will result in disqualification or forfeiture of benefits, and the authority of the plan sponsors or others to terminate or modify the plan;
- any cost-sharing provisions, such as premiums, deductibles, and co-payments;
- the preventive services that are covered under the plan;
- whether, and under what circumstances, existing and new drugs are covered under the plan;
- whether coverage is provided for medical tests, devices, and procedures;
- provisions governing the use of network providers;
- conditions or limits applicable to obtaining emergency medical care;
- provisions requiring preauthorization or utilization review as a condition to obtaining a benefit or service under the plan;
- the plan's procedures regarding qualified medical child support orders (QMSCOs);
- statements of rights under COBRA and ERISA; and
- a disclosure regarding the length of hospital stay following newborn delivery under the Newborns' and Mothers' Health Protection Act.
Pension-type plans. Most retirement plans will have been amended for the so-called "GUST Amendment" during 2002 (GUST is an acronym for a number of tax acts that impact these plans since 1993). You should have a new SPD from your retirement plan consultant to pass out to your employees.
Welfare-type plans. The DOL considers any fringe benefit plan other than a pension plan to be a welfare benefit plan. Most welfare-type plans (health insurance, life insurance, disability, etc.) have benefit booklets prepared by the insurance company. As a general rule, the benefit booklets do not comply with the new SPD rules. A few insurance companies are revising their benefit booklets to comply with the new rules, but most are simply alerting their customers to these rules and suggesting they contact legal counsel to take care of it.
As a service to MDA members, MDA legal counsel, with the help of MDA Insurance, has prepared "wraparound" SPDs for health, life and disability plans. Completing a few blanks in the SPD will allow the wraparound SPDs, when accompanied by the benefit booklet, to serve as the SPD.
Believe it or not, this is serious business. The DOL has the authority to impose fines on a plan sponsor and administrator (up to $110 per day) if (1) they do not have SPDs for pension and welfare-type plans, and/or (2) if they have not given them out to the participants. While pension plans and health insurance plans are the likely targets of an audit by the DOL, life insurance and disability plans are also covered by these rules. In addition, a plan participant could arguably sue you for failure to distribute a completed SPD to them. You should therefore treat these new rules seriously.
MDA Insurance has also provided electronic versions of these SPDs on its website. Find them at www.mdaprograms.com