In This Issue:
- Compliance Corner Acronyms Glossary
- Compliance Corner Now Available in PDF Format
- New NFP White Paper Available: "ERISA and Multi-life Disability Plans"
- Revised Benefits Compliance Documents Now Available
- HHS Issues Guidelines and Interim Final Rule on PPACA's Preventive Services Provision for Women
- NAHU Releases Analysis on Newly Proposed Exchange Regulations
- Court Analyzes COBRA’s Gross Misconduct Exception
- Court Holds in Favor of Employee in FMLA Retaliation Claim Case
- State Updates: AL, AR, CT, HI, IL, IN, LA, MN, NJ, NC, ND, NY, SC, TX, VA
- FAQ: What is an ERISA “wrap” document, and how does it differ from a regular plan document?

Compliance Corner Acronyms Glossary
As part of our ongoing initiative to enhance the value of Compliance Corner, the newsletter will now include a Compliance Corner Acronyms Glossary containing the most commonly used benefits terminology. This glossary will always be available at the bottom of each email newsletter. Please note that you will continue to see some less commonly used benefits acronyms spelled out within the text of the articles.
Compliance Corner Now Available in PDF Format
Recently, numerous firms have requested that Compliance Corner be made available in a PDF format with active links. Beginning with this edition, the Benefits Compliance team is including a link at the bottom of each Compliance Corner newsletter that will allow you to download a PDF version. Please note that the only version that will be available in PDF format will be the client-facing version. To create a PDF of your branded Compliance Corner, you will need additional software. For further details on this option, please contact Benefits Compliance.
As always, we appreciate your feedback and look forward to enhancing the content and delivery methods that best suit you and your clients’ needs.
New NFP White Paper Available: "ERISA and Multi-life Disability Plans"
Benefits Compliance recently released a new white paper entitled “ERISA and Multi-life Disability Plans.” As background, ERISA places on employers and plan administrators certain disclosure, reporting and fiduciary responsibilities. The new paper focuses on the application of ERISA to short-term disability (STD) and long-term disability (LTD) plans offered by employers, with a special emphasis on individual STD and LTD policies offered on a voluntary basis. Benefits Compliance previously discussed this new paper in a “Monday Mentoring” call on June 13, 2011, which is archived and available for listening at the link below. The new white paper is now available through the NFP website, and can be customized with your own message and branded with your firm’s logo.
ERISA and Multi-life Disability Plans White Paper
Archived Version of June 13, 2011, “Monday Mentoring” Call
Revised Benefits Compliance Documents Now Available
Benefits Compliance has completed revisions of three frequently used documents. The first, the “Section 125 Qualifying Events Chart,” has been updated with the new branding. Additionally, feedback from firms was incorporated so that there are several new examples, clarifications to some of the descriptions for certain qualifying events, and updates to reflect special enrollment provisions as provided under health care reform. The second revised document discusses Health Reimbursement Arrangements and Section 111 Medicare Reporting. A new section detailing “Who is reported?” was added, as well as an updated link to the newest available user guide. The third document, “Medicare Part D: Guidance for Upcoming Employer Deadlines,” includes the revised creditable or non-creditable coverage disclosure deadline of Oct. 15, as well as updated links for the newest model notices available. All three documents are available in the Compliance & Regulatory MyCMO area.
Section 125 Qualifying Events Chart
HRA Section 111 Reporting
Medicare Part D: Guidance for Upcoming Employer Deadlines

HHS Issues Guidelines and Interim Final Rule on PPACA's Preventive Services Provision for Women
On Aug. 1, 2011, HHS issued guidelines and an interim final rule relating to group health plan coverage of preventive services under PPACA. As background, PPACA requires non-grandfathered group and individual health plans and insurers to provide certain preventive services without cost-sharing (including copayments, coinsurance and deductibles). Under PPACA, “preventive services” includes four categories of services, the last of which relates exclusively to preventive services for women. Specifically, the fourth category is evidence-informed preventive care and screenings for women, as provided for in guidelines supported by the Health Resources and Services Administration (HRSA), a division of HHS. HRSA based its guidelines on a July 19, 2011, federal Institute of Medicine (IOM) report relating to clinical preventive services for women.
