Why Consider a Wrap Plan related to your Employee Benefits?

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.

© 2019 Vandenack Weaver LLC

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SEC Announces Priorities for 2016; Protecting the Retail Investor From Retirement Advisors

The Securities and Exchange Commission (SEC) announced their priorities for 2016 and examining retirement plan advisors remains a focal point. In June of 2015, the SEC, through their Office of Compliance Inspections and Examinations (OCIE), launched the Retirement-Targeted Industry Reviews and Examinations initiative (ReTIRE). Since that time, OCIE has conducted over 160 examinations of retirement advisors and brokers, with over 115 on the advisors. The purpose, generally, is to protect retail investors and their retirement accounts.

With a priority on protecting retail investors, OCIE is examining SEC registered advisors to ensure they are taking adequate steps to follow their fiduciary obligation towards their client’s best interests. This often means the advisor’s fee is scrutinized, with practices such as reverse churning being the target. Reverse churning, in sum, is a practice of advisors putting investors into accounts that pay a fixed fee to the advisor, but usually fail to perform in a manner to justify that fee. For 2016, the review is expanding and will now include the practice, disclosures, and sales strategies for exchange traded funds (ETF). Two other new priorities include examining the sale of variable annuities and undisclosed public pension advisor gifts and entertainment.

The effort by OCIE is not to be confused with the Department of Labor (DOL) examination on retirement advisors, which is running concurrently. The DOL examinations under the Employee Retirement Income Security Act, however, is similarly focused on protecting the retail investor. Comments by those at the SEC and DOL suggest that the focus on protecting the retail investor through these investigations are likely to continue for some time.

© 2016 Vandenack Williams LLC
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