A Wrap Plan is a single welfare benefit plan that combines employee health and welfare benefit plans into one plan. A Wrap Plan can save employers time, filing costs, and ease compliance with reporting and disclosure rules.
The Employee Retirement Income Security Act (ERISA) provides an employer with the option to offer different types of welfare benefit to its employees:
- Medical, surgical, or hospital care or benefits, or
- Benefits in the event of sickness, accident, disability, death or unemployment, or
- Vacation benefits, or
- Apprenticeship or other training programs, or
- Day care centers, or
- Scholarship funds, or
- Prepaid legal services
ERISA requires welfare benefit plan to be codified in a written plan document, to include the following content:
- Benefits and eligibility, and
- Funding of benefits, and
- Procedures for allocating and delegating plan responsibilities, and
- Plan amendment and termination procedures, and
- Designation of named fiduciary, and
- Required provisions for group health plans, such as HIPPA compliance.
Employers must also provide employees with a Summary Plan Description (SPD) alerting them about their eligibility to participate in the plan. Many employee welfare benefit plans are provided through insurance, and the companies providing coverage will have documents relating to the plans. However, those documents are typically drafted to comply only with applicable insurance laws without being ERISA-compliant.
A Wrap Plan bundles the ERISA health and welfare benefits and includes all required disclosures. Rather than amending multiple documents after a new law is passed that affects a plan, an employer can make a single change to the Wrap Plan. Additionally, if an employer has plans that have 100 or more participants or are otherwise subject to the filing requirements to file Form 5500, a Wrap Plan also makes this administrative filing easier too. Rather than filing a separate Form 5500 for each health and welfare pan, a Wrap Plan allows the employer to file a single Form 5500 for all benefits covered by the Wrap Plan.
A Wrap Plan is an effective ERISA compliance strategy that allows employers to reduce the amount of time and cost involved in administering various health and welfare benefit plans.
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