Plan Descriptions – Setnor Byer Insurance & Risk

They say change is the only constant in life. Chances are you’ve already experienced some of life’s bigger changes, like marriage, childbirth, a new job, house or car, becoming an ‘empty nester’ or retirement. Chances are you didn’t consider how these changes may have affected your insurance needs.

To be effective, insurance must match your situation. To make sure you haven’t outgrown your insurance, it’s a good idea to review your coverage at least once a year. Consider whether insurance changes are needed to keep up with any recent life changes. The following questions from the Insurance Information Institute can help you get started.

Have you gotten married? You may be entitled to marital status or multi-car premium discounts on your auto insurance. Your homeowners’ insurance may no longer be sufficient after merging two households under one roof.
Have you had a baby? New children need to be covered by health insurance and should be protected by life insurance.
Did your ‘baby’ get a driver’s license? Covering a teenager under a parent’s auto insurance policy is often cheaper than purchasing a separate policy. Discounts may also be available for good grades or driving school.
Have you switched jobs? New jobs often mean new fringe benefits, so identify which employer-provided coverages have been gained or lost, and adjust personal coverages accordingly. If income increases, coverage limits may also need to be increased.
Have you done extensive renovations on your home? Major home improvements, such as adding a new room, enclosing a porch or expanding a kitchen, may leave you under insured. Homeowners’ coverage limits may need to be increased to cover the increased value of your renovated home. New structures, like a gazebo, pool or hot tub, may not be covered under your current policy.
Did you buy a second home? The risk of loss may not only be greater in a second home, but completely different. Second homes may be harder to insure because they are often located in areas with specific risks (earthquakes, avalanches, floods, etc.) and vacant for long periods of time.
Have you acquired any new valuables (jewelry, electronics, fine art, antiques)? Standard homeowners’ policies offer limited coverage for highly valuable items, so a personal property floater or endorsement may be necessary.
Did you purchase any new toys? In addition to being valuable, items like boats, motorcycles and recreational vehicles can create potentially significant liability exposures that must be covered by insurance.

These questions can help avoid painful coverage gaps that are likely to occur when your life becomes too big for your insurance. They can also help save money when your insurance is too big for your life.

If you have any questions or would like to discuss how your insurance needs may have changed, please contact us.

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The Employee Retirement Income Security Act (ERISA) is a federal law that sets minimum standards for most voluntarily established employee pension and welfare plans in the private sector. To protect individuals in these plans, ERISA requires plan administrators, which are oftentimes the employers, to provide plan participants and their beneficiaries with a Summary Plan Description (SPD).

SPDs are used to give plan participants and beneficiaries important information about pension plans, like 401(k) and profit sharing plans, and welfare plans, like group health, disability and pre-paid legal plans. SPDs provide information about the plan, what benefits are available under the plan, the rights of participants and beneficiaries under the plan, and how the plan works.

SPDs must generally be given to each plan participant and each beneficiary receiving benefits under the plan within 90 days after first becoming covered by the plan. Under ERISA, SPDs must generally:

Identify the plan name, plan number and employer identification number (EIN)
Describe the type of plan (ex. 401(k), profit sharing, group health, disability)
Describe the type of plan administration
Provide contact information for the plan administrator and service of process
Describe the plan’s eligibility requirements
Describe circumstances which may result in disqualification, ineligibility, denial, loss, forfeiture, suspension or reduction of benefits
State the date of the plan’s fiscal year
Describe the procedures governing claims for benefits, applicable time limits and remedies if claims are denied
Describe provisions governing termination of the plan
A statement of rights available to plan participants under ERISA

SPDs for employee pension plans must include additional information, such as:

The plan’s normal retirement age
A description of benefits, eligibility, vesting and accrual
A statement about whether the plan is covered by termination insurance from the Pension Benefit Guaranty Corporation
Source of contributions to the plan and the methods used to calculate contributions amounts

Similarly, SPDs for employee welfare plans must also include additional information, such as information about:

Cost-sharing provisions, including costs of premiums, deductibles, coinsurance and copayment requirements
Annual or lifetime caps or limits on benefits
Coverage for preventive services
Coverage for drugs, medical tests, devices and procedures
The use of network providers, the composition of provider networks and whether, and under what circumstances, coverage is provided for out-of-network services
Conditions or limits on the selection of primary care providers or providers of specialty medical care
Conditions or limits applicable to obtaining emergency medical care
Preauthorization requirements or utilization review as a condition to obtaining a benefit or service

Since comprehension is the key, SPDs must follow strict style and formatting requirements. For example:

SPDs must be written in a manner calculated to be understood by the average plan participant
SPDs must be sufficiently comprehensive to apprise the plan’s participants and beneficiaries of their rights and obligations under the plan
SPDs must not be formatted in a way that misleads, misinforms or fails to inform participants and beneficiaries
Advantages and disadvantages of the plan must be presented without either exaggerating the benefits or minimizing the limitations
Exceptions, limitations, reductions, and restrictions of plan benefits cannot be minimized, rendered obscure or otherwise made to appear unimportant (style, caption, printing type and prominence must be the same as that used to describe plan benefits)

In fulfilling these requirements, plan administrators must consider the level of comprehension and education of typical participants in the plan and the complexity of the terms of the plan. In most cases, this will usually require limiting or eliminating technical jargon and long, complex sentences, and using clarifying examples, illustrations, clear cross references and a table of contents.

Unlike the general descriptions provided in this article, the SPD requirements are highly technical and very specific. To avoid violations, employers must confirm strict compliance with ERISA’s SPD requirement. If you have questions about your employee welfare plans, or if you would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Tag: Plan Descriptions

Have You Outgrown Your Insurance?