COVID-19 Employer Playbook

SMM/SPD Update Requirements

Material Modification ERISA requires that plan documents be updated whenever there is a material modification to the plan. A material modification is one that would be considered by an average participant to be an important change to covered benefits or other terms of the plan. As such, it is generally accepted that COVID-19 related plan changes would be considered a material modification to the plan. Thus, formal plan notification must be provided to employees. Required Notification ERISA requires that a Summary of Material Modification (SMM) be provided to employees upon a material modification. When such a change is made, a SMM is simply a short document that outlines the changes in plan coverage. Alternatively, an employer may simply update and redistribute the Summary Plan Description (SPD). Either method is fine. Timing Technically, the required timing for distribution of formal notification (SMM or updated SPD) is 210 days after the close of the plan year or within 60 days of a material reduction in coverage. Really? Yes, really. Those laws haven’t been updated since the time they were written (when the IBM Selectric typewriter was cool technology). In today’s world of easily updated documents, it is considered best practice to provide such notification significantly before those formal deadlines. Practically speaking, ASAP would be the rule of thumb in order to allow employees to avail themselves of the important COVID-19 plan enhancements. Carrier Materials Most employers today rely on a wrap-around SPD, with the formal ERISA Plan Document being comprised of the combination of important disclosure materials and carrier certificate documents (which provide coverage details). To the extent that employers rely on carrier- created coverage certificate documents as part of a wrap-around SPD, continuing to rely on carrier-created amendment documentation is appropriate for formal documentation purposes. That said, providing quick communication about pertinent coverage enhancements is an appropriate course of action as well.

Lions and Tigers and Premiums, Oh My!

Health Insurance Premiums In the early months of the COVID-19 pandemic and the early months of Shelter in Place orders (March 2020 and April 2020), a marked reduction in overall healthcare cost has been noted. This is a result of essentially all routine visits, non-urgent visits, and elective surgeries being postponed. In addition to the decline in actual medical visits, a cascading decline in diagnostic tests and other medical support services has further lowered overall healthcare expenditures. While this reduction in claims experience would generally seen as welcome relief to otherwise high healthcare costs, it is generally considered a temporary reduction, not one that is expected to be sustained post-COVID-19.

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