QUESTION: Our company sponsors a self-insured major medical plan subject to ERISA. We are considering amending our plan midyear to increase the amount of the deductible, with no other changes in the plan terms. Are we required to update our SBC for this change or otherwise provide notice?
ANSWER: Yes, increasing the deductible under your plan would constitute a “material modification” that would trigger a notice requirement. A “notice of material modification” of a summary of benefits and coverage (SBC) must be provided if a plan makes a material modification in the plan terms affecting the content of an SBC. A material modification includes any modification to the coverage offered under a plan—an enhancement or reduction—that would be considered by an average plan participant to be an important change in covered benefits or other terms of coverage under the plan. Since the deductible is described on page one of the SBC, and the average participant would consider a change in the deductible amount to be important, an increase in the deductible would require a notice of material modification or, alternatively, an updated SBC.
This notice must be provided no later than 60 days prior to the date on which such change will become effective, if it occurs mid-plan year and is not reflected in the most recent SBC that was provided. Note that this notice is in advance of the timing for providing a summary of material modifications (SMM) of a summary plan description (SPD)—generally, not later than 210 days after the close of the plan year in which the modification or change was adopted, or, in the case of a material reduction in covered services or benefits, not later than 60 days after the date of adoption of the modification or change. In situations where a complete SBC notice of material modification is provided in a timely matter, a plan will also satisfy the requirement to provide an SMM.
For more information, see EBIA’s Health Care Reform manual at Section XVI.H (“Updating the SBC: Notice of Material Modification”), EBIA’s ERISA Compliance manual at Section XXIV (“Summary Plan Descriptions & Summaries of Material Modifications”), and EBIA’s Self-Insured Health Plan manual at Section XXVIII.C (“Summary of Benefits and Coverage (SBC)”).
Contributing Editors: EBIA Staff.