What’s in Your Rule Book? A Common Sense Approach to Plan Documentation.

BENEFITS LAWJOURNAL
VOL. 28, NO. 1 SPRING 2015
What’s in Your Rule Book?
A Common Sense Approach
to Plan Documentation
Karen R. McLeese
Karen R. McLeese is Vice President of Employee Benefit Regulatory
Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ,
Inc. She serves as in-house counsel, with particular emphasis on
monitoring and interpreting state and federal employee benefits law.
Ms. McLeese is based in the Leawood, Kansas, CBIZ office.
Two recent eligibility opportunities, one created as a result of a US
Supreme Court decision and the other enacted by law, are a wake-up
call for plan sponsors of welfare and pension benefit plans to review
and update, as appropriate, the terms of their plans. As is well known by
now, the Supreme Court’s ruling in United States v. Windsor1
extended
federal tax and benefit rights to couples in a same-sex marriage. In
addition, the Affordable Care Act (ACA) incents employers to extend
eligibility to their workforce or risk an excise tax penalty.2
Plan sponsors
should review their plan documents in light of these recent develop-
ments to ensure that the plan language is current and compliant.
As background, welfare benefit plans and pension benefit plans
are subject to a plan documentation requirement,3
as well as report-
ing and disclosure requirements contained in Title I of the Employee
Retirement Income Security Act of 1974 (ERISA)4
and the Internal
Revenue Code. The reporting and disclosure requirements of ERISA
include a written plan document, a summary plan description, a
Federal Beneﬁts Developments

BENEFITS LAW JOURNAL 2 VOL. 28, NO. 1, SPRING 2015
summary of material modification, an annual financial report (Form
5500), and a summary annual report.5
Qualified pension benefit
plans are subject to additional disclosure and reporting requirements
enforced by the Internal Revenue Service (IRS).
ERISA defines a welfare benefit plan or pension benefit plan “as any
plan, fund or program…established or maintained by an employer,
an employee organization, or both.”6
Further defined, a welfare ben-
efit plan provides, through the purchase of insurance or otherwise,
medical, surgical, or hospital care benefits or benefits in the event
of sickness, accident, death, or unemployment, vacation benefits,
apprenticeship or other training programs, day care centers, scholar-
ship funds, and prepaid legal services. A pension benefit plan provides
retirement income to employees, or results in a deferral of income
by employees for periods extending to the termination of covered
employment or beyond, regardless of the method of calculating the
contributions made to the plan, the method of calculating the benefits
under the plan, or the method of distributing benefits from the plan.
Plans exempt from ERISA include government plans sponsored by
a federal, state, or local government7
and certain church plans spon-
sored primarily for church employees, unless the church elects to be
covered by ERISA.8
Written Plan Document Requirement
All plans subject to ERISA must be established and maintained pur-
suant to a written plan document that describes the benefits provided
under the plan, names the individual(s) responsible for the operation
of the plan, and outlines the arrangements for funding and amending
the plan.9
The purpose of the plan document is to set forth the rules
and requirements governing the plan. The plan fiduciary is obligated
to follow the terms and conditions of the plan, as long as the plan is
compliant with the law.
ERISA does not specifically define what should be included in a plan
document. For retirement plans, the IRS offers a determination letter
approval-type process.10
Although it is not mandatory to use this pro-
cess, receiving a favorable determination letter would provide the plan
sponsor with a level of assurance that its plan terms are acceptable.
Equally important, though, is that the plan be operated in a manner con-
sistent with the law. There is no similar approval process by a regulatory
agency available for welfare benefit plans.
For both types of plans, the following are elements that would be
prudent to include in a plan document:
(1) Name of the plan fiduciary(ies)
(2) Policies and procedures relating to plan administration

(3) Funding requirements
(4) A description of how benefit payments will be made
(5) Claims and appeals procedures
(6) Plan amendment and termination authority and procedures
(7) Method for distribution of plan assets upon plan termination
(8) A statement that plan assets can be used to pay reasonable
costs of plan administration
The Windsor Effect
Both welfare and pension benefit plans also must include informa-
tion relating to plan eligibility and conditions for participation. For
benefit plan purposes, the definition of spouse depends on the type
of benefit.
ERISA does not define spouse for welfare benefit plan purposes.
The definition included in a plan document may be limited, for
example, to opposite sex spouses only. However, if a health plan is
insured, state insurance law may require spouse to include both same-
and opposite-sex spouses. If the plan is self-funded and spouse is to
be limited to opposite-sex spouses, caution should be exercised to
ensure no violation of any federal, state, or local jurisdiction’s equal
protection laws.
With regard to qualified pension and retirement plans, a same-
sex spouse is entitled to all of the benefits afforded an opposite-sex
spouse. Guidance provided by the IRS11
affirms that a legally married
same-sex spouse must be treated as a spouse for all qualified pension
and retirement benefit plan purposes, including the following:
• As a named beneficiary unless the spouse consents to
another beneficiary;
• If a retirement plan provides a qualified joint and survivor
annuity or a qualified preretirement survivor annuity, the
same-sex spouse would be entitled to these benefits;
• Minimum distribution and rollover rules;
• Withdrawals, loans, and hardship distributions;
• Alternative payee rights for distributions under a qualified
domestic relations order; and
• Family attribution and other ownership rules applicable to
retirement plans.