The guidelines require plans and issuers to cover the following preventive services for women without cost-sharing:
- Well-woman visits (annually and as necessary, depending on a woman’s health status, health needs and other factors);
- Screening for gestational diabetes (for pregnant women between 24 and 28 weeks of gestation and at first prenatal visit for women with a high risk of diabetes);
- Human papillomavirus (HPV) DNA testing for women 30 years and older (every three years, regardless of pap smear results);
- Sexually-transmitted infection counseling (annually);
- Human immunodeficiency virus (HIV) screening and counseling (annually);
- Food and Drug Administration (FDA)-approved contraception methods and contraceptive counseling (as prescribed);
- Breastfeeding support, supplies and counseling (in conjunction with each birth); and
- Domestic violence screening and counseling (annually and as prescribed).
Importantly, HHS also adopted an interim final rule relating to group health plans sponsored by certain religious employers. Under the interim final rule, such plans are exempt from the sixth requirement, which relates to covering all FDA-approved birth control and contraception without cost-sharing. This exception does not apply to individual policies. A religious employer is defined as one that:
- Has the inculcation of religious value as its purpose;
- Primarily employs persons who share its religious tenets;
- Primarily serves persons who share its religious tenets; and
- Is a nonprofit organization under section 6033(a)(1) and section 6033(a)(3)(A)(i) or (iii) of the Code (referring to churches, their integrated auxiliaries, and conventions or associations of churches, as well as to the exclusively religious activities of any religious order).
The interim final rules will be published in the Aug. 3, 2011, Federal Register. According to HHS, the guidelines and interim final rule are effective Aug. 1, 2011. Accordingly, non-grandfathered plans and issuers are required to provide coverage without cost-sharing, consistent with the rules in the first plan year that begins on or after Aug. 1, 2012. For calendar year plans, this would be Jan. 1, 2013. The interim final rules also solicit comments on the interim final rules, which are due 60 days after publication in the Federal Register.
Interim Final Rules on Preventive Services for Women
HHS Press Release
HRSA Preventive Services Guidelines
Healthcare.gov Women’s Preventive Services Fact Sheet
July 19, 2011, IOM Report
IOM Report Press Release
IOM Preventive Services for Women Web Page
NAHU Releases Analysis on Newly Proposed Exchange Regulations
As covered in the July 19, 2011, edition of Compliance Corner, HHS recently issued proposed regulations on health insurance exchanges, which states are required to establish as part of PPACA. The proposed regulations include a framework for the establishment of a state exchange, the process for health plans to be certified to sell in the exchanges, criteria for enrollment in the exchanges and information on the role of navigators. In connection with newly proposed regulations, the National Association of Health Underwriters (NAHU) recently released a chart detailing the provisions in the proposed regulations that are particularly relevant to health insurance agents and brokers.
NAHU Exchange Analysis Chart
NAHU Press Release

Court Analyzes COBRA’s Gross Misconduct Exception
In Shrimpton v. Quest Diagnostics Inc., 2011 WL 2648117 (N.D. Ohio 2011), a federal district judge in the Northern District of Ohio examined whether the COBRA gross misconduct exception applied where an employee was terminated as a result of a sex offense conviction resulting in a prison sentence and the employee being classified as a sex offender under state law. When the employer refused to allow the employee and his wife to enroll in COBRA benefits, the employee brought the lawsuit, alleging that his actions did not constitute gross misconduct. The employee further alleged that, even if his conduct did rise to the level of gross misconduct, the employer waived the gross misconduct exception because the employee was informed upon termination that he would receive COBRA paperwork in the mail and did receive the paperwork, although the employer later claimed it was sent by mistake. The employer countered that it was not obligated to provide COBRA benefits because the employee was terminated for gross misconduct, which, under COBRA, is a statutory exception to the requirements of COBRA and is, therefore, not a COBRA-qualifying event.
