As your company prepares to introduce a Health Flexible Spending Account (FSA), it’s essential to understand the legal documentation requirements that come with it. One key requirement under the Employee Retirement Income Security Act (ERISA) is the Summary Plan Description (SPD)—a document that outlines the plan’s terms and participants’ rights.
Why Is an SPD Required for a Health FSA?
A Health FSA is considered a group health plan under ERISA, meaning it must comply with SPD requirements regardless of your company’s size. There are no exemptions for small employers when it comes to welfare benefit plans.
What Must Be Included in the SPD?
The SPD must be written in a clear, understandable format and include:
- Plan Identification & Eligibility: Who can participate and when.
- Plan Benefits: What expenses are covered and under what conditions.
- Loss or Denial of Benefits: Circumstances that may affect reimbursement.
- Funding Sources: Whether contributions come from the employer, employee, or both.
- Claims Procedures: How to file claims and appeal denied claims.
- ERISA Rights Statement: A summary of participants’ legal rights.
- COBRA Information: If applicable, details on continuation coverage.
- QMCSO Compliance: Information on coverage for children under court orders.
Additional Health FSA-Specific Details
To help employees make informed decisions, your SPD should also explain:
- Contribution Limits: Minimum and maximum annual amounts.
- Election Change Restrictions: Rules around midyear changes.
- Use-It-Or-Lose-It Rule: What happens to unused funds.
- Eligible Expenses: What qualifies for reimbursement.
- Covered Individuals: Whose expenses can be reimbursed.
- Debit Card Program: If offered, how it works.
Best Practices for Employers
Many companies choose to have legal counsel draft or review the SPD to ensure full compliance. It’s also common to combine the SPD with documentation for related benefits like the cafeteria plan or Dependent Care Assistance Program (DCAP)—even though those are not subject to ERISA.
Finally, remember that ERISA also governs how and when SPDs must be distributed and updated. Staying compliant not only protects your company but also ensures transparency and trust with your employees.
Source: Thomson Reuters