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Plan Notice Requirements

DOL and SPD Rules

The Department of Labor (DOL) released final rules amending the regulations on the content of summary plan descriptions (SPD) required to be furnished under ERISA. These new rules will be applicable as of the first day of the second plan year beginning on or after January 22, 2001.

For an electronic version from the Internet go to:
www.access.gpo.gov. Scroll down to the Pension and Welfare Benefits Administration heading. You will see Summary Plan Description regulations.

DOL believes that many of the information items in the final SPD rules are currently required to be disclosed under the existing disclosure framework of ERISA and therefore are already in effect (these items are noted below). The final rule serves as a clarification of these required items. Other information items were included in interim regulations released about two years ago and are also already in effect. Many plans are already in compliance with these items. But double-check your SPDs to be certain.

Below is an overview of the final rules regarding Group Health Plan Provisions.

Premiums
The contentious issue of whether premiums must be included in the SPD was resolved in the final rule. The final rule requires a description of any cost-sharing provisions, including premiums, deductibles, coinsurance and co-payment amounts for which the participant or beneficiary will be responsible.  The preamble to the final rule states that specific amounts do not have to be disclosed in the SPD. According to the final rule, the SPD must communicate the circumstances and extent to which participants and beneficiaries will be liable under the plan for premiums, deductibles, co-payments, etc. Note: DOL considers these requirements to be already in effect.

Statement of ERISA Rights
The final rule updates the model statement of ERISA rights. The update includes references to participant rights under COBRA and the Health Insurance Portability and Accountability Act of 1996, as well as a number of other references.

Procedures for QMCSOs
The final rule requires SPDs of group health plans to include either a description of the plan's procedures governing qualified medical child support order (QMCSO) determinations or a statement indicating that participants and beneficiaries can obtain, without charge, a copy of such procedures from the plan.

Type of Plan
The current SPD rules require that the type of welfare plan be stated in the SPD. The types listed in the current rule include hospitalization, disability, prepaid legal service, etc. The current rules do not specifically list "group health plans." The new rules add "group health plans" to the list of examples of types of welfare plans. While many plans may already be using the term "group health plan" to describe the type of plan in the SPD, Plan Administrators should check their plans for the use of this term and include it if it is not already included.

COBRA
The final rule requires SPDs of group health plans to include a description of the rights and obligations of participants and beneficiaries with respect to continuation coverage, including, among other things, information concerning qualifying events and qualified beneficiaries, premiums, notice and election requirements and procedures, and duration of coverage. The DOL notes in the preamble to the final regulations that the fact that COBRA information is required to be set forth in the SPD does not relieve group health plan administrators from their obligation to provide notice to an employee's covered spouse at the time coverage commences under the plan. Plans have an option in determining how they want to satisfy the COBRA notice requirement at the time coverage commences under the plan for spouses. They can mail just the COBRA notice or they can mail the SPD that contains the COBRA notice to spouses at the time coverage commences under the plan.

The DOL notes that a single mailing of the required COBRA notice (which could be in the form of an SPD) addressed to both the employee and the spouse will constitute good faith compliance with COBRA. DOL further notes that in-hand delivery to an employee at his or her worksite location of an SPD containing COBRA information would not constitute adequate notice to the spouse of that employee.

Provider Network Lists
Unlike schedules and listings of specific benefits that may be furnished upon request, the final rule requires complete listings of network providers to be furnished automatically, without charge, to each participant (i.e., employees and former employees on COBRA). The listing of providers may be furnished as a separate document that accompanies the plan's SPD, provided that the SPD contains a general description of the provider network and provided that the SPD contains a statement that provider lists are furnished automatically, without charge, as a separate document. Note: DOL considers this requirement to be already in effect.

The provider list and SPD need not be provided automatically to spouses or other beneficiaries, except in the case of a QMCSO. According to ERISA section 609, a person who is an "alternate recipient" under a QMCSO ("alternate recipient" means any child of a participant who is recognized under a medical child support order as having a right to enrollment under a group health plan) must be treated as a participant for purposes of ERISA reporting and disclosure requirements. Since participants are to receive provider lists whether or not they request them, children and guardians of children who are "alternate recipients" must be treated similarly.

DOL regulations (§2520.104b-1) require that the SPD and other instruments of the plan be furnished upon written request to covered spouses and other dependents (i.e., beneficiaries) as well as employees and former employees on COBRA. While plans are not required to automatically provide an SPD and provider list to a dependent covered under the plan, if a dependent requests the SPD and a provider list in writing, the plan should furnish the latest updated summary plan description along with a provider list.

Claims Procedure
The final rule requires that the SPD include the procedures governing claims for benefits (including procedures for obtaining preauthorization, approval or utilization review decisions, and procedures for filing claim forms, providing notifications of benefit determinations, and reviewing denied claims in the case of any plan), applicable time limits, and remedies available under the plan for the redress of claims which are denied in whole or in part. The plan's claims procedures may be furnished as a separate document that accompanies the plan's SPD, provided that the SPD contains a statement that the plan's claims procedures are furnished automatically, without charge, as a separate document. The final rule gives plan administrators the flexibility to choose which method of communication (integration in an SPD or furnishing a separate document with the SPD) will best serve their plan participants and beneficiaries.

Drugs, Tests and Devices
The final rule requires that the SPD include a description of whether, and under what circumstances, existing and new drugs, medical tests, devices and procedures are covered under the plan. The preamble to the final rule clarifies that the DOL did not intend this requirement to require the SPD to list each and every drug, test, device or procedure covered by a group health plan. The preamble states that this requirement is intended to ensure that SPDs adequately inform participants and beneficiaries whether, and under what circumstances, these benefits will or will not be covered by the plan, and to direct participants and beneficiaries as to where additional information may be obtained, free of charge, about plan coverage of a specific benefit, i.e., a particular drug, treatment, test, etc.