The court relied on a two-part test to determine action rising to the level of “gross misconduct”:
- The conduct in question must be intentional, wanton, willful, deliberate or reckless, or performed with deliberate indifference to an employer's interests.
- The conduct in question must have a “substantial nexus” to the workplace.
The court concluded that the employee’s conduct in this case, however terrible, had not been shown to directly involve the employer, its clients or employees. The court noted that the employer has only speculated that the employee’s co-workers might be uncomfortable if they had knowledge of his conduct. The court further ruled that a genuine issue of fact existed as to whether the employer had waived a known right to rely on COBRA’s gross misconduct exception or had merely made a mistake by sending the COBRA election form. The judge ultimately concluded that these factual disputes prevented him from entering a judgment, and ordered that the case proceed to trial.
This case is significant because it further demonstrates to employers that because the term “gross misconduct” is not defined by COBRA and the courts do not apply a uniform standard in these cases, denying COBRA coverage on account of gross misconduct should be avoided, except in the most extreme cases.
Shrimpton v. Quest Diagnostics Inc.
Court Holds in Favor of Employee in FMLA Retaliation Claim Case
A district court case in Virginia, Weth v. O’Leary, provides a clear reminder that employers should institute careful processes for FMLA leave and performance reviews. The plaintiff, Patricia A. Weth, was employed by the Treasurer of Arlington County for several years before she went on medical leave for cancer surgery. The first day back on the job, her manager told her to find a new job. One month later, Weth was suspended, and then officially terminated shortly thereafter. Weth asserted two interrelated claims: interference with rights granted by FMLA and retaliation for taking FMLA leave.
In the first claim, the plaintiff argues that she was denied reinstatement to her former position as required under FMLA. Although courts have ruled that employers have the right to fire returning workers if they can prove the workers would have been terminated whether or not they took FMLA leave, the evidence must clearly prove the firing was unrelated to the leave. The defendant produced evidence of serious performance problems that predated the FMLA leave. The judge acknowledged the defendant’s evidence, but also noted that Weth had received a number of very positive performance evaluations — including one within a year of the time she took FMLA leave. In addition, the manager approved several salary increases during Weth’s tenure as his direct report. On her claim for retaliation, the plaintiff-employee must show that: (1) the employee engaged in a protected activity, such as taking FMLA leave; (2) the employer then took an adverse employment action against her; and (3) the adverse action was causally connected to the plaintiff's protected activity. In the end, the court said, “the timeline in this case is highly suspicious” and sent the case to a jury trial.
Weth v. O’Leary

Alabama
On June 9, 2011, HB 60 was delivered to the secretary of state. The legislation is a proposed constitutional amendment that must be passed by a majority of the qualified electors voting in Alabama. The legislation proposes amending the Alabama Constitution to prohibit any person, employer or health care provider from being compelled to participate in any health care system.
HB 60
Arkansas
On April 5, 2011, the governor signed HB 1024 into law, creating Act 1164. The act expands certain available rights for leaves of absence and reemployment to all military personnel called to active duty, including all persons who are members of the armed forces of Arkansas or any other state, including the National Guard. These persons are now afforded such employment and reemployment rights, privileges, benefits and protections included in hiring and promotion opportunities. Available leaves of absence of fifteen paid days per calendar year for service, in addition to vacation time, is available to these individuals.
Act 1164
On July 7, 2011, the Arkansas Insurance Department released Bulletin No. 7-2011, which is directed toward insurers and provides guidance regarding the process for small employer health insurance premium reviews. The bulletin includes information indicating what factors the department will consider when evaluating proposed rate increases for reasonableness. For this purpose, a small employer is defined as at least two but no more than 50 employees. Carriers will also be required to include the medical loss ratio within the small employer group filing.
Bulletin No. 7-2011
Connecticut
On July 13, 2011, the governor signed Public Act 11-223 into law. As a result of this newly enacted legislation, employers in Connecticut will face new restrictions on the use of credit reports regarding current or prospective employees. In enacting the new law, Connecticut becomes the sixth state limiting employers' use of credit reports, following Hawaii, Washington, Oregon, Illinois and Maryland. Similar laws are pending in several other states and at the federal level.
