Demonstrating compliance with the multitude of new requirements imposed by the Health Care Reform Acts will require an employer’s group health plan to document its terms and provisions – and its very existence – as of critical dates. Plan sponsors need to act now to make sure their plan documentation is current and complete.
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (the “Health Care Reform Acts” or “Acts”) and related interim regulations impose numerous new benefit coverage and administration requirements on group health plans, with various effective dates. If challenged by any of the three federal agencies enforcing these requirements, the plan sponsor will need to be able to demonstrate not just that the applicable requirements were implemented, but that they were implemented by the appropriate deadline. Because most of the Health Care Reform Acts deadlines are based on the group health plan’s plan year, documentation of the plan’s 12-month plan year will be essential.
In addition, any group health plan claiming grandfathered plan status must be able to document the plan’s existence on March 23, 2010, the plan’s terms in effect on March 23, 2010, and all changes made to the plan’s terms after that date.
Group health plans subject to the Employee Retirement Income Security Act of 1974 (“ERISA”) have always been required to be maintained and administered under a written plan document. An ERISA-governed group health plan currently in compliance with this requirement should have a good start on complying with the Acts’ documentation requirements; after updating the plan document as necessary, the sponsors of these plans should only need to keep the plan document updated in a timely manner in the future. Similarly, ERISA-governed group health plans with at least 100 participants are required to annually file Form 5500; a group health plan that has met this annual filing requirement already has documentation of the plan’s 12-month plan year.
However, sponsors of ERISA-governed group health plans that do not have an updated written plan document – or any written plan document – need to create a plan document reflecting the plan’s current plan terms as soon as possible. If the plan is claiming grandfathered plan status, the plan’s terms as of March 23, 2010 also need to be documented. If the plan has not been required to file Form 5500 – or has not filed the required Forms 5500 – the plan’s 12-month plan year must also be documented.
Group health plans that are not subject to ERISA (e.g., governmental plans and church plans) have not previously been required to create or maintain a formal written group health plan document or to file Forms 5500. The sponsor of one of these plans needs to create a formal plan document that identifies the 12-month plan year, the plan’s current terms, and plan’s terms as of March 23, 2010 (if grandfathered status is claimed). The plan document also needs to be updated in a timely manner in the future to demonstrate that the Acts’ requirements have been implemented by the applicable deadlines.
Creating an appropriate plan document requires more than simply putting the plan sponsor’s name on a benefit description booklet provided by the insurance carrier that issued the insurance policy funding the plan, or by the third party administering a self-funded group health plan. In most cases, the benefit description booklet does not describe any plan terms other than the benefits provided by the plan. The plan’s additional terms (e.g., classes of employees eligible to participate, service requirement before participation begins, the plan’s funding mechanism, when participation ends, identity of the plan administrator) need to be included in the plan document, especially if the plan document is also intended to act as the plan’s summary plan description. The plan document can also include optional language and terms that protect the plan sponsor from unintended liability for benefits and grant the plan administrator discretionary authority in interpreting and applying the plan’s provisions.
An insurer’s or third-party administrator’s benefit description booklet can be a good starting point for a plan document and summary plan description (for plans subject to ERISA). Both the plan document and summary plan description requirements can be satisfied by combining the benefit description booklet with a supplemental “wrap document” incorporating all of the additional information required to be included in the plan document and in the summary plan description (under the applicable Labor Regulations) as well as additional provisions that protect the plan sponsor and plan administrator.
Similarly, the plan’s 12-month plan year is not always the same as the 12-month policy year for any underlying insurance policy. If the plan sponsor uses a different 12-month period for open enrollment or other administrative purposes, the plan’s 12-month plan year may be the 12-month administration year. All of this information needs to be reviewed to determine the correct 12-month plan year for any group health plan for which a Form 5500 has not been filed, so that the correct 12-month plan year can be identified in the plan document.
Sponsors of group health plans need to address these documentation requirements now, to ensure that the necessary information can be assembled and a current and complete plan document can be drafted before any of the enforcing federal agencies request this documentation or make other inquiries. Updating plan documents and summary plan descriptions can also help the sponsor of an ERISA-governed plan comply with the applicable ERISA disclosure requirements.
For assistance in updating – or creating – your group health plan document and complying with the documentation and disclosure requirements of both the Health Care Reform Acts and ERISA, please contact:
Antoinette M. Pilzner
For more information on Health Care Reform:
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