Under applicable Federal laws, Employee Benefit Plans must include certain disclosures. This article shall address the Basic Disclosure Requirements for Employee Benefit Plans that are provided for in both the public and private sectors under the Employee Retirement Income Security Act, commonly referred to as ERISA.
Most importantly under ERISA, each benefit plan must contain a summary of the plan description. This description serves as the primary vehicle for informing participants and beneficiaries about their plan and how it operates. It must be written for the average participant to understand and be sufficiently comprehensive to apprise covered persons of their benefits, rights, and obligations under the plan. This summary must be provided to participants and those pension plan beneficiaries, such as family members, who are receiving benefits. This summary must be sent to participants and beneficiaries within ninety (90) days of becoming covered by the plan.
The benefit plan must also contain a section addressing claims’ notices and explanation of benefits. This section must include information regarding benefit claim determinations. It should describe the determinations’ process, and inform the participant that adverse benefit determination must include the specific reason(s) for the denial of the claim, reference to the specific plan provisions on which the benefit determination is based, and a description of the plan’s appeal procedures.
An employee benefit plan should also include basic information about the employer’s health plan. Health benefits must be fully explained, and notice must be given in respect to the possibility of obtaining temporary health insurance for employees who lose their jobs, or whose employment is otherwise terminated as provided for in the Consolidated Omnibus Budget Reconciliation Act of 1985 (commonly known as “COBRA”). COBRA provides for a temporary health plan that allows employees to keep their health coverage for a certain amount of time, usually six months, after the termination of their employment. Consequently, employee benefit plans must provide notice to the employee and covered spouses of their right to purchase a temporary extension of group health coverage when the group health plan coverage commences. They must also receive notice if COBRA is unavailable to them and a reason for this exclusion.
For employee benefit plans covering pensions, there are certain additional disclosures the drafter must include, such as a provision covering individual benefit statements must be included. These statements must include statements made to the participants and their beneficiaries of total accrued benefits that have accrued, and the earliest date on which the benefits become non-enforceable. If applicable, the participant must also be notified in the agreement whether or not their benefits are being suspended during certain periods of employment.
As you can see, ERISA grants employees several important rights. Most important are the right to receive important information about their pension or health benefit plans, to participate in timely and fair processes for benefit claims, to elect to temporarily continue group health coverage after losing coverage, to receive certificates verifying health coverage under a plan, and to recover benefits due under the plan. A drafter of an Employee Benefit Plan must be careful to address all of these concerns.