The importance of FSA and HRA legal documents
All ERISA plans need a plan document and summary plan description (SPD).
The Employee Retirement Income Security Act of 1974 (ERISA) regulates employer-sponsored benefits plans for the protection of employees. One of the key requirements for plans subject to ERISA, including Health Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs), is the need for legal documents. In particular, ERISA plans must have both a plan document and summary plan description (SPD).
What to include in an FSA and HRA plan document
The plan document establishes the plan and is formal proof of the plan’s existence. It outlines generally the terms and conditions of the plan. While the plan document does not need to be distributed to plan participants upon adoption or enrollment in the plan, the plan sponsor must provide a copy of the plan document to participants upon request. Once adopted, the plan should be administered in accordance with the terms of the plan document and SPD described below.
What to include in an FSA and HRA summary plan description (SPD)
While the plan document establishes the plan, the SPD is used to comply with ERISA’s disclosure requirement. The SPD communicates to participants in more detail their rights and responsibilities under the plan. In order to do so, the SPD must include specific content requirements, must be written in plain language that participant’s can easily understand and must be distributed to all plan participants upon enrollment in the plan and as changes are made over time.
Incorporating FSA plan document and SPD into Section 125 plan documents
The plan document and SPD serve two different purposes, although they can be combined into a single document. Adding to the confusion, the FSA plan document and SPD are usually incorporated into a plan sponsor’s Section 125 plan legal documents. The Section 125 plan is simply the vehicle that allows plan participants to pay premiums for certain benefits with pre-tax payroll deductions (e.g., medical, dental, vision, life, FSA, etc.). The legal documents for a plan sponsor’s Section 125 plan will include both a description of the pre-tax premium component and, if offered by the plan sponsor, the FSA plan document and SPD.
Ensuring your FSAs and HRAs meet requirements
Failing to comply with ERISA’s plan document and SPD requirements could lead to monetary penalties or participant lawsuits. As part of our FSA and HRA administration services, Forma provides customers with a customized plan document and SPD in order to assist with ERISA compliance and limit liability. Customers simply need to review these documents with their benefits counsel, adopt them as required by the company’s corporate governance rules and distribute the SPD to plan participants.
For more information on FSA and HRA requirements, <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">schedule a consultation</span> with one of our experts. We’d be happy to help you.