Benefits Buzz

Broker Compensation Disclosure Update

Posted on January 11th, 2022

The Consolidated Appropriations Act of 2021 included a provision that requires brokers and consultants to disclose all direct and indirect compensation they expect to receive for group health plans. The disclosure is required when compensation is expected to be $1,000 or more, and the disclosure must be made prior to any contracts entered into, renewed, or extended on or after December 27, 2021. The disclosure requirements are now in effect.

Recently, the Department of Labor (DOL) issued Field Assistance Bulletin No. 2021-03 which included some additional guidance about the new disclosure requirements. The additional guidance was limited and certainly does not answer all open questions and concerns, but it was still helpful, nonetheless.

In the Bulletin, the DOL states they do not expect to issue “comprehensive implementing regulations” regarding the new compensation disclosure requirements. As long as a broker provides a disclosure with a good faith, reasonable interpretation of the law, the DOL will consider the disclosure requirement to have been met. The DOL states that relying on previous regulations that require compensation disclosures for pension plans would be at least one way to apply a good faith, reasonable interpretation of the law. Those pension regulations can be found here and here.

The DOL indicates that they do not intend to issue a model template disclosure notice. The rationale behind that decision are the diverse compensation structures that exist in the group health marketplace. Additionally, brokers must also disclose the services that they will be providing, and the services provided may vary drastically from one broker to the next. A disclosure of the broker’s fiduciary status to the group health plan is also required (note: in almost all circumstances a broker will not act as a fiduciary to a group health plan).

The Bulletin did provide clarification about the plans that are subject to the compensation disclosure requirement, which includes, but is not limited to:

  • Fully insured and self-funded group health plans.
  •  Grandfathered and non-grandfathered group health plans.
  • Group health plans that are considered excepted benefits (e.g., dental, vision, Health FSAs).
  • HRAs (but not QSEHRAs).
  • There is no small employer exemption.

Lastly, the DOL recognizes that it may be difficult to accurately disclose compensation prior to the sale or renewal of a group health plan contract. The Bulletin confirms it is acceptable to express compensation as a monetary amount, formula, per capita charge per enrollee, or if the compensation cannot be expressed in such terms, by any other reasonable method. The DOL also takes the view that disclosures using a range may be reasonable when compensation is based on the occurrence of future events (e.g., achieving certain requirements to receive a bonus).

 

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