Employer plan documents need updates before the new plan year

When a renewal change triggers an update

Most plan changes require a summary of material modifications (SMM), or an updated SPD, within 210 days after the end of the plan year in which the change was adopted. A material reduction in covered services or benefits under a group health plan shortens that to 60 days after adoption, under the Department of Labor’s regulation at 29 CFR §2520.104b-3. An updated SPD satisfies the SMM requirement, according to the department’s reporting and disclosure guide.

The regulation defines a material reduction as a change the average participant would consider important, and the National Law Review noted that increases in premiums, deductibles, coinsurance or copayments can qualify. A plan can skip the separate 60-day notice if it describes material reductions in a communication sent at least every 90 days.

Take an employer that adopts a higher deductible on Nov. 15. It has until Jan. 14 to notify participants, not 210 days after the plan year ends.

What a missed request can cost

Participants can ask in writing for the plan document or SPD, and the administrator has 30 days to provide it, according to the Department of Labor. Under ERISA section 502(c)(1), a court can penalize an administrator up to $110 a day for missing that window. The U.S. Court of Appeals for the Second Circuit has noted that such awards are discretionary.

Plans without current documents face other exposure. Employers missing plan documents and SPDs may face Department of Labor penalties and fines, USI said, and the NABIP presentation notes the department has broad authority to audit ERISA compliance. Benefit plans are also drawing lawsuits, and HRD America reported that voluntary benefits lawsuits are turning employer Form 5500 data into evidence.