Additional Guidance on Summaries of Benefits and Coverage

On March 19, 2012, the Departments of Labor, Treasury, and Health and Human Services (the “Departments”) issued a new set of FAQs (the FAQs about Affordable Care Act Implementation, Part VIII) providing guidance on the requirement to furnish Summaries of Benefits and Coverage (“SBC”). These FAQs help address questions that were raised following the issuance of the final SBC regulations. (For further discussion on the final SBC regulations, see our February 2012 issue). We summarize below some of the important highlights from these FAQs.

Effective Date Not Delayed
The FAQs do not provide for any further extension of the effective date for providing SBCs. Plan sponsors must furnish SBCs to participants and beneficiaries in connection with the first open enrollment period that begins on or after September 23, 2012. For a calendar year plan (with an open enrollment period that begins on or after September 23, 2012), this will require distribution of SBCs during open enrollment at the end of 2012 for coverage beginning January 1, 2013. For disclosures to participants and beneficiaries who enroll outside of open enrollment (e.g., new hires, newly eligible employees and special enrollees), the rule is effective on the first day of the first plan year that begins on or after September 23, 2012 (i.e.,January 1, 2013 for calendar year plans). However, recognizing the short time period that plans have to comply with the SBC requirements, the FAQs provide that during the first year of applicability, no penalties will apply to those “working diligently and in good faith to provide the required SBC content in an appearance that is consistent with the final regulations.”

Different Plan Features May be Combined in One SBC
The FAQs clarify that a plan may combine certain information in one SBC. Specifically, information for different coverage tiers (e.g., self-only coverage, employee-plus-one coverage and family coverage) and information regarding cost-sharing selections (e.g., levels of deductibles, copayments and co-insurance) may be combined in one SBC, provided the SBC’s appearance is understandable. The FAQs also state that if a plan offers participants add-ons to major medical coverage such as a health flexible savings account, a health reimbursement arrangement, a health savings account or a wellness program, this information may be combined with the major medical plan’s SBC, provided the SBC’s appearance is understandable. This information is good news for plans because it reduces the number of SBCs that a plan must prepare and distribute. For example, it is now clear that a plan will not have to automatically provide one SBC per tier of coverage.

Who Must Receive the SBC
The SBC rules require plans to distribute SBCs to plan participants and beneficiaries. The FAQs elaborate on this distribution requirement, explaining that although a plan is not required to automatically provide an SBC to an individual who experiences a COBRA qualifying event, if the COBRA qualifying beneficiary actually elects COBRA continuation coverage, he or she has the same right to receive an SBC as a similarly situated non-COBRA qualifying beneficiary (e.g., during open enrollment).

When Must the SBC Be Distributed?
The SBC rules require plans to distribute SBCs at various times, including “upon application” and “upon renewal.” In the FAQs the Departments clarify how these terms (commonly used for insured products) apply to a self-funded plan. With regards to the requirement that an SBC is provided “upon application,” (e.g., during an individual’s initial enrollment in the plan) the FAQs clarify that if a plan distributes any written application materials for enrollment (i.e.,any forms or requests for information that must be completed for enrollment), the SBC must be provided as part of those materials. If the plan does not distribute written application materials for enrollment (in either paper or electronic form), the SBC must be distributed no later than the first date the participant is eligible to enroll in coverage. The FAQs also clarify the term “upon renewal,” explaining that if a plan requires participants and beneficiaries to actively elect to maintain coverage during an open season (e.g., during an open enrollment period) — or provides these individuals with the opportunity to change coverage options during an open season — the plan must provide the SBC at the same time it distributes open season materials. If the plan does not require individuals to make an affirmative election to reenroll in coverage (i.e.,the plan has “evergreen elections”), the SBC must be provided no later than 30 days prior to the first day of the new plan year.

Electronic Distribution of the SBC
The SBC rules provide that a plan may electronically distribute the SBC to participants and beneficiaries. There are two different sets of rules for electronic distribution:

  • If the participant or beneficiary is covered under the plan, then the Department of Labor’s (“DOL”) electronic disclosure safe harbor rules apply.
  • If the participant or beneficiary is eligible but not enrolled for coverage under the plan, then the SBC may be provided electronically if the following requirements are met:
    • The format must be readily accessible (such as in an html, MS Word, or pdf format).
    • The SBC must be provided in paper form free of charge upon request
    • If the SBC is provided via an Internet posting, the plan must timely notify the individual that the SBC is available on the Internet and provide the Internet address. The Plan may provide this notice in paper form (such as a postcard) or by e-mail (such as an e-card). In Question 12 of the FAQs, the Departments provide model language that a plan may use when preparing such an e-card or post card.

Importantly, the FAQs also clarify that unless the plan has knowledge of a separate address for a beneficiary, the plan may provide an SBC to the participant on behalf of the beneficiary (including by furnishing the SBC to the participant in electronic form). This guidance provides relief to plans because it will reduce the number of SBCs a plan is required to distribute. For example, if a plan chooses to electronically distribute an SBC to an employee-participant, this SBC distribution would satisfy the plan’s distribution requirement for the employee’s entire family, provided they reside at the same address and the electronic disclosure rules described above are satisfied.

Determining Responsibility for the SBC through Contract
The Departments recognize that a plan may not have all of the resources necessary to prepare or distribute the plan SBCs. Accordingly, the FAQs provide that if a plan has entered into a contract with another party who assumes responsibility for:

  • completing the SBC;
  • providing required information to complete a portion of the SBC; or
  • delivering an SBC to certain individuals,

the plan will not be subject to any enforcement action by the Departments for failing to provide a timely or complete SBC.

However, in order to avoid enforcement action, the plan must satisfy the following conditions:

  • The plan must monitor performance under the contract.
  • The plan must take corrective action as soon as practicable if it has knowledge of a violation of the SBC rules and has the information to correct it.
  • If the plan has knowledge of a violation of the SBC rules, but does not have the information to correct it, the plan must inform participants and beneficiaries of the violation and begin taking significant steps as soon as practicable to avoid future violations.

Plans should refer to the FAQs for guidance when undertaking contract negotiations with service providers who may be involved with the preparation and/or distribution of SBCs.

SBC Language Requirements
If an SBC is sent to a county where 10% of the population is literate only in Spanish, Tagalog, Chinese or Navajo, the SBC must include a prominently displayed statement in the non-English language that clearly indicates how to access the language services provided by the plan. The FAQs suggest including this statement on the page of the SBC with the “Your Rights to Continue Coverage” and “Your Grievance and Appeals Rights” sections. Sample language for the language assistance statement is available at

The FAQs also provide a link where plans will be able to find translations of the SBC template and uniform glossary in Spanish, Chinese, Tagalog, and Navajo.

FAQs Part VIII provide welcome guidance to plan sponsors who are working to comply with the technical requirements of the SBC rules. However, the Departments recognize that additional open questions remain regarding the SBC rules, and anticipate issuing further FAQs that will assist plan sponsors with meeting their SBC obligations. Please note that this article only summarizes the highlights of FAQs Part VIII. The FAQs also include detailed information regarding SBC formatting (e.g., header placement) and content (e.g., whether to include the grandfathered plan notice). We recommend that plan sponsors carefully review these FAQs with their service providers when preparing and distributing plan SBCs. If you have any questions about this recently issued SBC guidance, or would like our assistance with the implementation of the SBC rules, please contact the author of this article or the attorney with whom you normally work.