Benefits Buzz

Employer Reminder: Check Your Plan Documents

Posted on April 16th, 2020

Making Plan Changes During the COVID-19 Pandemic

Needless to say, these last several weeks have created challenging times for a significant number of employers. Stay-at-home orders and other impacts from the COVID-19 (Coronavirus) pandemic have put many employers in a position where they must make sudden health plan and benefit changes.

At Flex, we work with thousands of employers directly through our Benefits Administration Division and indirectly with our broker partners through our General Agency Division. The most common types of questions we are fielding today surround some type of plan change consideration.

Whether it be changing an employer contribution, introducing a lower cost plan, determining how to treat furloughed employees, responding to employee hardship change requests or a wide variety of other change considerations, employers want to know their rights so as not to run afoul of employee benefit laws and regulations.

While plan change considerations can be unique to each employer, there are some relatively simple and general principals to follow, and this all starts with reviewing two important plan documents.

First, employers should review their Summary Plan Description (SPD) document that should be in place because of the Employee Retirement Income Security Act of 1974 (ERISA). Many employers have prepared a Wrap Document that serves as the SPD for their benefit programs. There are two important provisions that should be included in this document:

1. Plan Eligibility:

This provision outlines which employees are eligible to participate in the plan and when that eligibility could end.

2. Right to Amend the Plan:

This provision gives employers the right to amend their plan during the plan year (i.e. make plan changes). Most documents will also include a statement that an employer can amend their plan without any advanced or prior notice to employees.

Many plan changes, such as those related to eligibility or contributions, can be made without an issue so long as the employer has an SPD or Wrap Document for the plan(s) that they may be looking to change. The document will need to be updated and/or a plan amendment will need to be drafted whenever there are material changes to the SPD or Wrap Document.

Second, most employers who provide benefits to employees do so through a Cafeteria Plan which allows employees to pay their portion of premiums with pre-tax dollars. IRS rules require Cafeteria Plans to also have a written plan document in place, often times called a Premium-only-Plan Document or POP Document.

Cafeteria Plan rules limit the circumstances of when employees can change their pre-tax election for benefits; however, changes to things like eligibility for coverage, contribution requirements, or changes to benefit offerings will generally allow employees to increase or decrease their pre-tax elections accordingly. It should be noted that employers don’t have to allow every IRS permitted election change, so employers should refer to their POP Document to double check which pre-tax election changes can be made.

We recognize these are unprecedented and difficult times for a lot of employers as well as their employees. If you need assistance having a Wrap or POP document prepared, please feel free to reach out to us. Flex can help!

Looking for a POP or Wrap Document for your organization?

Have questions about permitted plan changes? Contact us.


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