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Benefits and Benefits AdministrationCOBRAFeaturedJanuary 4, 2014by Stanton LawBenefits Basics: Decoding the Alphabet Soup of Plan Documents

The Employee Retirement Income Security Act (ERISA) is a complex and detailed federal law governing the administration of employee benefits. ERISA’s application to a particular plan is itself a complex issue, but the law generally governs pension, “welfare benefit,” and profit sharing plans employers offer their employees, and is supplemented by other federal statutes with which you may be already familiar, such as HIPAA and COBRA. Among its many requirements, ERISA obligates plan administrators to provide participants with specific information about their benefits, including financial information, plan rules, claims procedures, and plan management. ERISA compliance has always been an important and challenging HR function, and it has recently grown more complex with the addition of new requirements accompanying the Affordable Care Act (ACA), which are particularly relevant to employer-sponsored health insurance plans.

Why should employers be concerned with the reporting and disclosure requirements of ERISA and related laws? Plan sponsors who fail to provide and maintain appropriate documentation are subject to hefty fines, which can accumulate by the day. A spate of recent changes in required document content and a renewed enforcement focus by the DOL make now a particularly critical time for employers to review the accuracy and completeness of their plan documents to ensure current and ongoing compliance. Well-crafted and timely amended plan documents are also a strong defense against litigation arising from a participant’s challenge of decisions made under the plan. Absent, deficient, or outdated plan documents, however, make lawsuits much easier for plaintiffs to win. Below is a brief overview of the primary documents ERISA plans must have and reports they must file.

The Plan Document

ERISA requires that all covered plans be in writing, thereby requiring a general controlling document describing the operation of the plan. The plan document must explain how the plan can be amended or terminated, who has authority to act for the plan, how it is internally administrated, and what types of benefit components make up the plan. Administrators must make the plan document available to participants upon request.  When the terms of a plan change, participants must receive notice according to strict timelines, or the administrator may have difficulty proving it acted according to the plan if challenged.


The Summary Plan Description, or SPD, is an equally important document to an ERISA-covered plan. An administrator not only must make the SPD available to participants, it must specifically provide it to participants or beneficiaries. SPDs should distill the plan in a succinct manner, including a statement of employee rights in “clear and simple English.” SPDs must also include information specifically identifying the sponsor, administrator, and trustee; plan eligibility requirements; circumstances that might result in a denial, reduction, loss, or recovery of benefits; specific funding, contribution, and financial information (particularly for pension plans); and detailed information describing claims procedures, remedies, and appeals. Health benefit plan SPDs must include additional content, including (among other issues): information regarding cost sharing; caps or other benefit limits; coverage of prescription drugs, preventative services, tests, devices, and procedures; routine and emergency provider information; and preauthorization/review procedures.


When pension, profit-sharing, or welfare plans are modified in a way affecting the design or administration of the plan, participants must receive a Summary of Material Modifications (SMM) within 210 days after the end of the plan year the modification was adopted, unless the modification was described in a revised SPD. If the plan is a group health plan and the modification materially changes any of the terms of the plan or coverage involved that is not reflected in the most recently provided SBC (see below), the plan or issuer must provide notice of the modification to enrollees at least 60 days before the modification will become effective.


Health Reform imposed additional disclosure requirements for administrators of group health plans to provide a Summary of Benefits and Coverage (SBC) to each plan applicant and enrollee. The SBC’s content to a large extent overlaps with what must be covered in a health plan’s SPD, but because of specific formatting requirements, the SBC must be a separate, 4-page document with a uniform glossary of terms, prepared for each benefit package. Because of their resemblance, sponsors and administrators should take care that SPDs and SBCs are consistent and simultaneously updated to avoid ambiguities inviting challenge.

Form 5500 and the SAR

Every year plans must file a 4-page Form 5500 with the DOL seven months after the end of the plan year. The form includes financial information about the plan, as well as information regarding plan design and structure, premiums, broker fees, and commissions. Filed Forms 5500 become public record. A number of plan types are exempt from the Form 5500 filing requirement, and plans with fewer than 25 participants may be eligible to file a simplified return. Any plan that must file a Form 5500 must also provide participants with a Summary Annual Report (SAR) summarizing the Form 5500 information and informing participants of the financial status of the plan.

This list highlights only a few of the documentation requirements for employee benefits plans, representing only a fraction of all disclosure and reporting obligations. Expert guidance is really essential here, and sponsor-employers should take active steps to review their plan materials regularly for compliance. An experienced employee benefits specialist can guide you through the disclosure and reporting morass and provide you what you need to stay compliant and protect your plan from costly litigation.