An ERISA Wrap Document is a legal document that combines, or “wraps” together various employee welfare benefit plans offered by an employer to help to comply more easily with the Employee Retirement Income Security Act of 1974 (ERISA).
It is important to note that a Wrap Document is not explicitly required by ERISA. However, it is highly recommended for employers as the purpose is to ensure that an employer’s benefit plans meet the necessary regulatory requirements by providing a comprehensive summary of the various plans and their provisions. It supplements insurance carrier provided plan documents, and Summary Plan Descriptions (SPDs), to fill in any gaps and provide a clear overview of the benefits offered.
The primary benefit of considering this service is to streamline the administration of your plan and minimize the risk of overall non-compliance. However, regardless of whether you use a wrap document or not, you do need a SPD for each benefit offered. For example, this would apply to group health plans, dental plans, vision plans or term life insurance plans.
What is an ERISA Wrap Plan Document
A “Wrap” document bundles ERISA-covered benefits together and treats the benefits as provided under a “single plan”. The wrap structure is designed to ensure that the reporting requirements are met for all ERISA-covered benefits in a manner that minimizes reporting obligations by bundling benefits under an “umbrella” plan document. In short, adoption of one or more umbrella plans will permit an employer to reduce the number of Form 5500s that are being filed.
Additionally, it is advantageous for the employer who has been filing one Form 5500 for multiple benefits without a formal document. Implementing a “wrap” document will confirm for ERISA filing purposes that there is in fact only one plan.
As an employer adds or changes benefits, it is only necessary to reflect the change and effective date on an Appendix to the document, allowing flexibility at minimal cost. The wrap document would not affect the operation or administration of the current programs and would incorporate by reference the substantive provisions of the underlying programs and insurance contracts. The provisions of the wrap plan apply only to the extent issues are not specifically addressed in the underlying program or contract. The wrap document could also contain the required COBRA provisions.
Also, the ERISA Wrap Document plays an important role in meeting the requirements of the Affordable Care Act (ACA) and ensuring compliance with its provisions. Although the ACA and ERISA are separate laws, they both govern employer-sponsored health and welfare benefit plans, and their requirements often overlap.
Common Mistakes
There are several common mistakes or oversights employers make when creating and maintaining their Wrap Documents. Being aware of these issues can help you avoid them and ensure compliance:
- Inadequate or inaccurate information or documentation: Make sure all the necessary information is provided, such as plan provisions, eligibility requirements, and employee rights under ERISA. Review the document for accuracy and update it regularly to reflect any changes to your benefit plans or regulatory requirements. This documentation is essential in case of an audit or legal dispute.
- Failure to distribute the document: Employers are required to provide employees with access to the Wrap Document and Summary Plan Descriptions (SPDs). You can distribute these documents to employees electronically, in print, or through your company intranet. It is important to notify employees of any updates and their right to request a copy.
- Other mistakes include insufficient training for HR and management staff, neglecting fiduciary responsibilities or ignoring necessary internal audits.
If an employer discovers that their ERISA Wrap Document is not in compliance with current regulations, it is crucial to take immediate action to rectify the situation and minimize the risk of penalties or legal issues. The following steps can help an employer address non-compliance and ensure their Wrap Document meets all necessary requirements:
- Identify areas of non-compliance
- Consult professionals
- Update the Wrap Document
- Communicate changes to employees
- Implement on-going compliance measures
Overall, by being proactive and paying close attention to these potential mistakes or oversights, you can avoid compliance issues and ensure that your employees have accurate and up-to-date information about their benefits.
Why Choose Us?
With offices from coast to coast, 5500Tax Group’s exclusive focus is on employee benefit tax compliance issues and regulatory changes. As highly qualified CPAs in good standing with decades of experience, our team of experts is well-versed in the latest regulatory reporting requirements and is dedicated to providing you with comprehensive and accurate Wrap Document preparation.
Additionally, our document preparation services include a HIPAA Rules and Policy and Procedures manual at no additional cost. Also, both the wrap document and the HIPAA document come with a $1,000,000 Governmental Penalty Protection.
Our commitment to you is accuracy, timeliness, and customer satisfaction which ensures that your filing experience is as seamless as possible. Click here to learn more.
Contact us today to learn more about how we can make the Wrap Document experience easy for you!
