Seyfarth Synopsis: Almost a decade after the 408(b)(2) fee disclosure requirements took effect for retirement plan service providers, Congress finally passed legislation addressing compensation disclosure rules for service providers to group health plans. At the end of 2020, Congress passed the Consolidated Appropriations Act, 2021, which requires individuals to disclose direct and indirect compensation of $1,000 or more that they reasonably expect to receive in connection with the provision of brokerage or consulting services to group health plans. The written disclosures are required to be made to the plan/fiduciaries in advance of contracting to assist plan fiduciaries in assessing the reasonableness of the service provider’s fees.
These disclosure requirements generally became effective on December 27, 2021 (subject to the exception noted below for grandfathered arrangements) and shortly thereafter, on December 30, 2021, the Department of Labor (“DOL”) issued Field Assistance Bulletin 2021-03, extending a “temporary enforcement standard” with respect to these disclosure requirements. DOL will not be issuing regulatory guidance on the disclosures at this time, but the bulletin answers some questions relating to how the DOL intends to apply and interpret the fee disclosures requirements. In the meantime, service providers will be deemed to be in compliance with the disclosure rules so long as they follow a reasonable, good faith interpretation of the requirements. Below are some key takeaways from the bulletin:
- Look to Retirement Plan Rules for Guidance. Plans may rely on the parallel guidance for retirement plans under 408(b)(2) in order to better understand how the DOL intends to enforce the requirements.
- Obligations Extend to Certain Excepted Benefits. The DOL is taking a more expansive view of the term “group health plan,” and intends to apply the disclosure requirements to certain excepted benefits, including limited-scope dental and vision plans, and presumably certain other ancillary “health” benefits such as health FSAs.
- Vendor Label Does Not Control. The rules apply to any entity providing “brokerage” or “consulting” services to group health plans, regardless of whether they have labeled themselves as such.
- Grandfathered Contracts Exempt until Renewal. The requirements only apply to contracts that are “entered into, extended, or renewed on or after” December 27, 2021, measured from the execution date.
- Both Fully-Insured and Self-Insured Plans Are Covered. The disclosure requirements apply in the context of both fully-insured and self-insured group health plans.
- Compensation Estimates. If the form of compensation varies based on certain factors (enrollment, usage, etc.), the DOL provides broad discretion to the vendor on how to disclose the amount of anticipated compensation as long as the methodology for making the determination is disclosed, even if such amounts are just an estimate or a range.
If you offer a group health plan for which you purchase services or you provide services to a group health plan, and you have questions about the implications of these compensation disclosure requirements, please contact the author of this blog post or the benefits lawyer you work with for additional information.