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Providing SBCs to Employees

By Brian Gilmore | Published May 1, 2020

Question: What are the requirements for providing SBCs to employees?

Short Answer: The ACA sets forth specific rules governing when, what, how and to whom employers must provide SBCs.

What is the SBC?

The ACA added the Summary of Benefits and Coverage (SBC) document requirement for group health plans and insurance carriers to provide participants and beneficiaries with a short document in uniform format describing the benefits and coverage offered under the plan.

Although ERISA already required plans to provide a Summary Plan Description (SPD) requirement prior to the SBC, SPDs are typically long, complex, and difficult to use a tool to compare different plan options. The SBC is designed to address those SPD shortcomings in a separate, additional document. The SPD requirements remain unchanged by the ACA.

The SBC thereby serves two primary purposes that make it differ significantly from SPDs:

1. Short: The SBC cannot exceed four double-sided pages; and

2. Uniform: Permits easy apple-to-apples comparisons for among and between employer-sponsored group health plans and individual policies on the Exchange.

When to Provide the SBC

1. Initial Enrollment for New Hires or Newly Eligible Employees - Employers must provide as part of any written application materials distributed for enrollment.

   • If the employer does not use written application materials for enrollment, the employer must provide no later than the first date the participant is eligible.
   • The employer is not required to provide the SBC if it has already provided it upon request and there has been no change since previously provided.

2. Special Enrollment - Employers must provide to employees within 90 days from enrollment upon experiencing a HIPAA special enrollment event. Full details here: HIPAA Special Enrollment Events. - This matches the same timeframe required for SPD distribution. Full details here: Distribution and Timing Rules for SPDs and SMMs.

3. Open Enrollment - Employers must provide no later than the date it distributes written open enrollment materials.

   • If the plan has evergreen (i.e., continuing) elections, employers must provide the SBC no later than 30 days prior to the first day of the new plan year.
   • For fully insured plans not finalized before the 30-day period, employers must provide the SBC no later than seven business days after policy issuance or receipt of written confirmation.

4. Upon Request at Any Time - Employers must provide as soon as practicable, but in no event later than seven business days following receipt of the request.

What to Provide

1. Initial Enrollment for New Hires or Newly Eligible Employees - The SBC for each benefit package (i.e., plan option) offered by the plan for which the employee is eligible.

2. Special Enrollment - The SBC for each benefit package (i.e., plan option) offered by the plan for which the employee is eligible.

3. Open Enrollment - Currently Enrolled Employees: Only the new SBC for the benefit package (i.e., plan option) in which the employee is currently enrolled is required (SBCs for the other plan options must still be available upon request). - Not Currently Enrolled Employees: The SBC for each benefit package (i.e., plan option) offered by the plan for which the employee is eligible.

4. Upon Request at Any Time - The SBC for each benefit package (i.e., plan option) offered by the plan for which the employee is eligible.

How to Provide: Where Employer Has Online Enrollment

The SBC rules add special new electronic disclosure safe harbors that apply only to distribution of the SBC:

1. Online Enrollment
Where the employer has online enrollment, the employer may distribute the SBC electronically in connection with the online enrollment to any employee. This special expanded electronic disclosure safe harbor for SBCs applies only for employees enrolling online (initial enrollment or open enrollment) where the SBCs are made available to the employee as part of the employee’s online enrollment process.

2. Online Requests
Employers may also distribute the SBC electronically in response to an online request for the SBC from an employee or dependent.

The SBC must always be available in paper form free of charge upon request.

How to Provide: Where Employer Does Not Have Online Enrollment

Where the employer does not have an online enrollment process (or for groups of employees that do not enroll through the online enrollment system) more restrictive SBC electronic disclosure rules apply:

3. Covered Employees

For covered employees, the standard ERISA electronic disclosure rules apply.

The standard electronic disclosure safe harbor generally requires:

1. The employee has work-related computer access that is integral to his or her job duties (e.g., employee works at a desk with a computer); or
2. The employee’s affirmative electronic consent to electronic disclosure (i.e., opt-in to electronic distribution).

Full details here: ERISA Electronic Disclosure Rules.

4. Eligible But Not Enrolled Employees

For employees who are eligible but have not enrolled in the plan, the employer may distribute the SBC electronically provided:

1. The format is readily accessible; and
2. If the SBC is provided on the internet, the employer must timely notify the employee in paper form (e.g., a postcard) or by email that the documents are available on the internet, including the internet address and notice that SBCs are available in paper form upon request.

The SBC must always be available in paper form free of charge upon request.

Who Must Receive the SBC

Unlike the rules that apply to SPD and SMM distributions, the SBC rules provide that both employees and dependents have the right to receive SBCs.

Major Carve Out: There is no requirement to separately provide SBCs to dependents if the dependent’s last known address is the same as the employee.

This means that if a dependents’ last known address is different from the employee’s last known address, the employer must provide separate SBCs to the dependent at the dependent’s address.

Potential Penalties

An employer that willfully fails to provide SBCs in accordance with the SBC rules is subject to a fine of up to $1,176 per failure. A failure with respect to each employee or dependent constitutes a separate offense. For example, the employer could be liable for a penalty of up to $4,704 for failure to provide SBCs to a family of four.

Good Faith Enforcement Safe Harbor: The Tri-Agencies (DOL/IRS/HHS) have stated that they “will not impose penalties on plans and issuers that are working diligently and in good faith to provide the required SBC content in an appearance that is consistent with the [SBC rules].” In May 2014, the Tri-Agencies stated that this good faith enforcement safe harbor from potential penalties applies “until further guidance is issued.” No further guidance has overturned the safe harbor.

Reminder: New SBC in 2021

The DOL has posted its revised SBC and associated materials for use starting with the open enrollment period for plan years beginning on or after January 1, 2021.

The new SBC templates and materials are available here: DOL SBC Templates

Regulations

29 CFR §2590.715-2715(e):
(e) Failure to provide.
Failure to provide. A group health plan that willfully fails to provide information under this section to a participant or beneficiary is subject to a fine of not more than $1,000 (adjusted for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended) for each such failure. A failure with respect to each participant or beneficiary constitutes a separate offense for purposes of this paragraph (e).

85 Fed. Reg. 2292,2301 (Jan. 15, 2020):
https://www.govinfo.gov/content/pkg/FR-2020-01-15/pdf/2020-00486.pdf

Tri-Agency ACA FAQ Part IX:
https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-ix.pdf