The EEOC is conducting related investigations and pursuing at least one disparate impact claim based on the use of credit reports. Thus, employers who use credit history information to inform hiring or personnel decisions in states that have enacted credit check laws should review their policies for compliance, and employers everywhere should continue to monitor developments in this evolving area of the law. Public Act 11-223 is effective Oct. 1, 2011.
Public Act 11-223
Source: Littler Mendelson
Hawaii
On July 12, 2011, Gov. Abercrombie signed into law HB 1134. The new law relates to the future termination of Hawaii’s Prepaid Health Care Act (the Act). Among other things, the Act requires employers to offer health insurance coverage to employees working at least 20 hours per week. The Act also includes a provision that calls for termination of the Act upon enactment of federal health care reform legislation at least equal to the Act, such as PPACA. HB 1134 removes that provision. In a press release, Gov. Abercrombie stated that federal regulators have “concluded the intent of both the federal government and state of Hawaii is to retain the Hawaii Prepaid Care Act alongside the Patient Protection and Affordable Care Act.”
HB 1134
Press Release
Illinois
On July 14, 2011, the governor approved SB 1555, creating Public Act 097-0142. The act creates the Illinois Health Benefits Exchange, which is established to assist small employers and individuals in obtaining health insurance coverage. When the exchange becomes operational, employers that have 50 or fewer employees can use the exchange to enroll their employees in health plans. The act is effective Oct. 1, 2013.
Public Act 097-0142
Indiana
On May 10, 2011, the governor signed HB 1211, which states that applicants and employees can legally state on job applications and other documents that they have not been arrested for or convicted of certain misdemeanors or class D felonies that did not result in injury to anyone if a court orders such records restricted. HB 1211 is effective as of July 1, 2011.
HB 1211
On April 15, 2011, the governor signed SB 411 into law, which states that employers cannot require applicants and employees to disclose whether they own, possess, transport or use firearms or ammunition unless the disclosure concerns firearms or ammunition used to perform their employment duties. Employers also cannot condition employment or employment rights, benefits, privileges or opportunities on agreements that applicants and employees refrain from such nondisclosure rights or refrain from otherwise lawful ownership, possession, storage, transportation or use of firearms or ammunition. SB 411 is effective as of July 1, 2011.
SB 411
Louisiana
On June 29, 2011, Gov. Jindal signed into law HB 345, creating Act No. 350. The new law requires plans that offer the coverage of prescription drugs through a drug formulary to meet certain requirements. A drug formulary is defined as a list of prescription drugs for which a health benefit plan provides coverage, for which a plan approves payment, or that a health insurance issuer encourages or offers for physicians or other authorized prescribers to prescribe. Under HB 345, a plan that offers a drug formulary must provide notice to plan participants that the plan uses a drug formulary, an explanation of what a drug formulary is, the method the issuer uses to determine the prescription drugs to be included in or excluded from a drug formulary, how often the health insurance issuer reviews the contents of each drug formulary, and that the participant may contact the issuer to determine whether a specific drug is included in a particular drug formulary.
In addition, such plans must also make certain disclosures and notifications upon request. Lastly, the new law also provides for continuation of certain prescription drug coverages and processes for adverse determinations.
Act No. 350
Minnesota
On July 20, 2011, Gov. Mark Dayton signed legislation passed during the First Special Session of the 2011 Minnesota Legislature. Among the bills was a measure (HF 20) that will bring most of the state's income tax system into compliance with federal definitions of taxable income. One of the significant changes for employers in Minnesota is that for plan years beginning on or after Sept. 23, 2010, the value of employer-provided health benefits provided to any employee’s child under the age of 27 at the end of the taxable year may be excluded from income for Minnesota state tax in addition to the exclusion under federal tax purposes. The change in the law also amends Minnesota tax code to disallow reimbursement from HSA, FSA and HRAs for OTC medications without a prescription.
The legislation also repeals the refundable credit for certain taxpayers who purchase health care insurance through an employer-sponsored section 125 health care plan, effective beginning in tax year 2012.
