Broker Compensation Disclosure Requirements

Beginning on December 27, 2021, brokers and consultants will be held to new compensation  transparency obligations under the Consolidated Appropriations Act (CAA). The CAA is a spending  and coronavirus relief package that was signed into law on December 27, 2020 and expands ERISA’s existing disclosure requirements. It broadened the definition of a “covered plan” to include group health plans (previously it only included retirement plans).

This created new requirements for brokers and consultants to disclose any direct or indirect compensation they may receive for referring services to the plan. This new disclosure requirement applies to contracts entered into, extended or renewed on Dec. 27, 2021.

The CAA requires covered service providers (CSPs) to provide plan fiduciaries with information they need to assess reasonableness of total compensation, both direct and indirect, received by the CSP, its affiliates and/or its subcontractors.

• For groups – the statute is self-effectuating and agents need to make the disclosures for agreements made with the plan after 12/27. The trigger is the agent agreement with the plan to assist the plan, not insurance contract renewal dates. Many brokers believe that this will first really begin to apply to 2d quarter renewals (even end of the 2d quarter) when the work on those renewals begins.
• The Department of Labor (DOL) has specifically clarified that the implementation date of December 27, 2021 reflects the date by which a contract was entered into regardless of whether the plan year begins after that date. Any agreements signed prior to December 27, 2021 would not fall under the requirements for disclosure even if the plan year begins on January 1, 2022.
• For the individual markets – rules need to be in place before any disclosures are required AND the disclosure obligation is on the carriers, not the agents, to disclose what is being paid to the agents.

As the government elected not to provide a sample form for disclosures by filers, you may instead find a form here that can assist in navigating the filing process. The form is only advisory but may serve as a useful tool during this process.

The DOL has additionally released a bulletin providing further guidance on excepted benefits and the definitions of "covered plan" and "covered service providers." The DOL is not expected to release further guidance. The DOL’s bulletin and press release are available online.