DOL Brokers and Consultants Compensation Disclosure Notice

In Field Assistance Bulletin 2021-03, the Department of Labor (the “Department”) announced a Temporary Enforcement Policy relating to the rules enacted in Division BB of the Consolidated Appropriations Act, 2021 (the “Act”) requiring the disclosure of indirect compensation paid to brokers and consultants who advise group health insurance plans. (We covered these rules in a previous article.) This article summarizes the main features of the new guide.


The BB division of the law generally deals with surprise medical billing and health plan transparency. Section 202 of Section BB (the “Provision”) establishes the rules governing the disclosure of direct and indirect compensation paid to brokers and consultants who advise group health plans. The provision applies to contracts or agreements executed or entered into on or after December 27, 2021. More specifically, the provision amends the prohibited transactions exemption provisions of Article 408 (b) (2) of ERISA which govern service provider agreements with ERISA plans. The changes require that persons providing “brokerage services” or “advice” to group health plans covered by ERISA disclose detailed information to plan trustees about the compensation that providers expect to receive in connection with the plan. their services to the plan.

The Act’s broker and consultant compensation rules are modeled after similar disclosure requirements that apply to pension plan service providers since 2012. The Field Assistance Bulletin follows and cites the pension plan disclosure rules. while providing transitional flexibility for persons and entities subject to the rules to act reasonably. and in good faith. The 2021-03 Field Assistance Bulletin is organized as a series of questions and answers that, according to the Ministry, “are designed to explain the Ministry’s perspective on what constitutes a reasonable interpretation and good faith of the law regarding several key issues that had been raised by stakeholders.

Highlights of the 2021-03 Field Assistance Bulletin

  • Noting that the disclosure requirements added by the Act are essentially similar to the Department’s pension disclosure rules, the Department indicates that it “would consider it a good faith and reasonable step for a group health plan service provider to take take into account the Department’s directives on its regulations for pension plans.

The pension disclosure rules apply to covered service providers. A “covered service provider” is a service provider who expects to receive at least $ 1,000 in direct or indirect compensation as part of the service engagement. The term includes investment advisers, registrars, brokers and consultants, among others. A Covered Service Provider who provides record keeping services must also disclose any direct and indirect compensation that an Affiliate or Subcontractor expects to receive in connection with such services. So, the retirement rules are similar to the provision. According to the Ministry, “much of the terminology and many requirements [ERISA] Section 408 (b) (2) (B) as added by CAA and the Ministry’s Pension Disclosure Regulation are identical, so the Ministry’s explanations of this terminology and requirements may be useful when analyzing new provisions. The consequences of this approach will be particularly important in determining whether the compensation paid to a broker or consultant is “indirect” (a topic we plan to discuss in a future post).

Based on what appears to be a straightforward reading of the definition of what constitutes a “group health plan” under ERISA, the ministry concludes that the term includes both insured group health plans and self-insured, including acquired health plans. However, “because Section 733 (a) (1) of ERISA expressly excludes qualified small employer health reimbursement arrangements from the definition of group health insurance plan”, these arrangements are not applicable. not subject to disclosure rules.

  • Plans that provide “excluded benefits”, such as limited scope dental and vision benefits, are subject to the disclosure rules.

While noting that some benefits are not subject to certain ERISA Part 7 requirements if offered separately, including limited scope dental or visual benefits, the ministry nevertheless expresses the view that dental plans and Limited Scope Visuals, although exempt from certain requirements of ERISA Part 7, are “covered plans” subject to the requirements of Section 408 (b) (2) (B) of ERISA. The ministry goes on to say, correctly, that the definition of a “plan covered in Section 408 (b) (2) (B) of ERISA refers to Section 733 (a) of the ERISA. ERISA, without any indication that the definition is further limited by ERISA. section 733 (c) (2). “

  • Whether or how a broker or consultant is licensed, or how services are marketed, is irrelevant. The terms “broker” and “consultant” are defined in relation to a list of sub-services which constitute the object of brokerage or advisory services with respect to the categories of advice.

Service providers have considerable discretion over how they describe and market their services and label their rates. It is not material that a service provider does not qualify as a “consultant” or charge a “consulting” fee.

The ministry treats bundled services separately, stating:

[I]n In some cases, “bundled” services are provided to a group health insurance plan for a single fee, with no separate charge being disclosed for a specific service. The nature of the compensation received by a service provider is also not a basis for defining or differentiating brokerage services from consulting. Pending further guidance, the Department’s enforcement policy will apply to parties who reasonably and in good faith determine their status as a covered service provider under section 408 (b) (2) (B).

Recognizing that providers of covered services may be unable to accurately indicate the amount of compensation they expect to receive for the services, the Department strives to provide flexibility. The law itself (Article 408 (b) (2) (B) (ii) (II) of ERISA) states that the required description of compensation or cost:

“[M]may be expressed as a monetary amount, formula or per capita charge for each registrant or, if the remuneration or cost cannot reasonably be expressed in these terms, by any other reasonable method, including including a disclosure that additional compensation may be earned but may not be calculated at the time of contract if such disclosure includes a description of the circumstances under which additional compensation may be earned and a reasonable and good faith estimate if the provider Covered services cannot otherwise easily describe the compensation or cost and explains the methodology and assumptions used to prepare this estimate.

Therefore, pending further guidance, disclosure of compensation within ranges may be reasonable in circumstances where the occurrence of future events or other features of the service agreement could cause compensation to vary. service provider within a projected range. However, the Department cautions against the fact that these ranges must be reasonable in the circumstances surrounding the service and compensation agreement in question. It also expresses a preference for more specific, rather than less specific, information whenever it can be provided without “undue burden”.

According to the statute, “[n]o a contract or arrangement for services between a Covered Plan and a Covered Service Provider, and no extension or renewal of such a contract or arrangement, is reasonable ”unless the disclosure requirements of Section 408 ( b) (2) (B) are not complied with. No contract executed before December 27, 2021 is subject to the Disposition. Thus, in practice, renewals on January 1, 2022 should not be subject to the rule.

The Department separately adopts a clarification that applies to “official broker” (“BOR”) agreements under which the date of the contract or arrangement will be considered to be concluded is the date closest to the date on which the The BOR agreement is submitted to the insurer or the date on which a collective request is signed for insurance coverage for the following plan year “provided that the submission or signature is made in the ordinary course and not for avoid disclosure obligations ”.

The Department specifies that the new compensation disclosure rules apply to group health insurance plans, regardless of their size. There is no exception for small plans covering less than 100 participants. A small group health plan is subject to disclosure requirements even though the plan is exempt from filing an annual report on Form 5500.

Noting that the “CAA does not oblige the Ministry to issue regulations” under the provision, the Ministry does not plan to do so (“[T]The ministry does not believe that a full implementing regulation is necessary. “). The Department intends, however, to continue to monitor stakeholder comments to assess whether, and if so, what additional guidance may be required.

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