Broker Compensation Transparency Guidance
June 4, 2021
A few months back we advised about the recent passage of the Consolidated Appropriations Act (CAA), which introduced some new guidance regarding Broker Compensation Transparency.
While we still await further guidance as to how this will be implemented and additional details as to definitions, dates, and the entities the guidance applies to, we wanted to briefly recap what we already know.
Effective December 27, 2021, brokers and consultants of ERISA covered group health plans, regardless of size, will be required to execute a written contract with a responsible plan fiduciary that includes the following information:
While this list may appear daunting on the surface, many of you already have a contractual agreement in place with your clients. The requirements above, in those situations, simply specify the type of information that must be discussed and the circumstances under which the disclosure must occur.
The requirements will apply to group health plans and products, including the following:
We also must pay attention to some of the already stated parts of the amendment, such as:
These new rules apply only when the broker or consultant expects to receive at least $1,000 in direct or indirect compensation, whether paid to the broker, an affiliate, or subcontractor. The disclosure should occur well in advance of either the contract date or the renewal date. For the purposes of this new regulation, the definition of a broker or consultant is broad and includes parties who are not considered traditional brokers/consultants.
For sales and services where the compensation is based on commissions, we await guidance on whether the insurance carriers will produce a template that brokers and consultants can use to properly disclose compensation.
Additionally, fiduciaries must report brokers/consultants to the DOL if they do not comply with these requirements.
We anticipate further guidance to be available sometime during the summer. With so many potential interpretations of what we already know, it is premature at this point to be overly concerned as to how these eventual regulations will affect your business operations.
As the process advances, the BenefitMall compliance team will be preparing tools to assist our broker partners to comply with the new regulation.