Most Common $74,000 ERISA violation - problem solved

Compliance Misconceptions that Put Employers at Risk

Let’s face it: ERISA compliance isn’t exactly a page-turner. But if you offer health benefit plans subject to ERISA, understanding your Summary Plan Description (SPD) obligations is non-negotiable, and skipping the details could cost you big time.  The highest penalty on file for failing to provide an SPD is $74,140 ($110 per day for 674 days of non-compliance.) Here's a look at SPD basics and some common misconceptions.  

Common SPD Misconceptions:

The Insurance Carrier’s Documents Are Enough.
Many employers believe the summary of benefits or certificate of insurance from their carrier fulfills the SPD requirement. This is incorrect. Carrier documents rarely include all the provisions required by ERISA, such as participant rights, claims procedures, and specific ERISA language. Relying solely on these documents leaves employers exposed to compliance risks

Small Employers Don’t Need an SPD.
SPD requirements apply to all private-sector employers offering group health plans, regardless of size. Even a one-person plan must comply

Isn't the SPD the same as a Plan Document?
All ERISA-covered benefit plans, including group health and welfare plans, must be administered according to a written Plan Document containing specific provisions required by ERISA and related laws like HIPAA. Many employers mistakenly believe insurance contracts for fully insured plans serve as Plan Documents, but these contracts comply with state insurance laws and often lack essential provisions that protect the plan and fiduciaries. Unlike the SPD, the Plan Document does not need to be distributed automatically but must be kept on file and made available upon participant or beneficiary request.

Key SPD Points:

• The SPD informs participants about their legal rights and benefits under the plan
• The SPD must be written in a manner calculated to be understood by the average plan participant and must include certain types of information, such as the plan's eligibility rules for benefits
• Plan changes must be communicated to participants, either through an updated SPD or Summary of Material Modifications (SMM)

SPD Delivery Requirements:

• An SPD must be provided to new participants automatically (within 90 days)
• The SPD must also be provided within 30 days of a participant's request
• Common distribution methods include hand delivery, mail, and electronic delivery
• Federal regulations include a safe harbor for the electronic delivery of SPDs

How an Insurance Advisor Helps You Stay Compliant:

A proactive insurance advisor does more than just place coverage. They help you navigate compliance:

• Clarifying Requirements: Advisors explain the difference between carrier documents and ERISA-compliant SPDs, ensuring you understand your obligations.
• Providing Resources: Many advisors partner with ERISA specialists or offer access to “wrap” SPD templates that supplement carrier documents with the required legal language and disclosures.
• Customizing Documents: Advisors can help you tailor your SPD to your specific plan design, eligibility rules, and employer policies.
• Guiding Distribution: They advise on proper distribution methods, hand delivery, mail, or electronic delivery that meets Department of Labor standards so you meet the timing and access requirements.
• Keeping You Current: Advisors alert you to regulatory changes and help ensure SPDs are updated when your plan changes, protecting you from penalties and audit risks.

SPD compliance is not optional, and common misconceptions can put your organization at risk. A knowledgeable insurance advisor should act as your compliance partner, helping you understand, create, and properly distribute ERISA-compliant SPDs so you can focus on operating your business with confidence. If you’re unsure about your SPD status, now is the time to contact Koppinger & Associates for a compliance review. Our compliance solutions/tools ensure our clients meet federal and state requirements, freeing them to focus on running and growing their business.

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