If your business offers health insurance or other employee benefits, you may have heard the term “ERISA wrap” and wondered what it means. While it might sound technical, understanding what an ERISA wrap is (and whether your business needs one) is essential for staying compliant with federal benefits regulations.
What Is an ERISA Wrap?
An ERISA wrap is a legal document that “wraps around” your existing insurance policy or policies to provide the information required under the Employee Retirement Income Security Act of 1974 (ERISA). While insurance carriers provide benefit summaries and certificates of coverage, those documents often do not meet all of ERISA’s disclosure requirements.
A wrap document fills in the gaps. It includes the necessary legal language to create a complete Summary Plan Description (SPD) and plan document, as required by ERISA for employer-sponsored group benefit plans.
Why Would a Business Need an ERISA Wrap?
If your company offers any group health benefits (such as medical, dental, vision, life, disability, or other pre-tax benefits) you are likely subject to ERISA regulations. That means you are required to provide a formal SPD and plan document to your employees.
An ERISA wrap is often necessary because…
Compliance. Most insurance policies do not contain all the elements required by ERISA, such as plan name, funding arrangements, eligibility rules, and claims procedures. Without an ERISA wrap, your plan could be non-compliant.
Bundling Plans. If your company offers multiple insurance policies, an ERISA wrap allows you to combine them into a single plan for reporting purposes. This simplifies annual filings like Form 5500.
Risk Management. Failing to comply with ERISA rules can result in costly penalties. A wrap document helps protect your business from these risks by ensuring you meet federal requirements.
What Goes Into Creating an ERISA Wrap?
An ERISA wrap document typically includes…
- A description of the benefits provided
- The name of the plan administrator
- Information on eligibility and participation
- Claims and appeals procedures
- COBRA continuation coverage rights
- ERISA rights statements
Creating a wrap document involves reviewing all current benefit plans and insurance policies, drafting compliant language, and ensuring that your summary aligns with your actual plan offerings.
Do You Need an ERISA Wrap?
If you are unsure whether your current documents meet ERISA requirements, it is best to speak with a knowledgeable benefits advisor. An ERISA wrap provides a relatively simple solution that can protect your business from unnecessary legal and financial exposure.
At Bay Area Health Insurance, we can help you determine if an ERISA wrap is needed for your employee benefits plan. Call our benefits specialists to receive expert guidance and ensure your benefits program is compliant and secure.
