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You Need a Wrap Document for Your Health and Welfare Plan

Scott E. Hamner
8/22/18

documents tied wtih a red bow   ERISA was passed and signed into law over 40 years ago.  Among its attributes for the protection of benefits and transparency is the requirement for any benefit plan subject to ERISA to be established and maintained pursuant to a written plan document.  Nonetheless, 40 years after ERISA’s becoming law, many employers still do not have a plan document for the employer’s health and welfare plans, e.g. health care, group term life insurance and disability benefits. 

Why don’t employers have a H&W plan document?   

   Unlike retirement plans where employers are quite conscious of the obligation to have a plan document, perhaps because of IRS requirements, employers tend to think of the insurance contracts and agreements with third party administrators and related employee explanations as defining the health and welfare programs adequately.  That assumption is about half right.  Those contracts, agreements and explanations probably do define the benefits and general operations well, but lack some of the ERISA required provisions, such as listing the “named fiduciary” or describing the funding policy and methods. 

What is a “wrap document”?  

   A wrap document refers to and incorporates those insurance contracts, TPA agreements and general employee explanations into the wrap document (hence wraps around those items) and also provides the missing ERISA-required provisions.  In summary, those requirements concern: 

  There are other reasons for adopting a wrap plan besides complying with the basic ERISA requirements: 

What are the penalties for failure to have a H&W plan document? 

The ERISA provided penalties include: 

   As noted above, defining and communicating the claims and appeals process limits the ability of a participant to file suit.  Further, reserving discretion to the plan administrator to interpret the plan document can also result in limiting the issues that might be litigated.  Both of these limit the employer’s exposure to litigation and consequently, are practical reasons for having wrap document.

Who to call to discuss? 

   Should you wish to discuss this, please call either Scott E. Hamner or Jeffrey D. Snavely.

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Disclaimer: This alert has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.

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