A summary of material modification (SMM) is required anytime there’s a “material” change to the SPD. The guidance doesn’t describe what changes are considered material, but some examples could include changes to the benefits provided (such as adding vision), carrier changes, changes in policy numbers, TPA changes, participating employer changes or changes in eligibility. So, since carrier certificates of coverage are part of the SPD, there needs to be an SMM given while waiting on new carrier certs.
Technically speaking, the SMM has to be given out within 210 days after the end of the plan year in which a change is adopted.
If the change is considered a reduction in benefits, then there’s an accelerated requirement which means the SMM must be disclosed no later than 60 days after the date of adoption of the change.
Here are some of the DOL’s examples of a reduction in benefits that would necessitate giving the SMM out much sooner:
an elimination of benefits payable under the plan
a reduction of benefits payable under the plan (reductions caused by a change in formulas, methodologies, or schedules that are the basis for benefit determinations)
an increase in premiums, deductibles, co-insurance, copays, or other amounts paid by enrollees
a reduction in the service area covered by an HMO, and
new conditions or requirements imposed (i.e., preauthorization requirements) for obtaining covered services or benefits
In addition, if there are any material changes that affect the summary of benefits and coverage (SBC), an SMM must be given out at least 60 days before the change becomes effective.
Be aware that issues can arise from waiting to communicate changes until the normal 210-day deadline or the accelerated 60-day deadline for plan reductions. Adhering strictly to these timelines may not absolve a plan sponsor from general claims of breach of fiduciary duty, avoiding reimbursement of “vested” benefits or other problems from participants relying on outdated information.
Therefore, it’s best to distribute the SMM as early as possible to avoid misunderstandings, especially if there is a material reduction in benefits. To make it easier, employers who communicate plan changes for the coming year in open enrollment materials should consider adding language to notify participants that these same materials constitute an SMM.