What is an ERISA “wrap” document, and how does it differ from a regular plan document?

Under ERISA regulations, it is mandatory for group health plans to have a documented plan in place and to provide a summary plan description (SPD) to participants when they enroll in the plan or other applicable times. The plan document serves as the guiding instrument for the plan administrator to operate the plan effectively. In contrast, the SPD serves as a medium for conveying important plan details to participants, including eligibility criteria, funding, contributions, and benefits. Although the plan document and the SPD should align in content, they are distinct documents and are both individually required by ERISA.

ERISA assigns the responsibility of meeting the prerequisites of the plan document and the SPD to the plan administrator, who is typically the employer. With respect to the SPD, fully insured plans may think that they can rely on the insurance carrier’s contract, policy or certificate booklet (collectively, the certificates) with the plan sponsor to satisfy the SPD requirement. However, while the carrier certificates may contain much of the information that is required to be contained in the SPD, most certificates will not likely satisfy the SPD requirement in and of itself.

The employer may contract with the carrier or a third-party administrator (TPA) to provide the SPD. However, unless the carrier or TPA has been designated as plan administrator (and even then it’s not entirely clear), the employer as plan administrator is still liable if the carrier or TPA fails to furnish an adequate SPD. While a carrier or TPA that contracts to provide SPDs and/or become “plan administrator” may be liable to the employer as a matter of contract law for failure to do so, the employer will remain liable under ERISA for the carrier or TPA failure. A plan administrator may draft an SPD by itself or engage an outside entity to assist.

Oftentimes, in conjunction with the carrier certificates, the plan administrator will use a “wrap” document, which basically means that the employer will take the insurance carrier’s certificate and add (or “wrap”) any required ERISA language (and any additional items that are needed) to the certificate.

There are two classifications of wrap documents.  The initial one is referred to as a mega-wrap document, which serves two functions. The main purpose of the mega-wrap document is to encompass the essential ERISA verbiage surrounding a carrier’s coverage certificate.  Additionally, the mega-wrap document combines numerous employer-sponsored plans into one comprehensive plan. The primary reason an employer may choose to consolidate multiple plans into one plan is for the purpose of simplifying their Form 5500 filing. For larger employers with multiple separate plans that require filing, they would be obligated to submit multiple Forms 5500. However, if they opt to utilize a mega-wrap document to merge these plans into one, they would only need to file a single Form 5500. Nonetheless, there are other factors to consider when employing a mega-wrap document. If an employer has nearly 100 participants on one or more plans, they may choose not to consolidate them into a single plan as it would result in having to file a Form 5500 for a plan that would otherwise not require filing.

Another aspect to consider when using mega-wrap documents is the connection to HIPAA. Insured plans that are fully covered are not subject to several of HIPAA’s privacy and security obligations. However, if a plan sponsor decides to merge a fully insured plan with a self-funded plan using a mega-wrap document, the sponsor would have to adhere to all of HIPAA’s requirements for all their plans, including the fully insured plans that would typically have some exemptions.

The second category of wrap document serves the purpose of enclosing the necessary ERISA language around a specific policy or plan. A fully insured customer utilizing this particular document would only have the intention of incorporating the ERISA terminology regarding a certificate of coverage related to medical, dental, vision, disability, or life services.  Insurance providers commonly incorporate state-mandated provisions regarding coverage, but they may not consistently include the mandatory federal ERISA requirements. Depending on the situation where the plan includes multiple benefits to be bundled, both a wrap and a mega-wrap document may be advantageous.

According to the information provided, although carrier contracts, policies, and certificate booklets may serve as the written document outlining the plan, these documents typically do not contain the necessary ERISA language and specific details about the plan. In such cases, it will be necessary to include a wrap document or mega-wrap document to ensure compliance with ERISA’s requirements for the written plan document and summary plan description (SPD).