New Compensation Disclosure Requirements for Group Health Plan Service Providers

The Consolidated Appropriations Act (CAA), signed into law December 27, 2020, contained a provision that will soon require covered service providers—including agents, brokers and consultants—to disclose to their group and individual health plan clients the compensation they expect to receive and describe the services they provide in return. The disclosures are intended to assist plan fiduciaries in determining whether the compensation earned in connection with the services is reasonable.

Overview of Disclosure Requirements

The CAA’s disclosure requirements apply to service providers who:

• Enter into a contract to provide services to an ERISA group health plan of any size; and
• Reasonably expect to receive at least $1,000 in “direct” or “indirect” compensation related to brokerage or consulting services provided to the plan(s).

Effective December 27, 2021, service providers must provide the disclosures “reasonably in advance” of the date on which the contract or arrangement with the service provider is entered into, extended or renewed. The statement must include the following information:

• A description of the services to be provided;
• If applicable, a statement that the service provider plans to offer fiduciary services to the plan;
• A description of all direct, indirect, and contingent compensation the service provider expects to receive; and
• A description of any compensation the service provider expects to receive in connection with the contract’s termination.

For purposes of these disclosures, “compensation” is defined as anything of monetary value, but it excludes non-monetary compensation with an aggregate value of $250 received during the term of the agreement. Compensation may be described using monetary amounts, formulas, or per capita charges. However, if the compensation cannot reasonably be described in those terms, it may be expressed by any other reasonable method, such as historical ranges or estimates, or a statement that additional compensation may be earned but may not be calculated at the time of the contract.

What to Expect from IMA

IMA is committed to the transparency called for by the CAA. We will be updating our compensation disclosures to incorporate the CAA’s new requirements and will timely provide the disclosures to each of our covered clients.

IMA will continue to monitor any regulatory updates and guidance pertaining to these requirements, and in the meantime, we remain committed to providing transparent service to support our clients and their businesses.