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The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law stipulating the employers to prepare a written SPD or Summary Description Plan for any welfare benefit plan allocated to their employees.
The SPD comprises the summary of the plan document written in an easily comprehensible format for the beneficiaries or recipients explaining the eligibility conditions, benefits, claims, appeal procedures, and the rights under ERISA.Along with sustaining the provisions and features of specific plans, and funding details, the ERISA law also instructs employers to maintain strict compliance for revealing the plan information to all eligible employees through the SPD.
Now, when the wrap document is used, the ERISA Plan Document comprises of two components, which are the insurance certificate or benefits booklet and the wrap document that formulates all the ERISA-mandatory facts that are mislaid from the insurance testimonial or benefits handbook.What is the Need for such Wrap Documents?Now, as we all know that a wrap document is a drafting device helping to add an appendage to the existing documentation.
Therefore, having a wrap document assists the employers to reduce the risk of litigations and financial penalties, and keeping them in compliance with the ERISA, and the Internal Revenue Code non-compliance laws.
The wrap document is always specific to the concerned company and related employee benefits.
Moreover, it also collates the necessary data that will make the compliance procedures less arduous.How useful is the Wrap Document?Certain employers are capable of enclosing multiple welfare benefits under a single plan, which can be termed as ‘mega-wrapping’.
