When it comes to ERISA compliance, employers and brokers frequently ask us: who is responsible for creating documents and SPDs, how is a wrap plan used to satisfy ERISA compliance, and what information must be provided to employees and when. To help navigate some of the more commonly asked questions surrounding when employers must have plan documents and SPDs for benefits they sponsor we have provided the following responses.

Which employers are subject to ERISA?
ERISA typically applies to employers regardless of size or business type (corporations, S corporations, LLC, sole proprietors, and nonprofits).

Which employers are exempt from ERISA overall?  

The only employers exempt from ERISA overall are governmental employers (i.e. village, town, city, county, public school district, state government, etc.) and church plans.  A church plan is an employee benefit plan that is sponsored by a church or convention or association of churches that are exempt from taxes under IRS § 501 and has not elected to be subject to ERISA.

Are there penalties for failure to meet the SPD requirement?

Yes, penalties can result from an employer who does not have an SPD.

Will the insurance booklet or certificate provided by the insurance carrier meet the SPD requirement?

Generally, no. This information alone generally does not satisfy the ERISA plan document and SPD requirements, which is a DOL requirement under federal law.

How does a Wrap plan help satisfy the DOL plan document and SPD requirement?

Wrap plans are a function of complying with ERISA’s plan document and summary plan description (SPD) requirements. The “wrap” plan can bundle one or more lines of coverage together under one ERISA plan number and provide supplemental wording not found in insurance certificates or booklets. The wrap plan acts as a companion piece to the insurance certificates and/or booklets and the two together satisfy ERISA’s plan document and SPD requirement.

Article Credit: Employee Benefits Corporation