While ERISA does not apply to governmental plans, there are compelling reasons for schools, municipalities, counties, sheriff’s departments and other governmental employers to have a formal plan document. Here’s why:
1. Clarity is Kindness: A well-crafted plan document ensures clarity and consistency among various benefits-related documents. Benefit summaries and booklets produced by carriers and TPAs tend to be generic, leaving gaping holes in the terms and conditions of benefits—particularly things that the employer controls like eligibility, leave, continuation coverage, retiree benefits, etc. Without a plan document, whatever employees think they were told becomes the rule in their minds, and there’s nothing to tell them (or their plaintiff’s lawyers) any different. A plan document, though, will coordinate the various benefits documents and clearly outline the terms and conditions of benefits, reducing the risk of misinterpretation or disputes.
2. Legal Safeguard: A well-drafted plan document is a first line of defense in resolving disputes with employees quickly—more often in the employer’s favor. It shields the organization from unexpected legal liabilities that can arise from misinterpretations or personnel changes.
3. Efficient Administration: With a formal plan document in place, administering welfare benefits becomes more efficient. It provides a clear roadmap for handling benefits-related matters, making life easier for HR and administrative teams.
4. Platform for Future-Proofing: As the organization evolves, so should the benefits program. A plan document can be updated to adapt to changing needs and regulations, ensuring that benefits remain compliant and aligned with risk management goals.
5. Keep Funds in the HR Budget: DOL has rules requiring that things like MLR rebates be distributed pro rata to employees, but those rules don’t apply to governmental plans. Nevertheless, a good plan document will provide the organization’s official, written policy that such funds are employer—not employee—property. (And this being a benefits-related expense, there’s a good argument it should stay in the HR budget. 😉 )
Niche employee benefits law firm LeFevre Law PC and its compliance services arm, ERISAfire, specialize in helping governmental entities create customized plan documents for their welfare benefits programs to protect the organization and provide peace of mind. Contact the firm’s managing attorney, David LeFevre, at firstname.lastname@example.org for a proposal.