Why Should I Use Wrap Documents?

Under the Employee Retirement Income Security Act of 1974 (ERISA), the federal law that sets minimum standards for employee welfare benefit plans, plan administrators (typically employers sponsoring such plans) must furnish to plan participants a Summary Plan Description (SPD) which contains important disclosures and other information about the plan in understandable terms.

Because the benefit summaries, certificates of coverage, and other documents that are typically provided by insurance carriers to plan participants don’t contain all of the information required by ERISA, many employers choose to use a Wrap SPD to make sure the plan is ERISA-compliant. The Wrap SPD functions by "wrapping around" the benefit summaries and other materials to create an SPD that satisfies ERISA's reporting and disclosure requirements.

Plan administrators are also required to have a written Plan Document in place that governs how the plan operates. A Wrap Plan Document, together with the insurance contracts and other materials from the carrier, fills in the gaps left by the insurer-provided materials to ensure that the plan functions in accordance with federal law.

Perhaps the most compelling reason that many employers use Wrap Documents is the significant amount of time and expense involved with preparing plan documents from scratch. Few small- or even medium-sized employers possess the resources or expertise necessary to create ERISA-compliant plan documents—and to maintain compliance in an ever-changing regulatory landscape. Moreover, hiring a team of ERISA attorneys to draft an employee welfare benefit plan SPD and Plan Document that complies with ERISA is cost-prohibitive for the majority of small companies.

Bottom line, be sure to maintain your Wrap documents and distribute the Wrap SPD to all participants in a timely manner to comply with ERISA's requirements.