- New SPD Content Rules
- May 1, 2003 | Author: Robert F. Simon
- Law Firm: Vedder, Price, Kaufman & Kammholz, P.C. - Chicago Office
In addition to significantly changing the claims procedure rules governing health and disability benefit plans, the Department of Labor ("DOL") also recently published final regulations on the required content of summary plan descriptions ("SPDs"). The SPD content regulations apply to both pension and welfare benefit plans.
SPDs must be updated to reflect the new regulations no later than the first day of the second plan year beginning on or after January 22, 2001. Thus, for calendar plans, SPDs must be updated by January 1, 2003, to reflect the new content requirements.
Highlights of the new SPD content regulations are described below.
Under the new regulations, SPDs must describe any plan provisions that may result in the imposition of a fee or charge to a participant or beneficiary, or to his or her individual account under the plan, the payment of which is a condition to the receipt of plan benefits. For example, a 401(k) plan SPD must describe any loan fees and annual account maintenance fees charged to participants.
QDPROs and PMCSOs
The new regulations require SPDs of pension plans, including 401(k) plans, to either (a) describe the plan's procedures for handling qualified domestic relations order ("QDRO") determinations or (b) state that a copy of those procedures may be obtained without charge from the plan administrator upon request. Similarly, group health plan SPDs must either (a) describe the plan's procedures for handling qualified medical child support order ("QMCSO") determinations or (b) state that a copy of those procedures may be obtained without charge from the plan administrator upon request.
The new SPD content regulations contain specific rules for group health plans subject to the COBRA continuation coverage rules. The SPD must include a description of the COBRA rights and obligations of plan participants and beneficiaries including, among other things, information about what constitutes a qualifying event and who qualifies as a qualified beneficiary. The SPD also must include notice and election requirements and procedures, premium payment rules, and a duration of continuation coverage explanation. SPDs which currently provide a comprehensive description of COBRA rights and obligations may need only minor revisions to comply with this portion of the new regulations.
Other Health Plan Requirements
The new regulations also require group health plan SPDs to include a description of the following:
- any cost-sharing provisions, including premiums, deductibles, coinsurance and co-payment amounts for which the participant or beneficiary will be responsible;
- any annual or lifetime caps or other limits on benefits under the plan;
- the extent to which preventive services are covered;
- criteria utilized by the plan for determining whether prescriptions for existing and new drugs are covered;
- rules governing the use of network providers and the circumstances under which coverage is provided for out-of-network services;
- any conditions or limits on the selection of primary care physicians or providers of specialty medical care;
- any conditions or limitations on obtaining emergency medical care;
- any provisions requiring pre-authorizations or utilization review as a condition to obtaining a benefit or service under the plan; and
- any circumstances which may result in an offset, reduction or recovery of benefits, such as the plan's exercise of subrogation or reimbursement rights in connection with the treatment of injuries caused by a third party.
For health plans with a provider network, the new regulations state that a listing of providers may be furnished as a separate document that accompanies the plan's SPD as long as the SPD contains a general description of the provider network and a statement that provider lists are furnished automatically, without charge, as a separate document.
Plan Termination Information
The regulations require (i) additional information about the plan sponsor's right to terminate the plan or to modify or eliminate the benefits provided; (ii) a summary of plan provisions governing the benefits, rights and obligations of participants and beneficiaries upon the plan's termination or amendment; and (iii) an explanation of plan provisions governing the allocation and disposition of plan assets upon termination. In the case of a pension plan, the SPD also must include a description of any provisions governing the accrual and vesting of benefits upon termination of the plan.
All pension plan SPDs must include a statement indicating whether benefits of the plan are insured under Title IV of ERISA and, if insured, a description of the insurance provided by the Pension Benefit Guaranty Corporation ("PBGC"). The new regulations contain two versions of a revised and updated PBGC model statement, one for single-employer plans and one for multi-employer plans.
ERISA Rights Statement
The model statement of ERISA rights provided in the existing regulations, and found in many existing SPDs, has been substantially revised and updated.
Existing regulations exempt the benefits being provided through a federally qualified HMO from various SPD disclosure requirements, as long as certain conditions are met. Under the new regulations, this limited exemption for qualifying HMOs is eliminated.
As noted above, SPDs do not have to be updated to comply with the new content requirements until the beginning of the second plan year beginning on or after January 22, 2001. However, due to the costs associated with the preparation and distribution of updated SPDs, plan sponsors generally should plan to incorporate the newly required changes into the next version of the SPD for each of their plans, even if that SPD is being issued this year.