Wrap Plan (ERISA)
The ERISA Requirement
Most “health and welfare” benefit plans must comply with specific requirements set forth by ERISA (the Employee Retirement Income Security Act of 1974). Most fully insured policies comply with ONLY SOME of those requirements. The following are a few of the ERISA requirements that employers need to comply with:
- Employer must establish and maintain, for each benefit plan, a written plan document that includes specific elements described in/by ERISA.
- Employers must provide a summary plan description (SPD) that explains the key terms and conditions of the plan document to each plan participant.
- Form 5500, the Annual Return/Report of Employee Benefit plan, needs to be filed with the Department of Labor (DOL) and the Internal revenue Service (IRS) for each benefit plan.
Penalties for Non-Compliance
Failure to meet ERISA’s requirements can result in significant penalties imposed by the DOL:
- Up to $110 per day per plan
- Failure-to-file penalties of up to $1,000 per day per plan
- IRS penalties of $25 per day up to $15,000 per year per plan
- Individual penalties for other breaches of fiduciary responsibilities.
The Wrap document is a shortened plan document and/or summary plan description that incorporates all required language to meet the ERISA guidelines. This document “wraps around” existing insurance policy language, and self-insured plan language, to create a fully compliant plan document and summary plan description. The Wrap document is a single document that can fully incorporate multiple plan documents for the different employee benefits that an employer offers. It can also be a combination of fully-insured and self-insured plans or any variation thereof. More importantly, only ONE summary plan description and ONE Form 5500 filing is required for all the plans that fall under the Wrap arrangement.