The DOL references an older, final SPD rule which is still in effect that continues to govern the required disclosure of detailed schedules of benefits, including schedules and listings of specific preventive services, drugs, tests, devices, procedures. Under this rule, only a general description of such benefits is required if reference is made to detailed schedules of benefits which are available without cost to any participant or beneficiary who so requests. Note: DOL considers these requirements to be already in effect.

Summary of Material Modification
In the preamble the DOL explains that it believes the current rules for a summary of material modification (SMM) provide sufficient flexibility to plans so that they do not have to constantly amend SPDs to reflect frequent changes in specific benefits, such as the addition of new drugs, medical tests or devices. Under the SMM rules, plans can furnish participants with a summary of a change to plan benefits without having to immediately amend and distribute an updated SPD.

See also:  Summary of Material Reductions requirements.

Benefit Classes
The DOL notes in the preamble that plan administrators may utilize different SPDs for different classes of participants. This regulation provides that where an employee benefit plan provides different benefits for various classes of participants, the plan administrator may fulfill the requirement to furnish an SPD by furnishing each class of participant a copy of the SPD appropriate to that class. This rule is meant to permit the furnishing of relevant information to each participant. A plan participant who selects a fee-for-service option does not want to be bothered with the SPD information for a benefit plan that he did not select (e.g. the HMO plan). Note: DOL considers these requirements to be already in effect.

Non-Discrimination Rules
Warning!! This DOL regulation does not override the non-discrimination rules in Internal Revenue Code section 105(h) which impose tax penalties for the provision of a richer benefit plan to highly compensated employees. This DOL regulation focuses only on the disclosure aspect of different sets of benefits.

Loss of Benefits
The final rules require SPDs to include a statement clearly identifying circumstances which may result in disqualification, ineligibility, or denial, loss, forfeiture, suspension, offset, reduction, or recovery (e.g., by exercise of subrogation or reimbursement rights) of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide on the basis of the description of benefits.

Summary of Plan Provisions
The final rules require SPDs to include a summary of any plan provisions governing the authority of the plan sponsors or others to terminate the plan or amend or eliminate benefits under the plan and the circumstances, if any, under which the plan may be terminated or benefits may be amended or eliminated.

The final rules require SPDs to include a summary of any plan provisions governing the benefits, rights and obligations of participants and beneficiaries under the plan on termination of the plan or amendment or elimination of benefits under the plan, and a summary of any plan provisions governing the allocation and disposition of assets of the plan upon termination. Plans must also include a summary of any provisions that may result in the imposition of a fee or charge on a participant or beneficiary which is a condition to the receipt of benefits under the plan.

In the preamble to the final reg, the DOL notes that it does not view this section as requiring an exhaustive listing or description of every circumstance that might result in the elimination of benefits or termination of the plan. Instead, the DOL notes that SPDs should include a clear, understandable summary of the sponsor's authority under the plan, as well as limitations to that authority, to eliminate benefits or terminate the plan. Note: DOL considers these requirements to be already in effect.

Funding Medium
The final rules require that the SPD contain information on whether a health insurance issuer (i.e., health insurance company) is responsible for the financing or administration of the plan, and if so, the name and address of such issuer, and a description of the nature of any administrative services (e.g., payment of claims).

Another concern for most Plan Administrators is whether a self-funded plan's SPD is required to include the name of the stop-loss carrier? According to DOL's Chief of Reporting and Disclosure, Joe Canary, if the employer is the named insured under the stop-loss contract, then there is no need to include the name of the stop-loss carrier in the SPD. If the plan is the named insured under the stop-loss contract, then the stop-loss carrier would need to be mentioned in the SPD. Note: This requirement is already in effect.

Newborns' and Mothers' Health Protection Act Disclosure
The final rule requires SPDs of group health plans that provide maternity or newborn infant coverage to include a statement describing any requirements under federal or state law applicable to the plan, and any coverage offered under the plan, relating to hospital length of stay in connection with childbirth for the mother or newborn child. If federal law applies in some areas in which the plan operates and state law applies in other areas, the statement should describe the different areas and the federal or state law requirements applicable in each. In those cases where federal law applies, the final rule provides a statement to be included in the SPD that describes the federal law requirements. Note: These requirements were released in an interim regulation and are already in effect.

Other Content Requirements
The final rule also requires SPDs to include descriptions of the following: any annual or lifetime caps or other limits on benefits under the plan; the extent to which preventive services are covered under the plan; any conditions or limits applicable to obtaining emergency medical care; and any provisions requiring pre-authorizations or utilization review as a condition to obtaining a benefit or service under the plan; provisions governing the use of network providers, the composition of the provider network, whether and under what circumstances coverage is provided for out-of-network services, any conditions or limits on the selection of primary care providers or providers of specialty medical care. Note: DOL considers these requirements to be already in effect.

Summaries of Material Reductions
The final rule requires SPDs to include language required under the Health Insurance Portability and Accountability of 1996 concerning furnishing each participant with a summary of any "material reductions" in covered services or benefits not later than 60 days after the adoption of the modification or change. The 60-day rule does not apply to participants if this information would be furnished in connection with a system of communication maintained by the plan sponsor or administrator at regular intervals of not more than 90 days. Note: This requirement was released in an interim regulation and is already in effect.

Federally Qualified HMOs
The final rule repeals the exemption from some SPD requirements for federally qualified HMOs.


Information provided courtesy of EBSA. See additional information and publications at http://www.dol.gov/ebsa/