Are there penalties if an employer does not have an SPD or plan document?

Employers/plan administrators may be liable for serious penalties if they don't provide an SPD or have a current plan document:

  • Failure to provide an SPD or plan document within 30 days of receiving a request from a plan participant or beneficiary can result in a penalty of up to $110/day per participant or beneficiary for each violation.
  • Lack of an SPD could trigger a plan audit by the U.S. Department of Labor (DOL).
  • Failure to furnish to the DOL any requested information relating to the employee benefit plan can result in a penalty of up to $152 per day (not to exceed $1,527 per request).
  • Having documentation in order protects against disgruntled employees if issues regarding coverage arise.

 Can I use Wrap360 to create a Summary of Material Modifications (SMM)?

Yes. To access Wrap360's SMM Generator, go to Notices & Tools > SMM Generator in the top navigation menu.

 Can the SPD be distributed electronically?

Yes, as a general rule, materials required to be furnished under ERISA may be provided electronically if the plan administrator takes necessary measures reasonably calculated to ensure that the system for furnishing documents results in receipt of the material. Ways to ensure receipt of an SPD include using return-receipt or notice of undelivered email features, or conducting periodic reviews or surveys to confirm receipt. In addition, in order to provide materials electronically:

  • The administrator must take steps reasonably calculated to ensure that the system protects the confidentiality of personal information relating to the individual's accounts and benefits;
  • The electronically delivered documents must be prepared and furnished in a manner consistent with the style, format and content requirements applicable to the particular document;
  • Notice must be provided to each participant, beneficiary or other individual, at the time the document is furnished electronically, that informs the individual of the significance of the document when it is not otherwise reasonably evident as transmitted (e.g., the attached document describes changes in the benefits provided by your plan) and of the right to request and obtain a paper version of such document; and
  • Upon request, the participant, beneficiary or other individual must be furnished a paper version of the electronically furnished documents.

Unless an individual has the ability to effectively access documents furnished in electronic form at any location where the individual is reasonably expected to perform his or her duties as an employee, and access to the employer or plan sponsor's electronic information system is an integral part of an individual's job duties, he or she must affirmatively consent to receive documents through electronic media. In the case of documents to be furnished through the Internet or other electronic communication network, consent must be given in a manner that reasonably demonstrates the individual's ability to access information in the electronic form that will be used to provide the information. Prior to consenting, the individual must be provided a clear and conspicuous statement indicating:

  • The types of documents to which the consent would apply;
  • That consent can be withdrawn at any time without charge;
  • The procedures for withdrawing consent and for updating the individual's address for receipt of electronically furnished documents or other information;
  • The right to request and obtain a paper version of an electronically furnished document, including whether the paper version will be provided free of charge; and
  • Any hardware and software requirements for accessing and retaining the documents. 

 Can you combine the Wrap SPD and Wrap Plan Document?

ERISA has separate and distinct legal requirements for summary plan descriptions (SPDs) and plan documents. Under the law, SPDs must be written in a manner "calculated to be understood by the average plan participant." In fulfilling this SPD requirement, the plan administrator is responsible for exercising considered judgment and discretion by taking into account such factors as the level of comprehension and education of typical participants in the plan and the complexity of the terms of the plan. Consideration of these factors "will usually require the limitation or elimination of technical jargon and of long, complex sentences." 

By contrast, the plan document must include specific items required under federal laws such as ERISA and HIPAA, regardless of their complexity. In addition, it must contain all technical and legal specifics that are not only required to sponsor and administer the plan, but also to withstand any legal challenges that may be brought against the plan or the employer.

Including the lengthy and often technical terms of the plan document in the SPD is likely to cause confusion for the average plan participant, rather than promote an understanding of plan benefits and eligibility requirements. Similarly, omitting these details from the plan document would result in a document that could be legally inadequate.

Therefore, separate documents are recommended to address these separate legal requirements.

 Do employers of all sizes need to provide Wrap SPDs?

ERISA requires plan administrators to give plan participants, in writing, the most important facts they need to know about their benefit plans, including plan rules and documents on the operation and management of the plan. Participants are entitled to receive a summary plan description (SPD) automatically when becoming a participant of an "ERISA-covered employee benefit plan." (See Wrap360 FAQs titled, What does it mean for an employee benefit plan to be "covered" by ERISA? and Which employee benefit plans are ERISA-covered?) The plan administrator is legally obligated to provide the SPD to participants free of charge.

 If plan participants received their component benefit plan documents, can the employer just distribute the Wrap SPD or does everything have to be distributed at the same time?

The Wrap SPD and benefit plan component documents do not have to be distributed at the same time, as long as the plan participants receive all the required documents with the most current information that applies to plan benefits.

 Is there a Data Collection Booklet for the SMM Generator?


 Isn't distributing the plan booklets or insurance certificates enough to be compliant with government requirements?

No. While carriers do provide plan information, they typically will not provide all the required provisions that must be included in an SPD and plan document. So an employer/plan administrator will not be in compliance and faces the risk of penalties and other complications if participants only receive a benefits booklet, benefits summary, or certificate of insurance.

 What is a Summary of Material Modifications (SMM), and when must one be distributed?

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.

 Where will the SMMs I generate using the SMM Generator be archived?

Generated SMMs that have not been replaced by a SPD or another SMM will be archived in the “Generated Documents” section of the Employers Dashboard. SMMs that have been replaced by a SPD or another SMM will be in the “Archived” section of the Employers Dashboard.

 Who must provide the Wrap SPD?

The plan administrator (which is typically the employer) is the person specifically designated by the terms of the plan who is responsible for its management. If the plan does not make a designation, the plan sponsor (typically the employer that establishes or maintains the plan) is generally the plan administrator.

 Who must receive the Wrap SPD?

The SPD should be distributed to all plan participants. The employer/plan administrator also must furnish copies of the most current SPD and plan document to participants and beneficiaries upon written request and must have copies available for examination. Copies should be furnished no later than 30 days after a written request.

Please Note: Wrap360 and its employees and officers are not permitted to offer legal advice. These FAQs are provided for general information purposes only. As the answers to specific questions may vary based on federal or state law, as well as on company documents for the issues in question, it would be prudent to consult knowledgeable benefits counsel for individualized guidance.