Tag Archives: Summary Plan Description

Do You Know What Your Summary Plan Description Says?

Contributed by Rebecca Dobbs Bush, January 22, 2019

page with ERISA the employee retirement income security act of 1974 on a table.

The Employee Retirement Income Security Act (ERISA) requires that plan sponsors develop and maintain a comprehensive plan document as well as a concise, understandable summary plan description (SPD) to communicate to employees what types of benefits are available under an ERISA plan, what the eligibility requirements are, how to receive benefits and who to contact if there are problems or questions. An employer cannot assume that because a plan is exempt from filing requirements, it is also exempt from maintaining a plan document. Even a small plan covering only 10 employees could still be subject to ERISA’s requirement for a written plan document. 

Many employers mistakenly operate under the assumption that the coverage booklet or insurance contract they receive from their health insurance provider meets the requirements for a SPD. While these documents contain important information, they typically are drafted to comply with state insurance codes, not federal ERISA regulations, and are not adequate to serve alone as a plan document or SPD.  An employer can help remedy such a situation by creating a wrap document to attach to the health insurance provider’s coverage booklet. A good wrap document may help bring the company into compliance and serve to protect it from future litigation and Department of Labor (DOL) audits of the company’s benefit programs.

As a plan document that governs administration and operation of a plan is, in effect, a contract between the employer and its employees, employers should engage counsel to review their plan documents, just as they would any other contract. Most importantly, a plan sponsor must follow the plan procedures consistently. Employers should not wait until the IRS, DOL or a lawsuit forces them to hire counsel to review their documents.

Summary Plan Description Posted on Company Intranet Does Not Satisfy ERISA Electronic Disclosure Rules

Contributed by Kelly Haab-Tallitsch

A recent court decision from the Eastern District of New York found that posting a summary plan description (SPD) on a company Intranet, without additional notice to participants, does not satisfy the electronic disclosure rules for employee benefit plans under ERISA.

In Thomas v. CIGNA Group Ins, an employee was participating in her employer’s life insurance plan at the time she became disabled. She stopped working and ceased paying the insurance premiums. The life insurance plan included a waiver of premium provision under which a disabled employee could request that life insurance coverage continue without payment of premiums. However, the employee never requested the waiver of premium and her life insurance coverage lapsed.

After her death, her beneficiary filed for life insurance benefits. The insurer denied the beneficiary’s claim arguing that the employee did not request a premium waiver, as required by the plan, and therefore was not covered by the plan at the time of her death. The beneficiary sued the plan saying that the premium waiver requirement had not been communicated to the employee.

The employer argued that the employee should have known about the premium waiver requirements because they were included in the plan’s SPD. The SPD was posted on the employer’s Intranet site, but was not specifically forwarded to participants. The employer argued that the employee was notified that she could access the Intranet in her initial employment confirmation letter, two years prior to her disability.

The court found in favor of the beneficiary and ruled that the employee’s estate was entitled to the death benefit. The court noted that simply posting the SPD on the company Intranet was considered insufficient delivery for ERISA plans under Department of Labor electronic disclosure rules. Those rules require the employer to provide notice to employees directing them to the website where the SPD is located, notification of the SPD’s significance, and notice of the right to request a paper copy. The rules also require notice each time a new electronic document is furnished.

Employers need to be aware of the rules regarding distribution of notices electronically and should review their distribution practices. While posting an SPD on a company Intranet is permissible, it alone does not satisfy the Department of Labor’s electronic distribution rules.

When distributing an SPD by making it available on a company Intranet, employers must also provide notice to participants informing them of the availability of the SPD and how to access it, the significance of the SPD, and the participant’s right to request a paper copy.