Broker Compensation Transparency Is Here—Are You Compliant?
December 21, 2021
The Consolidated Appropriations Act (CAA) was passed in December, 2021. Within that act is a transparency provision requiring benefits brokers and consultants to disclose compensation to their clients, effective December 27, 2021. The era of broker compensation transparency is now here. Are you compliant?
A summary of the CAA's transparency provision reveals that brokers and consultants must inform group health insurance clients of the compensation they expect to receive. They must also disclose the services they provide in exchange for that compensation. Total compensation in excess of $1,000 must be disclosed to clients.
The compensation transparency mandate was not too surprising when we first learned of the CAA. A less strict form of transparency has been in place since 2012, thanks to ERISA requirements. The new law simply expands those requirements beyond retirement plans.
Under the CAA, consultants and brokers must disclose both direct and indirect compensation exceeding $1,000 to their respective clients with group health insurance plans. All compensation must be disclosed, except for non-monetary compensation valued at less than $250. Disclosures must include:
In addition, compensation disclosure is governed by time limits. Disclosures are made directly to clients themselves rather than the Department of Labor.
The CAA's primary goal is to protect clients and their employees against broker actions that might otherwise not be above board.
You are a broker of integrity. Nonetheless, the mandate applies to you too. Our advice is that you do not take any chances. Study up on the law so that you fully understand what is required. Then submit your disclosures as directed.
Transparency requirements are in effect as of December 27, 2021, and to help our brokers meet their obligations, we have developed an editable Broker Compensation Reporting Form. Feel free to download it for your use (the file must be saved first to edit). Just fill in the dollar amounts and descriptions, save the template under a different name, and send it off to your clients.
Note that you must provide the disclosure to your clients prior to the start date of any new plan. You must also provide it prior to the date of a plan extension or renewal.
To learn more, listen to BenefitMall’s Compliance Café podcast episode, “Broker Compensation Transparency” where Misty Baker, Director of Compliance & Government Affairs and David Mordo, Senior Compliance Analyst discuss reporting and compensation.