What is an ERISA Wrap Document, and Why Do You Need One?

ERISA covers more benefits plans than many employers realize, and it takes more than a plan booklet to comply with federal regulation. 

How can small businesses simplify compliance with an ERISA wrap document? Find out more.

What is ERISA?

ERISA stands for The Employee Retirement Income Security Act of 1974, a federal law that establishes the minimum standards for most retirement and healthcare plans in the private sector. Enforced by the Department of Labor (DOL), the law is designed to protect employees who enroll in these employer-sponsored benefits. 

Employers who administer ERISA-qualified plans are called “fiduciaries” and bear responsibility for compliance. Unlike Affordable Care Act (ACA) requirements, ERISA applies to employers of all sizes who offer qualified plans. Noncompliance can be costly.

What Plans are Covered Under ERISA?

ERISA covers any retirement plan that provides either retirement income in the future or the opportunity for employees to contribute current wages to retirement. Major plans covered under ERISA also include:

• Major medical plans
• Dental
• Vision
• Prescription benefits
• FSAs
• HSAs
• Specific EAPs
• Wellness programs
• Cancer policies

Plans that do not fall under ERISA primarily include pensions or other plans provided by the United States government, state or local governments, and churches. 

What is a Summary Plan Description (SPD)? 

To better understand ERISA wrap documents, it would be best to start with ERISA’s Summary Plan Description (SPD) requirement. According to the DOL, qualified plan administrators are required to provide participants with an SPD—which explains “what the plan provides and how it operates”—within 90 days of coverage and within 30 days of a request.

More specifically, the DOL clarifies that an SPD is the “primary vehicle for informing participants and beneficiaries about their plan” and “must be written for an average participant and be sufficiently comprehensive to apprise covered persons of their benefits, rights, and obligations under the plan.”

To comply, a written SPD must include:

• The plan name, address, and contact information
• The plan benefits and how to file a claim for them
• The duties of the plan and/or employee
• The plan’s claims procedure
• The basic ERISA rights and responsibilities of plan participants
• Information about premiums, deductibles, and copayments
• Information about who’s in-network and how to use providers
• Pre-certification procedures
• Plan procedures for Qualified Medical Child Support Orders
• Notices and descriptions of certain HIPAA rights and other health coverage laws

What is an ERISA Wrap Document?

An ERISA wrap document supplements the insurance policy, coverage certificate, or plan booklet provided by carriers, filling the gaps to comply with federal regulations.

Unlike SPDs, ERISA wrap documents are not required, but they can simplify SPD compliance. In fact, “wrap document” is not a formal term used by the federal government. But that doesn’t mean employers should overlook the benefits of having an ERISA wrap document.

Why Would an Employer Need an ERISA Wrap Document?

Most insurance carriers and third-party administrators (TPAs) provide policy and coverage information to comply with applicable state regulations, but often lack all the information necessary to meet federal ERISA requirements. Remember, as fiduciaries under ERISA, employers—rather than insurers—bear the responsibility for compliance.

To be clear, a plan document or booklet often cannot serve as a plan’s SPD. A plan document is often comprehensive and written in dense legal language whereas an SPD should summarize a plan’s details in more understandable terms. Also, an SPD must be distributed to participants, but a plan document does not.

A wrap document can also be used to consolidate several employer-sponsored benefit plans into a single “umbrella” plan, which could reduce the costs and administrative burden of filing and distributing multiple annual reports, such as Form 5500.

Large employers often have the time, money, and expertise to prepare SPDs and other custom documents for each plan they sponsor, but most small businesses do not have the resources to prepare custom documents for each plan or participant on demand and stay up-to-date with changing regulations at the same time.

Simplify compliance and save on costs with an ERISA wrap document. To make the process even easier, use a qualified and experienced benefits administrator like Alpine TPA.

Additional Resources

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• BerniePortal Blog—a one-stop-shop for HR industry news
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