by admin | Jan 25, 2024 | Blog
QUESTION: Our company has just received a letter from a participant in our health plan, asking for copies of numerous documents relating to the plan. What are our responsibilities?
ANSWER: ERISA § 104(b)(4) requires a plan administrator to furnish copies of specified plan documents within 30 days after a written request from a participant or beneficiary. Failure to timely provide requested documents could lead to financial penalties, so it is important to quickly evaluate the participant’s request and provide copies of the documents that are subject to the disclosure obligation. Here are some issues to consider in responding to the request.
- Plan Administrator’s Responsibility. The ERISA disclosure obligation and penalties for noncompliance fall on the plan administrator. Unless the plan document designates a different person or entity, the plan administrator is the plan sponsor, which in a single employer plan is the employer. We assume that your company is the “plan administrator” under ERISA. Courts are authorized, in their discretion, to impose penalties of up to $110 per day for each day that requested documents are not provided, starting on the 31st day after the request.
- Covered Documents. The specified documents that must be furnished upon request are the latest updated SPD (including any interim SMMs); the latest Form 5500; any final Form 5500 for a terminated plan; and any applicable bargaining agreement, trust agreement, contract, or “other instruments under which the plan is established or operated.” It can be challenging to determine what documents fall within the “other instruments” category. This is ultimately a facts-and-circumstances determination. The DOL and the courts have found this category to include plan documents, insurance policies, usual and customary fee schedules and guidelines, TPA contracts (if they affect plan administration), and minutes of plan meetings (affecting plan administration). The plan administrator is generally not obligated to furnish documents that are not within the plan administrator’s possession—for example, an insurer’s or claims administrator’s claim processing guidelines.
- How to Furnish. While the statute specifically refers to mailing requested documents, it appears that, like other ERISA-required disclosures, these documents are to be furnished using a method “reasonably calculated to ensure actual receipt of the material.” This would include any of the methods appropriate for furnishing SPDs, including mail, hand-delivery, or electronically (preferably in a manner that satisfies the DOL’s safe harbor for electronic delivery). A reasonable charge may be imposed for copying (up to 25 cents per page but not more than the actual cost), but not for postage or other tasks associated with handling the request.
Keep in mind that other situations may trigger an obligation to furnish documents to participants or beneficiaries. In addition to the requirement to furnish SPDs and other materials automatically, ERISA’s claims procedure rules require that a claimant be given, upon request and free of charge, “reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.” Also, the courts and the DOL have sometimes relied on a generalized fiduciary duty to require that additional information be provided to participants and beneficiaries in individual situations.
Source: Thomson Reuters
by Lexi Garcia | Jan 11, 2024 | Blog
QUESTION: Our company sponsors a calendar-year self-insured major medical plan subject to ERISA. Are we permitted to treat Patient-Centered Outcomes Research (PCOR) fees as plan expenses?
ANSWER: The DOL has indicated that PCOR fees generally are not permissible plan expenses under ERISA since they are imposed on the plan sponsor and not the plan. As background, PCOR fees, which are used to fund research on patient-centered outcomes, are payable annually by sponsors of self-insured plans (and insurers, but we focus here on plan sponsors) through plan years ending before October 1, 2029. By statute, the fee for a self-insured plan is to be paid by the “plan sponsor,” which in most cases means the employer or employee organization that established or maintains the plan.
This means that plan assets (e.g., trust assets or participant contributions) should not be used to pay PCOR fees since ERISA’s prohibited transaction rules prohibit plan assets from being used to offset employer obligations. However, multiemployer plan assets may be used to pay PCOR fees since the plan sponsor liable for a multiemployer plan’s fee is generally an independent joint board of trustees with no source of funding other than plan assets.
Source: Thomson Reuters
by Lexi Garcia | Sep 21, 2023 | Blog
QUESTION: At the beginning of the year, we distributed new SPDs to participants in our company’s ERISA-covered group health plan. We are planning to make some changes to the plan’s terms. When and how do we need to communicate these changes to participants?
ANSWER: ERISA requires that participants be notified of any material modification in a welfare plan’s terms or any change in the information required to be in an SPD. This can be done by providing a summary of material modifications (SMM) describing the change. In addition, under a special rule for group health plans, notice must be provided when there is a material modification in plan terms that affects content required to be included in the summary of benefits and coverage (SBC) and is not reflected in the most recently provided SBC. Here is an overview of the SMM rules:
- What Is a “Material” Change? Except for the definition of a material reduction in group health plan covered services (discussed below), there is no guidance regarding when a modification is material. It appears to be a facts and circumstances determination. We suggest that you err in favor of preparing and distributing SMMs.
- Who Must Receive SMMs? SMMs must be provided to the same individuals who must receive SPDs—generally, participants but not beneficiaries. Note that individuals who do not have the right to automatically receive SPDs or SMMs may have the right to receive a copy upon written request to the plan administrator.
- Deadlines for Providing SMMs. The timing requirements depend on the nature of the change. Any modification that is considered a “material reduction in covered services or benefits provided under a group health plan” must be disclosed no later than 60 days after the date the modification was adopted. (If participants regularly receive SMMs at intervals of not more than 90 days, a plan administrator may wait beyond the 60-day limit to describe the modification in the regularly published form.) Reductions in covered services or benefits include, among other things, the elimination or reduction of benefits payable under the plan, a premium increase, and the imposition of new conditions or requirements. For other changes (i.e., group health plan changes that are not material reductions and changes to plans other than group health plans), the SMM must be provided no later than 210 days after the end of the plan year in which the modification or change was adopted. We suggest a common-sense approach to these deadlines—depending on the type of modification, it may be advisable to provide the SMM before the statutory deadline. This is particularly true if the plan administrator wants the modification to apply on its effective date. Delivery methods must comply with the SPD distribution rules. If the change is included in an SPD that is distributed by the applicable SMM deadline, a separate SMM need not be furnished.
- Style and Content. Like SPDs, SMMs should be written in plain language and must comply with general understandability requirements. The SMM also must work in an understandable way with the SPD it is modifying—for example, by clearly identifying the SPD being modified and the affected SPD provisions. The DOL has provided no prescribed format or model language for SMMs. We suggest including the plan name, the SPD to which the SMM relates, a description of the changes (or the language to be substituted in the SPD) and their effective dates, an explanation that the SMM and SPD must be read together and should be kept together, and whom to contact with questions.
Source: Thomson Reuters
