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The Dream Quest of Unknown Benefits Documents

Channeling some H.P. Lovecraft into this month’s post.

This month, we’re going to change things up a bit and have a look at our reader mail.  This one comes to us from a Mister N. Y. Arlathotep, out of Arkham, Massachusetts.

It was Christmas.  I was at home, in bed, knees-to-nose in a fetal ball of anxiety.  It’s not so much that I had stepped forward to assume responsibility for my company’s employee benefits; more like – everyone else took a step back.  And since the day I first walked into that office, as the former benefits administrator was being escorted out of it – endlessly gibbering, “PBGC mglw’nafh EFAST2 R’lyeh ERISA fhtagn!” – sleep has continued to elude me.

What I found in that office was an eldritch horror, organized into eleven separate manilla folders: (1) group health plan, (2) dental plan, (3) vision plan, (4) group term life insurance plan, (5) accidental death and dismemberment insurance, (6) insured disability benefits, (7) prescription drug plan, (8) health flexible spending account, (9) medical expense reimbursement plan, (10) health reimbursement arrangement, and (11) executive medical reimbursement plan.

Eleven separate health and welfare plans!  Eleven plan numbers!  Eleven Form 5500 filings! Twenty-seven pages!  Ninety-nine Schedules!  What unutterable ghastliness was behind this mess?  There must be a way out!  But how?!?

Merely recalling that day propelled my feeble wits beyond the mountains of madness, but I was pulled back by a rap at the front door.  It was my neighbor, Lakhshmi, from down the hall.  I could tell she had been hosting a party (I must have missed my invitation) because she was dressed up in a stunning sari and absent-mindedly holding a burrito obtained from the catering table, while the voices of Snoop Dog and Dr. Dre called out from her home stereo system.  “What did she want?”, I thought, still half-trying to work out a solution to my benefits problem before insanity finally overtook me.

“Hi, uh, hope I didn’t wake you, but we were having a Secret Santa party at my place, and one of our guests needed paper for her gift.  You wouldn’t happen to have any to spare, would you?”

“Iä!”, I erupted, out of esophageal depths.  The music stopped.  Lakshmi regained her hold on a momentarily-juggled burrito.  “I’ll be right back”, I whispered.  I closed the door gently and scuttled away to consult that deathless tome, the Grouphealthplanomicon, and there it was, (remarkably well-indexed, as far as cursed arcana goes), under “W” – “Wrap Document”.  (It’s a good thing I’m so smart).

So, my question is, will this help?

In reply, I say, “Yes, my fractious friend, it just might”.  There are two big advantages to having one document “wrap” around all of your employee welfare benefit plans.


First, it will ensure compliance with ERISA’s requirement that every welfare benefit plan be both in writing and accurately described in a summary plan description that’s provided to all eligible employees.  The thing of it is, the definition of a “welfare benefit plan” is extremely broad; it includes medical, surgical or hospital care benefits; benefits in the event of sickness, accident, disability, death or unemployment; vacation benefits; apprenticeship or other training benefits; day care centers; scholarship funds; and prepaid legal services[1].  Consequently, many employers offer benefits, not knowing that these benefits are actually “ERISA plans”, without meeting these documentation and disclosure requirements.  Others incorrectly assume that the insurance policy itself, coverage certificate, or plan booklet they receive from their carrier or TPA satisfies the plan document requirement.  It doesn’t.  You’ll want to have a summary plan description in place and duly distributed.  Trust me, even an afternoon spent with Cthulhu is preferable to one spent with a DOL or HHS inspector.

But the creeping chaos emerges because, while the summary plan description must describe all of the important plan rules and the benefits available under the plan, as well as key information about the plan, most small employers lack the time, money and expertise to prepare custom plan documents and summary plan descriptions for each employee welfare benefit plan they sponsor and keep them up-to-date (I’m looking at you, COVID-19 legislation!).

Here’s where the “wrap” comes in.  A wrap document is a summary plan description (SPD) that “wraps” around the insurance policy, coverage certificate or plan booklet. The benefits available under the plan continue to be governed by the policy, certificate, and so forth, while the wrap document fills in the gaps left by insurance carriers and TPA’s to ensure ERISA compliance.

Consolidation, Simplicity, and Sanity

Thus, the second benefit to having a wrap document is that it allows you to consolidate employee welfare benefit plans into a single plan, thereby reducing costs associated with filing multiple 5500 Forms, distributing multiple summary annual reports, and amending multiple plans in response to legislative or regulatory changes.

That’s a Wrap – Now What?

Being, as it is, a SPD, a wrap document must be provided to plan participants as follows:

  • Within 90 days after the employee becomes a participant in the plan;
  • Within 60 days of adopting a material reduction in covered services or benefits;
  • No later than 210 days after the end of a plan year in which a material modification that is not a material reduction in covered services or benefits is adopted. Material modifications include a change in carriers, eligibility requirements or participant contributions. Alternatively, instead of a new SPD, employers can provide notice of a material modification via a Summary of Material Modifications document during the same time period;
  • Every five years if changes are made to SPD information or the plan and those changes are not material modifications or reductions in covered services or benefits; and
  • Every 10 years if no changes are made to SPD information or the plan.

So, dear reader, I hope that answers your question.  And I also hope Lakshmi eventually got her wrapping paper.

[1] Although they may appear to meet the criteria listed above, health savings accounts and Archer medical savings accounts are not subject to ERISA because it is the employee who funds the benefit. Disability benefits funded as a payroll practice, dependent care assistance plans and adoption assistance plans are also not subject to ERISA.