February 15, 2018

Question: Our company sponsors an insured group health plan. Are we, or our insurer, responsible for providing a summary of benefits and coverage?

Answer: If your plan is fully insured, the obligation to timely provide a summary of benefits and coverage (SBC) lies both with the insurer and the plan administrator (usually the plan sponsor, unless another entity is named as such in the plan documents).

Note that a different rule applies in the case of Summary Plan Descriptions and Summary of Material Modifications, for which ERISA plan insurers are never directly liable.

A special rule prevents unnecessary duplicates of SBCs by treating the plan’s SBC obligation as satisfied so long as any entity has provided the summary in a timely manner and in accordance with applicable rules. Thus, if the insurer provides a timely and compliant SBC, the plan administrator’s obligation is satisfied.

Safe Harbor Rule

There is an enforcement safe harbor, first set forth in frequently-asked-questions guidance and later finalized in regulations. It provides that a plan administrator (or other entity), which enters into a binding contract with another party (for example, an insurer) to provide the SBC, will be treated as satisfying the SBC requirement if the following obligations are met:

  • The plan administrator monitors performance under the contract.
  • If the plan administrator has knowledge of a violation of the SBC rules and has the information to correct it, the plan administrator must correct it as soon as practicable.
  • If the plan administrator has knowledge of a violation of the SBC rules and doesn’t have the information to correct it, the plan administrator must communicate with participants and beneficiaries regarding the lapse and begin taking significant steps as soon as practicable to avoid future violations.

You should discuss with your insurer whether it will provide the SBC, and if so, document the agreement and monitor the insurer’s performance to ensure that SBCs are being provided in a timely and compliant manner.

Question: What records does ERISA require us to maintain for our employee welfare benefit plans, and for how long?

Answer: The exact records that need to be retained under ERISA depend on the plan. ERISA Section 107 requires retaining records sufficient to document the accuracy and completeness of information required to be reported on Form 5500. (Records must be maintained by the party responsible for filing or certifying the relevant information — the plan administrator is generally responsible for filing 5500 and thus will have the primary retention obligation, but other parties may also have record obligations.)

Even for ERISA plans that are exempt from filing Form 5500 (or that qualify for simplified reporting), records relating to information that would be reportable on  5500 absent the filing exemption must be maintained. (It’s also advisable to keep records documenting the plan’s eligibility for the exemption or simplified reporting.) Records that support (or would support) Form 5500 information vary according to the size/type of plan in question and may include  checks, invoices, contracts, agreements, receipts, claim records, and payroll information. Notably, summaries aren’t generally sufficient — actual records must be retained. ERISA permits records to be kept electronically if certain requirements are met. Ask your employee benefits adviser for more information.

How long should you keep these records? ERISA Section 107 requires that they be retained for a period of not less than six years after the Form 5500 filing date (or, for plans exempt from the filing requirement, when the filing would have been due). Because the Form 5500 due date is after the end of the plan year (the last day of the 7th  month after the close of the plan year (later if the plan files an extension), the effective retention period is eight years from the beginning of the relevant plan year.

Finally, additional considerations will affect plan recordkeeping, such as requirements under the Internal Revenue Code and other laws, demonstrating compliance with applicable laws and regulations, and keeping records in anticipation of possible litigation.

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