Release 7/27/2016

DirectPath Encourages the Department of Labor to Modernize Summary Plan Descriptions

DirectPath, the industry leader in employee health care engagement and compliance, today announced that it has responded to the Department of Labor’s (DOL) request for comments regarding the Summary Plan Description (SPD) Requirements under the Employee Retirement Income Security Act (ERISA). In itscomment letter, DirectPath strongly urges the DOL to facilitate electronic distribution of plan documents, suggesting that people who prefer paper form opt into receiving them that way. DirectPath also advocates for the DOL to mandate improvements around the readability of SPDs to help deepen consumers’ understanding of their health care coverage.

Encouraging Electronic Distribution 

The SPD distribution guidelines were developed 15 years ago and do not align with the current widespread use of the internet by consumers. According to a report from the Pew Research Center, more than 89 percent of American adults today are internet users, up from only 60 percent when the SPD regulations were initially released in 2002. Currently, electronic distribution of SPDs is only permitted where employees use computers as an integral part of their job duties, or have affirmatively opted in to receive plan documents electronically. Reversing this strategy and requiring employees to actively elect to receiveprinted plan documents will provide environmental benefits, reduce print and postage costs and increase information accessibility for consumers. It would also be consistent with other federal regulations regarding electronic distribution.

Making Readability Enhancements  

The Affordable Care Acts Summary of Benefits and Coverage (SBC) is a good model to follow for the SPDs. The purpose of the SBC is to provide clear, concise information for consumers to compare medical plans as they make decisions about their plan choice. Even with the advent of the SBC, the SPD remains the primary source of information for workers who participate in an employment-based plan. The statutory authority underlying the SPD directs employers to provide an SPD that is written to be understood by the average plan participant, is accurate and comprehensive and reasonably apprises participants and beneficiaries of their rights and obligations under the plan. Unfortunately, this guideline is often ignored by employers looking to “check the box” on compliance. A study by the Employee Benefit Research Institute (EBRI) found that important information contained in many SPDs is written at a reading level that may be too high for the average plan participant.

Fully rewriting each SPD to meet current readability standards is often impractical, but there are simple edits employers can make to facilitate easy understanding, from small word changes (“before” instead of “prior to,” “if” instead of “in the event of,” “when” instead of “at the time,” etc.), writing in the first person and eliminating extra words, the use of more white space, call-out boxes and headings to provide visual interest. Instituting and enforcing a minimum readability standard will help ensure that plan participants adequately understand their coverage.

“Summary Plan Descriptions are critical tools for helping employees understand the parameters of their benefits. Unfortunately, given their current format and distribution form, many plan participants are not reading or comprehending the content,” said Kim Buckey, vice president of client services for DirectPath. “This is a missed opportunity. That is why DirectPath has taken steps to make its point of view and suggestions known to the Department of Labor. We strongly hope the Department makes adjustments to the regulation with the best interest of employees everywhere in mind.”

To access the comment letter, please follow this link.

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