HF 20, First Special Session
Summary of Tax Changes
New Jersey
The New Jersey Department of Labor and Workforce Development has announced that the taxable wage base for New Jersey Temporary Disability Insurance increases to $30,300 in 2012. The maximum weekly benefit amount increases to $572, also effective for 2012. As a reminder, New Jersey is one of a handful of states that mandates temporary disability insurance. The New Jersey program provides temporary disability benefits for 26 weeks. The increased taxable wage base also applies to unemployment insurance and family leave insurance.
Announcement
North Carolina
On June 2, 2011, Gov. Perdue signed into law SB 608. The new law exempts health care sharing organizations from the North Carolina health insurance regulatory laws. A health care sharing organization is an organization that:
- Maintains nonprofit status under the IRC;
- Limits its participation to those who share similar interests as defined by the organization;
- Provides for the financial or medical needs of a participant through contributions from one participant to another in accordance with the criteria established by the health care sharing organization;
- Provides amounts that participants may contribute with no assumption of risk or promise to pay among the participants and no assumption of risk or promise to pay by the health care sharing organization to the participants;
- Publishes a written monthly statement to all participants that lists the total dollar amount of qualified needs submitted to the health care sharing organization; and
- Provides a written disclaimer on or accompanying all applications and guideline materials distributed by or on behalf of the organizations.
The new law includes a model notice with respect to the written disclaimer. SB 608 is effective Oct. 1, 2011.
SB 608
North Dakota
On April 15, 2011, HB 1438 was signed into law. The legislation states that employers cannot prohibit employees, customers or invitees from keeping legally owned firearms that are locked inside or locked to private vehicles in parking lots when employees, customers or invitees are lawfully in such areas. Employers may not terminate the employment of or otherwise discriminate against an employee for exercising the constitutional right to keep and bear arms as long as the firearm is never exhibited on company property for any reason other than lawful defensive purposes. HB 1438 is effective on Aug. 1, 2011.
HB 1438
On April 20, 2011, SB 2258 was signed into law. The legislation requires that new-hire reports submitted to the state registry indicate whether employers offer health insurance to employees. Employers that have more than 24 employees at any time must also report new hires through the North Dakota Department of Human Services’ Internet-based method. SB 2258 is effective on Jan. 1, 2012.
SB 2258
New York
The New York State Department of Taxation and Finance has revised the “Employer’s Guide to Unemployment Insurance, Wage Reporting, and Withholding Tax,” effective May 2011. The booklet includes several updates and incorporates recent legislation that requires employers to report if dependent health insurance benefits are available to any employees. This particular requirement was effective July 14, 2011.
Employer’s Guide
South Carolina
The South Carolina Department of Insurance issued Bulletin Number 2011-04 in direct response to the July 2010 Interim Final Rule for external review procedures and subsequent Technical Release 2011-02, which together provided the 16 minimum consumer protection standards that a state external review process must include. HHS intends to issue determinations regarding state external review processes by July 31, 2011.
This bulletin notifies all insurers and independent review organizations within the state that South Carolina’s current external review procedures do not meet the standards outlined under federal law. As a result, all non-grandfathered, fully insured health insurance plans issued in South Carolina must adopt new standards as outlined in the bulletin to comply with the external review requirements under PPACA.
Bulletin 2011-04
Texas
On June 17, 2011, Gov. Rick Perry signed HB 300 into law. The legislation mandates new patient privacy protections and harsher penalties for privacy violations related to electronic health records than federal law under either HIPAA or the Health Information Technology for Economic and Clinical Health Act (HITECH). Of interest for employers, the law requires covered entities (health care providers, health insurers and health clearinghouses) to create employee training, to be administered to new employees within 60 days of hire, and at least once every two years for existing employees. The training must be tailored to the company’s operations and each employee’s scope of employment as related to the maintenance and protection of protected health information (PHI).
The legislation also incorporated existing requirements under HITECH, such as requiring any business in Texas that handles PHI to provide notification to individuals in the event there is a breach of personal information. The Texas law varies from federal law under HITECH, because the Texas law applies to any business, not just covered entities, operating in Texas and handling PHI.
