SPD vs. SBC: What’s the Difference?

 August 6 2019     Diane Cross
In an acronym heavy industry, it can be easy to confuse what documents plan sponsors are required to distribute and when. For example, both ERISA and the ACA require SPDs and SBCs, respectively, be provided to keep participants in the loop with what is happening with their welfare plans. Despite sounding so similar, ERISA’s SPDs and ACA’s SBCs are different documents that serve different purposes.

Summary Plan Description (SPD)
All group health care plans that are subject to the Employee Retirement Income Security Act (ERISA) are required to operate their plans in accordance with a written plan document and provide participants with an SPD. Meant to be an easily understood version of the plan document, the SPD informs participants of their rights and obligations under the plan. Basic information contained in the SPD includes: 

  • Plan contact information; 
  • Financing and administration details; 
  • Contact information for agent for service of legal process; 
  • Eligibility and benefits under the plan; and
  • ERISA rights and disclaimers.

SPDs must be given to participants within 120 days of a plan becoming subject to ERISA and within 90 days of enrollment for new participants. It must also be provided every five years if there have been plan modifications, or every ten if it has stayed the same. SPDs may be delivered via first class mail, hand delivery, or in some circumstances, electronically.

Contrary to common belief, the certificate of insurance (or similar document provided by the insurer) usually does not meet ERISA’s content requirements for the SPD. Often, an SPD “wrap document” is used along with the certificate of insurance to meet ERISA’s requirement. A wrap document contains all the disclosures and provisions required by ERISA that are missing from the certificate of insurance, such as the designation of the plan administrator and named fiduciary, the plan year, number, and name, as well as source of plan contributions.

Summary of Benefits and Coverage
Summary of Benefits and Coverage (SBC) is a requirement of the Affordable Care Act (ACA) and is in addition to ERISA’s SPD requirement described above. The SBC is designed to be an easily understood explanation of the benefits and coverage offered by a group health plan allowing participants to have a consistent way to compare benefits. The basic information in a SBC includes:

  • Costs, coverage, and copays;
  • Deductibles, limitations, and excluded services;
  • Coverage examples explaining how the plan works; and 
  • Rights to file a complaint. 

SBCs are distributed to participants and beneficiaries at various times: initial enrollment, during open enrollment (only the SBC of the plan in which enrolled is automatically required), within 90 days of a special enrollment, and must be provided within 7 days of a request. SBCs may be delivered in a paper or electronic form, with nuances depending on how enrollment is administered. 

While it is easy to confuse the two, there is a clear and important distinction between SPDs and SBCs (previous blog posts, The Summary Plan Description and Summary of Benefits and Coverage (SBC) – New Template in Effect, elaborate on each topic). Both are intended to be easy to understand documents provided to plan participants and beneficiaries to explain information about their plans. However, the content requirements and purpose of these documents differ. 

Importantly, employers should be mindful of both disclosure requirements as there can be penalties associated for non-compliance. For example, if the SPD is not provided within 30 days of an individual’s request, an employer can be charged up to $110 per day per failure. (And, should the Department of Labor (DOL) audit an employer’s group health plan, an SPD will likely be requested. If an employer cannot respond to the DOL’s request, it could trigger additional requests, visits, and penalties). As for failure to provide the SBC, a penalty of up to $1,156 (adjusted for inflation) can be assessed for “willfully failing” to provide the SBC timely (a failure with respect to each participant or beneficiary constitutes a separate offense). This article provides a summary overview of each requirement.  For further questions on SPDs or SBCs, please contact your HORAN representative.

This article is co-authored by Cassidy Zang and Diane Cross.