If a group health plan is materially modified, the federal Employee Retirement Income Security Act (ERISA) requires participants to be informed, either through a revised Summary Plan Description (SPD), or in a separate document, called a Summary of Material Modifications (SMM). In general, a SMM must be distributed to group health plan participants:
- Within 60 days of adoption of a material reduction in covered services or benefits; or
- If not a material reduction in covered services or benefits, no later than 210 days after the end of the plan year in which the material modification is adopted.
A material reduction in covered services or benefits is any modification to the plan or change in the information required to be included in the SPD that, independently or in conjunction with other contemporaneous modifications or changes, would be considered by the average plan participant to be an important reduction in covered services or benefits under the plan. A reduction in covered services or benefits generally would include any plan modification or change that:
- Eliminates benefits payable under the plan;
- Reduces benefits payable under the plan, including a reduction that occurs as a result of a change in formulas, methodologies, or schedules that serve as the basis for making benefit determinations;
- Increases premiums, deductibles, coinsurance, copayments, or other amounts to be paid by a participant or beneficiary;
- Reduces the service area covered by a health maintenance organization; or
- Establishes new conditions or requirements (e.g., preauthorization requirements) to obtaining services or benefits under the plan.
Material modifications include a change in carriers, eligibility requirements, or participant contributions. Here are some basic tips for a Summary of Material Modifications:
- If your Plan has changed carriers, include the name of the new carrier, contract number, address, and claims administration phone number.
- If a specific eligibility rule has changed, be sure to include the amended rule if a specific class of employees is impacted.
- If participant contributions have changed, include the details of the specific contributions.
Additional requirements may apply. For example, group health plans are required to provide at least 60 days’ advance notice to participants before the effective date of any material modification to the plan that would affect the content of a Summary of Benefits and Coverage (SBC) but is not reflected in the most recently provided SBC. However, if the change occurs in connection with a renewal or reissuance of insurance contracts, then the 60-day rule is not applicable.