Since this state law is in addition to existing federal law under HIPAA and HITECH, the penalties included in the legislation for failure to comply can be assessed under both state and federal law for the same violation, in addition to existing federal penalties for unlawful disclosure of a patient’s PHI. Penalties range from $5,000 to $1.5 million per year.
The law is effective Sept. 1, 2012. Employers should complete training in advance of this deadline, as well as update any policies and procedures and Notice of Privacy Practices as soon as practicable.
HB 300
The Texas insurance commissioner released Bulletin B-0028-11, which relates to the definition of “small employer” and “large employer” for purposes of MLR reporting and rebate requirements. The objective of the bulletin is to announce that for purposes of federal MLR reporting and rebate requirements, the definitions for small and large employers will be as follows:
- Small employer: having an average of at least one but not more than 100 employees on business days during the preceding calendar year
- Large employer: having an average of at least 101 employees on business days during the preceding calendar year
Bulletin B-0028-11
Virginia
Gov. McDonnell recently signed into law HB 1928. The new law revises the process for independent external reviews of a health carrier’s adverse decision relating to covered health care benefits. PPACA requires states to adopt external review programs that meet certain requirements by July 1, 2011. HB 1928 adds requirements for external reviews consistent with the requirements set forth in PPACA. The new law also enacts a new chapter that requires a health carrier to establish an internal appeals process. HB 1928 is effective as of July 1, 2011.
In connection with HB 1928, on July 14, 2011, the Virginia Bureau of Insurance issued Administrative Letter 2011-05. The letter is directed toward all insurers, health maintenance organizations and other interested parties. The letter provides a nice summary of the new internal and external review process under HB 1928, including contact information for the bureau for any questions.
HB 1928
Administrative Letter 2011-05
On June 8, 2011, the Virginia Bureau of Insurance issued Administrative Letter 2011-04. The letter is directed toward all insurers and other interested parties, including insurance producers and employers. The letter contains summaries of certain statutes enacted or amended during the most recent session of the Virginia General Assembly. Of interest are summaries relating to the following:
- Chapter 788 (HB 1928): Revises Virginia law relating to independent external review of a health carrier’s adverse decision relating to covered health care benefits; adds requirements for external review that are consistent with PPACA.
- Chapter 823 (HB 2434): Expresses the intent of the state of Virginia to create and operate its own health benefit exchange meeting the relevant requirements of PPACA. This bill was previously covered in the May 10, 2011, edition of Compliance Corner.
- Chapter 876 (HB 2467) and Chapter 878 (SB 1062): Requires health insurers to provide coverage for the diagnosis and treatment of autism spectrum disorder in individuals ages two to six. This bill was previously covered in the May 10, 2011, edition of Compliance Corner.
- Chapter 882 (HB 1958): Brings certain inconsistent and conflicting requirements of Virginia’s health insurance laws into conformance with corresponding provisions of PPACA. This bill was previously covered in the May 24, 2011, edition of Compliance Corner.
Administrative Letter 2011-04
On July 18, 2011, the Virginia Bureau of Insurance issued Administrative Letter 2011-06. The letter is directed toward all insurance institutions in Virginia. The letter clarifies that insurance institutions may use the new federal Model Privacy to meet the requirements for compliance with the Gramm-Leach-Bliley Act set forth in Virginia’s financial information collection and disclosure practices notice requirements. The letter includes the federal Model Privacy Form, and insurance institutions may be used as a safe harbor of compliance with the Virginia Privacy Notice requirements. The letter clarifies that use of the federal Model Privacy Form is not required, and that institutions may continue to use their existing privacy notices that meet the Virginia Privacy Notice requirements.
Administrative Letter 2011-06

What is an ERISA “wrap” document, and how does it differ from a regular plan document?
ERISA requires group health plans to have a written plan document in place, and to provide a summary plan description (SPD) to plan participants upon enrollment in the plan, among other times. The written plan document is the instrument by which the plan administrator must operate the plan. The SPD, on the other hand, is the instrument by which the plan notifies the participants of the plan’s terms, such as plan eligibility, funding, contributions and benefits. While the plan document and the SPD should be consistent, they are two separate documents and are both separately required by ERISA.
