SPD and Wrap Documents: What You Need to Know

ERISA requires more benefit plans to be in compliance than many employers realize, and it takes more than just a plan booklet or explanation of benefits to comply with this federal regulation.  There is one simple way to stay in compliance with ERISA…the BASE® ERISA Wrap.

The Employee Retirement Income Security Act (ERISA) is a federal law that sets the minimum standards for health and welfare benefit plans to provide the protection for the participants in the employer-sponsored plans.  ERISA regulates plan administrators and sponsors of the health benefits to ensure they provide plan information to their participants and their dependents, and the offered benefits are outlined. 

The BASE® ERISA Wrap is a risk management tool that is designed to help employers provide the required provisions and information necessary to comply with the ERISA requirements and wrap around the existing certificates of insurance and benefit plan booklets with the Summary Plan Description (SPD) and Plan Document.  The ERISA Wrap applies to virtually all employers who sponsor a health benefits plan, regardless of size, structure, or number of participants. 

So, what is the Summary Plan Description (SPD) and Wrap Document?

The Summary Plan Description (SPD) is an important and required document that is given to the participants that outlines what their plan provides and how it operates.  It also provides the employee with the information on when they can begin to participate in the health benefits and how to file a claim for their benefits. 

The SPD is required for health plans such as group health, dental, vision, flexible spending account (FSA), health reimbursement arrangements (HRAs), and other fringe health benefits.  It contains information such as summary and description of benefits, features, benefit contributions and accrual, claim procedures, the right to sue due to a breach of fiduciary duty, guarantee of payment of certain benefits should the plan be terminated, and more. 

Not only does the SPD inform employees on important health plan information, but it is also used to protect employers from potential legal action. 

The Wrap Document “wraps around” all ERISA health and welfare benefits and includes the required disclosures that are not found in any other documents.  It simplifies employee health and welfare benefits by putting them together under a single plan. 

In this document, a participant will find that it packages all the separate employee benefits together and is put together in one comprehensive overview of benefits, administrators, fiduciaries, plan types, and other important and required details.

The Wrap Document is not required, but if a business has 100 or more employees, making them subject to Form 5500 reporting, they are widely necessary and simplify SPD compliance.    

As we are amid the Open Enrollment season, it is imperative that every business be in compliance with ERISA rules, plan documentation, disclosures, and other reporting requirements. 

For more information on the BASE® ERISA Wrap, contact BASE® at 888.386.9680 or visit www.BASEonline.com.

How Does the Limited Purpose FSA Work?

The LPFSA is one of several, pre-tax health benefits an employer may sign up for through their employer.  It may not be the one that many are familiar with, like the health FSA, but it is worth having in place!

The Limited Purpose Flexible Spending Account (LPFSA) is an employer-sponsored account used to pay for eligible dental and vision care expenses not covered by a traditional health insurance plan.  This additional tax-advantaged account is available to those enrolled in a qualified high-deductible health plan (HDHP) and a Health Savings Account (HSA).

The BASE® Limited Purpose FSA provides employees the opportunity to set aside money, on a pre-tax basis, to pay for their dental and vision expenses with an HSA in place. 

How does it work?

--- An employer elects to offer the LPFSA. 

When an employer has a high deductible health plan (HDHP) and a Health Savings Account (HSA) in place, it qualifies them to also offer the Limited Purpose FSA to their employees as well. 

--- The employee enrolls in the LPFSA and decides how much to contribute.   

The employee elects to contribute, on a pre-tax basis, up to the annual contribution limit.  Those funds are withdrawn automatically from each paycheck and deposited into the LPFSA. 

--- Eligible expenses are incurred.

When an eligible dental or vision expense has occurred, the employee will pay for the service and be reimbursed.

Not only can pairing the LPFSA with the HSA help to increase an employee’s take-home pay by electing to have the funds taken out of their paycheck on a pre-tax basis, but by eliminating the need to use the HSA funds for those eligible dental and vision expenses allowing more money to be saved in the HSA.  All the pre-elected LPFSA funds are available to the employee on day one of the plan year, helping the employee to pay for those expenses upfront, instead of waiting until the funds in the HSA to grow to cover the bill.  The HSA can grow, helping the employee pay for those health care expenses that are high down the road.  Over time, using the money in the LPFSA instead of the HSA can maximize the savings, creating a nest egg for retirement. 

For more information on BASE® Limited Purpose FSA, contact BASE® at 888.386.9680 or visit www.BASEonline.com.