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More on Summary of Benefits Coverage: FAQ Part 8

Posted in Plan Administration, Welfare Plans

In case you missed it, the Supreme Court is hearing arguments next week on the constitutional challenges to health care reform.  But government soldier’s on, so Monday the EBSA release is FAQ Part 8 relating to implementation of PPACA.  Here are some highlights:

We know that the Summary of Benefits Coverage (SBC) must be delivered to the employee and beneficiaries at initial application or enrollment, upon a change after enrollment and before the plan year, at renewal, at a special enrollment and upon request. FAQ 8 specifies that the “upon application” delivery requirement applies whenever a person completes materials to enroll even if no application is required.  So a good safe harbor option may be to provide the SBC any time you are generally providing any plan documentation to participants or potential participants.

For a timing perspective, the obligation to provide the SBC is based on your plan year.  If your open enrollment period commences prior to September 23, 2012, you will not have to comply with the SBC rules and you don’t have to provide an SBC until January 1, 2013.  If your open enrollment period starts on or after September 23, 2012, you must comply with all of the new SBC rules.  Otherwise, assume that after 1/1/13, everyone gets and SBC.  Like COBRA notices, the SBC must be delivered to the participant AND to the beneficiaries.  If you fail to provide an SBC, a penalty of $100 per day per person (capped at $200 per day per family) applies. 

FAQ 8 actually includes model language for an e-card or postcard for use with an evergreen website posting and there is also a requirement that the SBC must be culturally and "linguistically appropriate."  This means non-English versions of the SBC must be available and several templates are available on the DOL website.  The SBC must be sent to persons who are COBRA qualified beneficiaries and who are on COBRA continuation coverage.  It is also important to note that the SBC can be included in the summary plan description as long as it is prominently displayed right after the table of contents.  The SBC must be sent to a participant or beneficiary within 7 business days of a request.  Finally, an SBC can be provided electronically if the format is readily accessible (such as in an html, MS Word, or pdf format), it is provided in paper form free of charge upon request, and if it is provided via an Internet posting (including on the HHS web portal), the issuer timely advises the plan (or the plan or issuer timely advises the participants and beneficiaries) that the SBC is available on the Internet and provides the Internet address. 

Since it is not clear that there will be a final decision on PPACA’s status before the 9/23/12 deadline, and we certainly can’t predict what part or parts will stand (if at all), it is wise for plan administrators to continue on in their preparation from compliance with the SBC distribution requirements.  The good news is that FAQ 8 concludes with a statement that SBC requirements are not expected to change for 2014, so we can take some comfort in that.  For compliance assistance, please contact your attorney at Fox Rothschild.