Did you know that in 2023, the Department of Labor collected over $1.43 billion in fines and penalties related to employee benefit plan violations? With fines like these coming in annually, it reveals the critical importance of maintaining compliance in benefits administration. These circumstances also focus on the fact that many benefits companies don’t have as good a handle on their compliance as they believe they do.
For small and medium-sized businesses, the complex landscape of benefits compliance can be confusing and overwhelming. Still, there is a powerful tool that can help simplify this process and protect your business at the same time: the Wrap Plan. This blog will explore what a Wrap Plan is, why it benefits you, and how it can help your clients avoid becoming a part of costly statistics.
The Basics of a Wrap Plan
A Wrap Plan is a detailed document that combines several welfare benefit plans into a single plan for Employee Retirement Income Security Act (ERISA) compliance needs. The purpose of the plan is to essentially "wrap around" existing benefits. With a Wrap plan, consultants create a unified structure that simplifies management and supports ongoing compliance efforts.
Wrap plans can also exist in other formats, namely when it concerns one benefit plan. Wraps can also fill in the gaps where the benefit documentation is missing essential ERISA components left out by the insurance carrier. The key factors included in a Wrap Plan are the wrap plan document itself and the wrap summary plan description (SPD).
The plan uses these elements to provide a complete picture of the benefits involved and the rules that oversee them. Your clients may still ask: Why is a Wrap Plan necessary? Businesses usually offer various benefits that may include health insurance, dental plans, and life insurance.
Each benefit has documentation and becomes yet another resource that clients have to manage. Over time, managing several, separate benefit documents can become an unnecessary burden. Worse still, managing all the documentation involved can make consistent compliance efforts across all plans impossible to handle.
A Wrap Plan removes the complications of this scenario and creates a single ERISA plan that streamlines everything and reduces the risk of compliance violations.
Key Requirements of a Wrap Plan Document
Overall, the wrap plan document is the foundation of your Wrap Plan. The plan includes essential elements, such as:
Plan name and number
Plan year
Plan sponsor and administrator information
Eligibility requirements
Benefit offerings
Claim procedures
Your Wrap Plan needs each of these elements as they all work together to show that your plan meets ERISA requirements while still communicating all benefits information to employees and regulators. The wrap SPD is equally important. It serves as a detailed guide for employees, detailing their rights and obligations under the plan.
In order for them to function as intended and meet the legal obligations, an SPD has to include language that's easy for the average plan participant to understand. You know your wrap plan document fulfills its purpose when it clearly communicates information about the available benefits to your clients.
How a Wrap Plan Benefits Everyone
Wrap plans do more than combine all benefits disclosures into a neat plan. They can offer distinct advantages to employers and benefits consultants. Here’s how a wrap plan benefits employers and benefits consultants:
They provide improved consistency in plan documentation
Wrap plans enhance employee understanding of their benefits
Wrap plans strengthen client trust and retention
They offer a competitive advantage in the market
Much like other administrative duties, benefits compliance will change as the industries it serves evolve. In these cases, it’s necessary to understand how recent developments could affect your client’s compliance efforts and the tools they use to support their work.
How to Track Any Recent Developments in Benefits Compliance
Any benefits consultants worth their salt understand that regulatory changes can happen often, sometimes annually, or more frequently depending on legislators.
Ongoing Regulatory Changes: The IRS recently made a filing change that reduces the electronic filing threshold from 250 to 10. This change affects Forms 1094 and 1095, meaning that all employers will need to file electronically. While this change applies more to larger employers, it’s good for all businesses to review and stay compliant.
Legislative Impact: Major legislation can lead to significant changes in compliance requirements. For instance, the Affordable Care Act (ACA) introduced new notice requirements for group health plans.
Evolving Interpretations: Sometimes laws don't change, but regulators may issue new interpretations that actively change how plans operate to remain compliant.
Consultants and employers should use best practices to track new developments. Best practices for staying updated include:
Frequently check and update your Wrap Plan
Try to attend industry conferences and webinars
Look for compliance-tracking software to use
A fitting benefits compliance solution can offer useful tools and resources to help you manage your Wrap Plan and get your clients into compliance faster.
Professional Help
While it's possible to create a Wrap Plan independently, the complexity of benefits compliance often necessitates expert assistance. There’s no shame in pursuing professional advice, especially when it involves receiving guidance that allows you to tailor Wrap Plans to your client’s needs. With a customized wrap plan using specific data, your clients can maintain full compliance with no added stress.
Reward Your Clients With Simplified Compliance
A well-implemented Wrap Plan is more than just a document – it's a detailed strategy for simplifying benefits management. There’s no need to manage multiple plan documents. Wrap plans combine important disclosures and lower the risk of costly fines while improving communication efforts.
Have you recently implemented a Wrap Plan? What challenges have you faced in benefits administration? With so many questions involved, benefits compliance can keep you up at night. Check out our solution for creating Wrap Documents today to discover how BCS can help you get a robust Wrap Plan in place that makes benefits administration simpler.
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