Knowing Your Fiduciary Responsibilities Under a Group Health Plan

Offering and administering a group health plan require certain actions and involve specific responsibilities.  To meet the responsibilities as plan sponsors, employers need to understand a few basic rules, specifically the Employee Retirement Income Security Act (ERISA).  ERISA sets standards of conduct for those who manage an employee benefit plan and its assets (called fiduciaries).  An ERISA-covered group health plan is an employment–based plan that provides coverage for medical care, including dental, vision and disability insurance.  
  

ERISA requires plan administrators to provide plan information to participants and beneficiaries and to submit reports to government agencies.

The following documents must be automatically provided to participants and beneficiaries.

The Summary Plan Description (SPD) – a document that is an explanation of the plan and must be comprehensive enough to apprise participants of their rights and responsibilities under the plan.  It also informs participants about the plan features and what to expect of the plan.  Among other things, the SPD must include basic information such as:

       §    Plan name, address, and contact information;

      §    What the plan benefits are;

      §    How to get the benefits; and

      §    Duties of the plan and/or employee.

More specific information must also be provided, including:

        § The plan’s claims procedure (either in the document or as a separate

           attachment);

       §    A participant’s basic rights and responsibilities under ERISA

         (model language is  provided in the SPD rules);

§  Information on any applicable premiums, cost-sharing, deductibles,

  co-payments, etc.;

§  Any caps (annual or lifetime) on benefits;

§  Procedures for using network providers (if PPO/HMO) and composition

   of network;

      §   Conditions regarding pre-certification;

 

     §   A description of plan procedures governing Qualified Medical

       

        Child Support Orders; and

 

     §   Notices and descriptions of certain rights under the Health Insurance

        

        Portability and Accountability Act (HIPAA) and other health coverage

       

        laws, described below.

This document is given to employees within 90 days after they are covered by the plan.  SPD’s must also be redistributed every 5^th year and provided within 30 days of a request.  The SPD must be current within 120 days.

The benefit summary, Summary of Benefits and Coverage (SBC) and/or Certificate of Coverage (COC) that you receive from the insurance carrier does not satisfy this requirement.  All employers must provide a Summary Plan Description to plan participants.

The Summary of Material Modification (SMM) – apprises participants and beneficiaries of material changes to the plan or to the information required to be in the SPD.  The SMM or an updated SPD for a group health plan must be provided automatically to participants within 210 days after the end of the plan year in which such material change was adopted.  However, if the changes to the plan or changes to the required information in the SPD result in a material reduction in covered services or benefits, then the SMM must be distributed no later than 60 days from the date the change was adopted.  A material reduction is any plan change that eliminates benefits, reduces benefits payable, increases premiums, deductibles, coinsurance or co-payments, reduces the service area covered by an HMO, or establishes new conditions or requirements (such as pre-authorization) for obtaining services or benefits.

A Summary Annual Report (SAR) – Outlines in narrative form the financial information in the plan’s Annual Report, the Form 5500 and is furnished annually to participants in plans that are required to file the Form 5500.  A group health plan with fewer than 100 participants that is either fully insured or self-funded (or combination of both) does not need to file an annual report.  Plans with 100 or more participants that are fully insured or self-funded (or a combination) are required to file a report.  There are penalties for failing to file required reports and for failing to provide required information to participants.

There are other provisions in ERISA, as well as other Federal and State laws that affect group health plans.  A fiduciary’s responsibilities include making sure the plan complies with ERISA, which includes the COBRA, HIPAA, and other group health plan provisions in the law.

The Affordable Care Act (ACA) provides additional protections for benefits under an employment-based group health plan.  Many of the protections are in effect now including the extension of dependent coverage until age 26, ban on lifetime limits on coverage for most benefits.  Additional protections will be effective in 2014.

Penalties for non-compliance can be costly.  There may be law suits under ERISA enforcing ERISA’s document requirements, including requiring one where none exists.  The penalty for failing to provide an SPD within 30 days from request is $110/ day.   Department of Labor audits are being performed and they have increased staff to focus on compliance.

Limiting Your Liability

With fiduciary responsibilities comes potential liability.  Fiduciaries that do not follow the standards of conduct may be personally liable.  However, in certain situations you can limit your liability.  Fiduciaries can demonstrate that they have carried out their responsibilities properly by documenting the processes used to carry out the fiduciary responsibilities.  Another way is to hire a third party administrator (TPA) to handle fiduciary functions, setting up the agreement so that the person or entity then assumes liability for those functions selected.  If an employer contracts with a TPA to manage the plan, the employer is responsible for the selection of the TPA, but is not liable for the individual decisions of that provider.  However, an employer is required to monitor the TPA periodically to assure that it is handling the plan’s administration prudently.

For more detailed information, please go to Compliance Assistance Guide… Health Benefits Coverage Under Federal Law.