Jan 06, 2022
The U.S. Department of Labor announced a temporary enforcement policy for those who provide brokerage services and consulting to ERISA group health plans. It applies to the new fee disclosure requirements beginning on December 27, 2021.
The Field Assistance Bulletin FAB 2021-03 makes it clear that DOL understands that people are doing their best to comply with new requirements. The department will focus enforcement on those who don’t act in good faith with a reasonable interpretation of the statute.
A Little Background
Under the Consolidated Appropriations Act, 2021, those who provide brokerage services or consulting to ERISA-covered group health plans must disclose the compensation they expect to be paid in connection with their services to the plan. Similar disclosure requirements already apply to pension plan service providers.
What Kinds of Plans Does it Apply to?
The bulletin makes it clear that the new law applies to insured and self-insured and large and small group health plans including grandfathered plans. It also applies to plans that provide only excepted benefits like limited-scope dental and vision plans. Qualified Small Employer HRAs are excluded from the group health plan definition and thus are not covered.
Who Is a Covered Service Provider?
The bulletin also makes it clear that the definition of “covered service providers” is not limited to those who are licensed as, or who market themselves as brokers or consultants. Service providers who reasonably expect to receive indirect compensation from third parties in connection with advice, recommendations, or referrals regarding any of the services described in the statute as brokerage services or consulting services can be covered service providers who are required to disclose their compensation.
What If You Don’t Know What Your Expected Compensation Will Be?
The bulletin also addresses the issue that a service provider does not always know what their compensation will be when they enter into a contract or arrangement with a health plan. The service provider can give a monetary amount, formula, or a per capita charge for each enrollee. If they cannot reasonably express the compensation or cost in such terms, they can include a disclosure that additional compensation may be earned, but may not be calculated at the time of the contract. The disclosure should include a description of the circumstances under which the additional compensation may be earned and a reasonable and good faith estimate if the covered service provider cannot otherwise readily describe compensation or cost. They need to explain the methodology and assumptions used to prepare the estimate. The Department says to be more specific, rather than less specific on compensation information.
What Contract Dates Does It Apply to?
The requirements apply to covered service providers and covered plans beginning on December 27, 2021. The date on which an agent or broker and a plan fiduciary enter into a contract or arrangement will be considered the date the contract or arrangement was executed. For example, if a plan fiduciary enters into a new service contract with an agent on December 15, 2021, for the plan year beginning on January 1, 2022, it will not be subject to the new compensation disclosure requirements. But the disclosure requirements would apply if the contract is renewed or extended or a new contract is executed on or after December 27, 2021.
What About BORs?
Suppose an agent or broker who enters into a contract or arrangement with a plan fiduciary through a broker of record (BOR) agreement. The date that counts is when the BOR agreement is submitted to the insurance carrier or when the group application is signed for insurance coverage for the following plan year. However, the submission or signature must be done in the ordinary course of business and not done to avoid ERISA disclosure obligations.