ERISA places the burden of satisfying the plan document and the SPD requirements on the plan administrator, which is generally the employer. With respect to the SPD, fully insured plans may think that they can rely on the insurance carrier’s contract, policy or certificate booklet (collectively, the certificates) with the plan sponsor to satisfy the SPD requirement. However, while the carrier certificates may contain much of the information that is required to be contained in the SPD, most certificates will not likely satisfy the SPD requirement in and of itself.
The employer may contract with the carrier or a third-party administrator (TPA) to provide the SPD. However, unless the carrier or TPA has been designated as plan administrator (and even then it’s not entirely clear), the employer as plan administrator is still liable if the carrier or TPA fails to furnish an adequate SPD. While a carrier or TPA that contracts to provide SPDs and/or become “plan administrator” may be liable to the employer as a matter of contract law for failure to do so, the employer will remain liable under ERISA for the carrier or TPA failure. A plan administrator may draft an SPD by itself or engage an outside entity to assist.
Oftentimes, in conjunction with the carrier certificates, the plan administrator will use a “wrap” document, which basically means that the employer will take the insurance carrier’s certificate and add (or “wrap”) any required ERISA language (and any additional items that are needed) to the certificate.
There are two types of wrap documents. The first is called a mega-wrap document, which has two purposes. The first purpose of the mega-wrap document is to wrap the required ERISA language around a carrier’s certificate of coverage. The second purpose of the mega-wrap document is to combine or bundle many employer-sponsored plans into a single plan. The main reason that an employer would want to combine multiple plans into a single plan is that it simplifies their Form 5500 filing. If the employer is large and has several separate plans subject to filing, it has to file multiple Forms 5500. If the employer uses a mega-wrap document to combine them into one plan, it only files a single Form 5500. However, there are other considerations with using a mega-wrap document. If an employer is close to 100 participants on one or more plans, the employer may not want to combine plans into a single plan, because it may have to file a Form 5500 for a plan that would otherwise not be subject to filing.
Another consideration with using mega-wrap documents is in relation to HIPAA. Fully insured plans are exempt from many of HIPAA’s privacy and security requirements. If a plan sponsor uses a mega-wrap document to combine a fully insured plan with a self-funded plan, the sponsor would have to comply with HIPAA’s full measure of requirements for all of their plans, including the fully insured plans that would otherwise be partially exempt.
The second type of wrap document is used solely to wrap the required ERISA language around a single policy or plan. This would be used by a fully insured client that simply wants to wrap the ERISA language around a medical certificate of coverage (or dental, vision, disability, life). Carriers often include state-mandated provisions regarding coverage, but do not always include the required federal ERISA requirements. Both a wrap and a mega-wrap document may be useful, depending on whether the plan has multiple benefits it wishes to bundle.
Based on the above, while carrier contracts, policies and certificate booklets may function as the written plan document, such documents will usually not include required ERISA language and specifics about the plan itself. When this happens, adding a wrap document or mega-wrap document will be necessary for compliance with the written plan document and SPD requirements under ERISA.

ADA |
Americans with Disabilities Act |
CMS |
Centers for Medicare & Medicaid Services |
COBRA |
Consolidated Omnibus Budget Reconciliation Act |
DOL |
U.S. Department of Labor |
EBSA |
Employee Benefits Security Administration |
EEOC |
Equal Employment Opportunity Commission |
ERISA |
Employee Retirement Income Security Act |
FLSA |
Fair Labor Standards Act |
FMLA |
Family and Medical Leave Act |
FSA |
Flexible Spending Arrangement |
HHS |
U.S. Department of Health and Human Services |
HIPAA |
Health Insurance Portability and Accountability Act |
HRA |
Health Reimbursement Arrangement |
HSA |
Health Savings Account |
IRC |
Internal Revenue Code |
IRS |
Internal Revenue Service |
OTC |
Over-the-counter Item or Drug |
PPACA |
Patient Protection and Affordable Care Act (aka health care reform) |

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