ACA’s Employer Shared Responsibility Effect
Plan eligibility provisions, as well as other components of the
plan document, also should be reviewed and amended, as appro-
priate, in light of the ACA. Of particular note, the ACA, although
not mandating coverage, does put certain employers employing 50
or more full-time employees, plus full-time equivalent employees,
at risk of a significant excise tax if adequate health coverage at an
affordable rate is not offered to employees working 30 or more
hours per week.12
Employers wishing to avoid the risk of penalties by making
health coverage available to the requisite group of employees will
want to review and update, as appropriate, the eligibility language
in the health plan. Due to the complexity of determining whether
an individual is full-time as defined by the ACA, the law allows but
does not require the employer to use a look-back period over which
time an individual’s status as full or not full-time is determined
for a corresponding stability period. If the employer intends to tie
health plan eligibility to this methodology of determining full-time
status, the plan document and related policies and procedures must
describe it.
Additional Reporting and Disclosure Requirements
Both welfare and pension benefit plans subject to ERISA also are
subject to additional reporting and disclosure requirements.13
Failure
to comply with these reporting and disclosure requirements can carry
substantial fines for each day of noncompliance. If the terms of the
plan are changed, the corresponding information contained in the
summary plan description (SPD) must likewise be modified, and
then distributed to plan participants either through re-issuance of the
SPD or provided by a summary of material modification (SMM), as
described later.
The SPD contains a summary of the provisions of the plan, including
details about eligibility, benefits, plan operations, funding, claims pro-
cedures, and a statement of ERISA rights. The initial SPD must be dis-
tributed to participants and beneficiaries within 120 days of the date the
plan becomes subject to ERISA’s disclosure requirements. Subsequent
to the initial distribution, an SPD reflecting plan changes must be dis-
tributed every five years (every 10 years if no changes are made to
the plan). The SPD must be distributed by the 210th day following the
close of the relevant plan year to which the SPD applies, unless there
is a material reduction in benefits. New participants must be provided
an SPD within 90 days of becoming a participant in the plan.
Changes made to the plan that affect the information contained
in the SPD or materially affect the plan could be communicated to

plan participants by providing an SMM. The SMM must be distributed
within 210 days of the close of the plan year in which the change
has been adopted. However, for health plans, if a plan modification
would result in a material reduction of coverage, benefits, or services
under the plan, then participants must be given an SMM describing
the change within 60 days of adopting the change. In the alternative,
a plan sponsor can provide an SMM every 90 days.
Conclusion
The evolution in eligibility standards offers a good opportunity
to review the entire plan and related documents to ensure that
all of the rules are accurately reflected. An employer would be in
a much better position for “Game On” when the rules are clearly
communicated.
Resources and Checklists
IRS
• Web page: Retirement Plan Reporting and Disclosure: http://
www.irs.gov/Retirement-Plans/Retirement-Plan-Reporting-
and-Disclosure, last accessed March 7, 2015.
• 401(k) Resource Guide and Fix-it Guide: http://www.irs.
gov/Retirement-Plans/401(k)-Resource-Guide, last accessed
March 7, 2015.
Department of Labor
• Reporting and Disclosure Guide for Employee Benefit
Plans: http://www.dol.gov/ebsa/pdf/rdguide.pdf, last accessed
March 7, 2015.
• Compliance Assistance for Health Plans and Retirement
Plans: http://www.dol.gov/ebsa/compliance_assistance.html,
last accessed March 7, 2015.
Notes
1. United States v. Windsor, 570 U.S. ___, 133 S. Ct. 2675 (2013).
2. Code § 4980H(c)(2)(A); Treas. Reg. § 54.4980H-1(a)(4).
3. ERISA Section 402 [29 USC § 1102] .
4. ERISA Section 101 [29 USC § 1021]; ERISA Section 104 [29 USC § 1024]; 29 CFR Part
2520—Rules and Regulations for Reporting and Disclosure.
5. Id.
6. ERISA Section 3 [29 USC § 1002].
7. ERISA § 4(b)(1).

8. ERISA § 4(b)(2).
9. ERISA Section 402 [29 USC § 1102].
10. IRS Form 5300, Application for Determination for Employee Benefit Plan.
11. Revenue Ruling 2013-17, 2013-38 IRB 201 (published in the Internal Revenue
Bulletin on September 16, 2013) to qualified retirement plans; Notice 2014-19,
2014-17 IRB 979; Application of the Windsor Decision and Post-Windsor Published
Guidance to Qualified Retirement Plans FAQs (found at: http://www.irs.gov/
Retirement-Plans/Application-of-the-Windsor-Decision-and-Post-Windsor-Published-
Guidance-to-Qualified-Retirement-Plans-FAQs, last accessed March 7, 2015).
12. Code § 4980H; Treas. Reg. §§ 54.4980H-1 through 54.4980H-6; Questions and
Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act
(found at: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-
on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act, last
accessed March 7, 2015).
13. ERISA Section 101 [29 USC § 1021]; ERISA Section 104 [29 USC § 1024]; DOL Reg.
§§ 2520.104b-1 through 2520.104b-4.
Copyright © 2015 CCH Incorporated. All Rights Reserved.
Reprinted from Benefits Law Journal, Spring 2015, Volume 28,
Number 1, pages 53–57, with permission from Wolters Kluwer,
New York, NY, 1-800-638-8437,
www.wklawbusiness.com

What’s in Your Rule Book? A Common Sense Approach to Plan Documentation.

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What’s in Your Rule Book? A Common Sense Approach to Plan Documentation.