Top 5 Tips for Benefits Plan Communications
The Employee Retirement Income Security Act (ERISA) is a federal law establishing minimum standards for employee health benefit and retirement plans.
A U.S. Supreme Court case of CIGNA Corp. v. Amara, addressed a situation to which all employers should pay attention. CIGNA had sent their employees SPDs describing a benefit greater than what the terms of the formal plan had provided. The employer was sued for the more generous benefit which the SPD had described, and a lower court had ruled in favor of the plaintiff. However, the U.S. Supreme Court unanimously reversed the ruling and held that inaccurate or misleading SPD statements were not subject to ERISA enforcement penalties or remedies.
The Court ruling reminds employers to constantly consider the following five tips:
Summary Plan Descriptions.
Draft and distribute SPDs that are brief and easy to read without overt contractual terms or legalese.
Determine the company representative who will have authority over plan administration and communications.
Routinely verify that plan documents are current and that communications are consistent and accurate with the summaries and are compliant with ERISA requirements.
Transparency in Changes.
Employee communications should fully disclose in advance any changes, especially those that may result in adverse circumstances (i.e. a decrease in benefits).
While an SPD may include both a complete description of the plan’s terms (i.e. a Certificate of Coverage) and required ERISA disclosure language, an insurance provider’s Master Contract or Certificate of Coverage itself is not considered an SPD.
Employers can gain some reassurance that the benefits as detailed in the plan would be limited to the contractual terms as written. At the same time, employers must ensure and regularly audit for proper and accurate communication of employee benefits. ERISA aspects including SPDs and plan documents can be very complex and confusing for employers – big and small. If you have any responsibility over your company’s employee benefits program, then consider seeking assistance from an HR professional or benefits consultant for added expertise and guidance.