New SPD Content Rules - Require Numerous Changes To SPDs

Background And Effective Date

The Department of Labor also recently finalized its rules on the required content of summary plan descriptions ("SPDs"), which will require many revisions to SPDs for all types of ERISA plans.

In general, the effective date of the new SPD content rules is the first day of the second plan year beginning on or after January 22, 2001. This effective date does not apply to the interim rules that are finalized in the new SPD content rules, because those interim rules are already effective now.

Procedures Governing QDRO And QMCSO Determinations

The new SPD content rules require that the SPD of a pension plan include either a description of the plan's procedures governing qualified domestic relations order (QDRO) determinations, or a statement indicating that participants and beneficiaries can obtain, without charge, a copy of such procedures from the plan administrator. A corresponding disclosure applies to group health plans with respect to procedures governing qualified medical child support order (QMCSO) determinations.

Group Health Plan Disclosures

Under the new SPD content rules, SPDs of a group health plan must describe:

• any cost-sharing provisions, including premiums, deductibles, coinsurance, and copayment 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 under the plan;
• whether, and under what circumstances, existing and new drugs are covered under the plan;
• whether, and under what circumstances, coverage is provided for medical tests, devices and procedures;
• provisions governing the use of network providers, the composition of the provider network, and whether, and under what circumstances, coverage is provided for out-of-network services; and
• other items specified in the new SPD content rules.

Disclosure Of Plan Termination Information

Under the new SPD content rules, SPDs must include certain information relating to the authority of the plan sponsors (or others) to terminate the plan or to amend or eliminate benefits under the plan, and a summary of what happens to the benefits, rights and obligations of participants and beneficiaries under the plan on termination of the plan or amendment or elimination of benefits under the plan.

Imposition Of A Fee

Under the new rules, SPDs must include a summary of any provisions that may result in the imposition of a fee or charge on a participant or beneficiary, or on an individual account thereof, the payment of which is a condition to the receipt of benefits under the plan.

PBGC Coverage

Currently, if the benefits under a pension plan are insured by the Pension Benefit Guaranty Corporation (PBGC) under Title IV of ERISA, SPDs must contain a model statement of the pension benefit guaranty provisions of Title IV. This model statement has been updated in accordance with changes provided by the PBGC to more accurately reflect the benefits guaranteed under Title IV, as well as update the information relating to the PBGC. Also, there are now two model statements: one for single-employer plans and one for multiemployer plans.

COBRA Rights

Under the new SPD content rules, SPDs of group health plans subject to COBRA must discuss a description of the rights and obligations of participants and beneficiaries with respect to continuation coverage, including, among other things, information concerning qualifying events and qualified beneficiaries, premiums, notice and election requirements and procedures, and duration of coverage.

Statement of ERISA Rights

The new SPD content rules update and substantially revise the model statement of ERISA rights.

Repeal Of Limited Exemption For SPDs Of Plans Providing Benefits Through A Federally Qualified HMO

Under current rules, SPDs of welfare benefit plans providing benefits through a "qualified HMO" are not required to make certain disclosures in the SPD, provided certain conditions are met. Under the new rule, this exception for qualified HMO is eliminated, meaning that qualified HMOs now need to comply with all of the SPD content rules.

Type Of Plan

The current rule requires plan administrators to specify in the summary plan description the type of welfare or pension plan they administer. As revised, this Section gives examples of types of welfare or pension plans (e.g., defined benefit, defined contribution, 401(k), cash balance, money purchase, profit sharing, ERISA section 404(c) plan, etc., and for welfare plans--group health plans, disability, pre-paid legal services, etc.).

Other Rules

The SPD content rules also adopt some existing interim rules that are already in effect, some with no modification, and some with minor modifications. Additionally, the new rules require further required disclosures about a plan's claim procedure.

ACTION NEEDED: Effective the first day of the second plan year beginning on or after January 22, 2001, SPDs will need to be substantially revised to comply with the new rules. For a calendar year plan, this means that the plan's SPD will need to be updated effective January 1, 2003.