The Consolidated Appropriations Act Introduces Broker Compensation Transparency
February 8, 2021
The recent passage of the Consolidated Appropriations Act (CAA) introduced new regulations concerning broker compensation transparency.
Currently, Section 408(b)(2) of ERISA requires any compensation paid to service providers be “reasonable.” While this generally applied to retirement plans, the CAA adds additional requirements to this section.
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 which includes the following information:
Some of the already stated parts of the amendment include:
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). It is preferred that 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, such as pharmacy benefit managers, wellness vendors, and third-party administrators.
Please note that plan fiduciaries must report brokers/consultants to the DOL if they do not comply with these requirements.
IMPORTANT Regulations for this new guidance have not been written. We do not anticipate those regulations being completed before July 2021. There may be different interpretations as the regulations are being written, so it is premature to be overly concerned as to how these impending regulations will affect your business operations.
As the process advances, the BenefitMall compliance team will be preparing tools to assist with complying with this new regulation.