DOL Temporary Enforcement Policy for ERISA Group Health Plan Service Provider Disclosures

January 12th, 2022

The DOL recently released guidance articulating its temporary enforcement policy for group and individual health plan service provider disclosures under ERISA, as required under Section 202 of Title II of Division BB of the Consolidated Appropriations Act (CAA). At a high level, these disclosure requirements require persons, who provide “brokerage services” or “consulting” to ERISA-covered group health plans and reasonably expect to receive at least $1,000 in direct or indirect compensation, to disclose specific information related to direct and indirect compensation received in connection with their services. These disclosure requirements are effective for contracts entered into, extended, or renewed on or after Dec. 27, 2021. ^[1]See 29 CFR § 2550.408b-2(c); 77 FR 5632 (Feb. 3, 2012), Reasonable Contract or Arrangement Under Section 408(b)(2)—Fee Disclosure (Final … Continue reading

Covered service providers, who fail to comply with these disclosure requirements can be subject to civil penalties under ERISA, as well as face termination of their contract for services with the plan. Thus, all covered service providers must ensure they have plan of action. Below we have included a summary of the latest guidance, as well as some best practice tips for implementing these new requirements:

• Good Faith Relief. As long as covered service providers and plan fiduciaries implement these disclosure requirements using a good faith, reasonable interpretation of the law, the DOL will not treat them as failing to comply. While the DOL has no current plans to issue new regulations, it pointed to its regulations addressing similar ERISA disclosure requirements for pension plans as useful when analyzing how the new disclosure requirements apply to group health plans. ^[2] See 29 U.S.C. § 1108(b)(2)(B)(ii)(I)(bb), https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1108&num=0&edition=prelim.
• Application to Covered Plans. The disclosure requirements apply to self-insured and fully insured group health plans subject to ERISA, including both large and small group health plans. The disclosure requirements also apply to grandfathered health plans and plans providing only excepted benefits (e.g., limited scope dental or vision plans).
• Good Faith Interpretation of Covered Service Providers. The DOL declined to further define when persons provide “brokerage services” or “consulting services” such that they are subject to the disclosure requirements. Instead, the DOL advised parties to use a reasonable, good faith approach when determining their status as a covered service provider keeping in mind the goal of enhancing fee transparency. Any service providers who reasonably expect to receive indirect compensation from third parties in connection with advice, recommendations, or referrals regarding any of the listed sub-services outlined in statute should be prepared to comply or explain how they made a good faith, reasonable conclusion that they are not covered service providers.
• Disclosures of Unknown Compensation Amounts. The DOL will not provide a model form for meeting the disclosure requirements given the diverse services and multitude of compensation structures in the group health marketplace. While anticipated compensation can be expressed as a monetary amount, formula, per capita charge, or other reasonable method^[3]See 29 U.S.C. § 1108(b)(2)(B)(ii)(II), https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1108&num=0&edition=prelim. , the DOL guidance also provides that disclosures of compensation in ranges may be reasonable in circumstances when the occurrence of future events or other features of the service arrangement could result in the service provider’s compensation varying within a projected range. However, all compensation disclosures should provide the responsible plan fiduciary with sufficient information to evaluate the reasonableness of the compensation and any conflicts of interest.
• Clarification of Effective Date. For purposes of determining whether a contract was entered into as of December 27, 2021, such that it is subject to these disclosure requirements, the parties should reference the date that the contract 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 January 1, 2022, the service contract will be treated as having been “executed” on December 15, 2021, and would not be subject to the disclosure requirements. Additionally, in the case of an agent or broker that enters into a contract with a plan fiduciary through a “broker of record” (BOR) agreement, the date the contract is considered entered into is the earlier of the date on which the BOR agreement is submitted to the insurance carrier or the date on which a group application is signed for insurance coverage for the following plan year provided that the submission or signature is done in the ordinary course and not to avoid the disclosure obligations.
• Best Practice Tips. In order to make a good faith effort to comply with these new disclosure requirements, we have included some best practice tips for brokers and other covered service providers to consider:
  • Create an implementation plan for first year disclosures and update your agency policy to handle disclosures moving forward to ensure consistency across all accounts.
  • Determine whether you will use one disclosure per account or per policy.
  • Review all accounts to determine which are subject to the disclosure requirements and maintain a record of contract execution dates in your client management tool to ensure you don’t miss deadlines for any renewals.
  • Document your plan of action with each client and retain with your files. 
  • Identify a template that you will use across your agency to disclose the required information.

---