SPD, Meet ACA: Time to Update Written Eligibility Provisions
You’ve mastered the complex guidelines on how to identify which employees must be treated as full-time and offered health insurance coverage to avoid the Affordable Care Act (ACA) employer shared responsibility penalties. Now there is an ERISA requirement to communicate the guidelines with participants in your summary plan description (SPD).
The SPD is an easy-to-read statement describing the provisions and features of a qualified benefit plan, including eligibility. The two measurement methods, monthly and look-back, used for determining full-time employee status are an integral part of eligibility determination in the post-ACA world. If your plan modified eligibility rules to satisfy the employer mandate, then you should update the existing plan document, SPD and any other employee notices about eligibility under your plan.
The SPD should include enough detail so that an employee can determine if he or she is eligible for health coverage, specifically:
- The measurement method used (look-back or monthly)
- Which employee groups, if any, the method applies to
- If using the look-back method, the length of measurement, stability and administrative periods
- Optional: details on eligibility determinations for rehires, unpaid leave and change in employment status (e.g., part-time to full-time and full-time to part-time).
An updated SPD or a summary of material modifications (a plain language document that describes changes to an SPD) must be distributed no later than 210 days after the close of the plan year in which a material change (e.g., in eligibility) was made.
The IRS rules on employer shared responsibility and information reporting don’t require documenting the measurement method, but proper documentation could demonstrate a good-faith attempt to follow such rules and help prepare for an audit. Also, as Fisher & Phillips cautions, legal trouble may arise by leaving existing plan documents and employee manuals to define health insurance eligibility with something vague like “full-time employees are those employees who regularly work 30 or more hours per week.”
If you’re interested in communicating to employees above and beyond the SPD required content, check out Mintz Levin’s sample supplemental notice. See ACA Central for more information on the two measurement methods and employer shared responsibility.