February 6, 2023

Volume XIII, Number 37

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February 03, 2023

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CAA Compensation Disclosures: DOL’s New FAB Confirms the Scope is Broad

The Consolidated Appropriations Act, 2021, Public Law 116-260 (CAA) set forth new compensation disclosure requirements that apply to service providers who provide “brokerage services” or “consulting” to group health plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). While several stakeholders in the industry were hoping for  delayed implementation, the Department of Labor (DOL) has confirmed that these new disclosure requirements apply to contracts entered into, extended or renewed on or after December 27, 2021. See our prior article on the new compensation disclosure requirements for more background.

On December 30, 2021, the DOL issued Field Assistance Bulletin No. 2021-03, “Temporary Enforcement Policy Regarding Group Health Plan Service Provider Disclosures Under ERISA Section 408(b)(2)(B)” (the FAB) to address outstanding questions regarding the application of these CAA compensation disclosure requirements, as summarized below.

Reporting Entities May Include Third Party Administrators

The FAB explains that how a service provider describes, labels or markets itself and its fees is not dispositive in determining whether disclosures are required under the CAA for that service provider. Specifically, the disclosures may be required whether or not a service provider is licensed as or markets itself as a broker or consultant. Additionally, the FAB explains that service providers cannot avoid these requirements by simply labeling “consulting fees” as something else.

As noted in our prior article, the scope of the service providers covered by these CAA compensation disclosure requirements appears to be fairly broad, and the FAB emphasizes this point. By implication, it seems that these rules will likely apply beyond traditional, licensed insurance brokers and consultants and could possibly apply to third party administrators (TPAs), pharmacy benefit managers (PBMs), and administrators of health reimbursement arrangements (HRAs), wellness programs, health flexible spending accounts (FSAs), employee assistance programs (EAPs), and other health benefits, to the extent such service providers provide “brokerage services” or “consulting” (as defined by the CAA).

This Applies Beyond Just Major Medical Plans, including Excepted Benefits

The FAB also addresses which types of plans are covered under the CAA compensation disclosure requirements. The DOL confirms that both insured and self-insured group health plans, including grandfathered plans, and small and large group health plans, are covered. This likely means retiree-only plans are also covered. Additionally, excepted benefits, including limited scope dental and vision plans, are covered by the requirement, which likely means HRAs, health FSAs, wellness programs, and other health benefits are also covered.

Reporting Fixed Dollar Amounts for Indirect Compensation May Not be Necessary

Reaffirming the rule in the CAA, the FAB states that covered service providers do not need to disclose indirect compensation (e.g., commissions) in the form of a fixed dollar amount for compensation amounts that cannot be known in advance. Reasonable, good faith estimates, ranges, and formulas can be used, depending on the facts and circumstances of the arrangement.

No Further Guidance at This Time; Existing Rules May Help

The DOL has no intention to issue formal guidance or regulations at this point in time. However, the new compensation disclosure requirements under the CAA for covered service providers are similar to existing ERISA compensation disclosure requirements applicable to retirement plans. Practitioners had questioned whether covered service providers could look to the DOL guidance developed for the retirement plan disclosures when complying with the new group health plan disclosures. The DOL answered that question in the FAB, indicating that a covered service provider could refer to the DOL’s retirement plan rules if it had any questions about the interpretation of the group health plan rules.

There is Temporary Good Faith Relief

The DOL has provided limited, temporary relief while service providers try to determine whether they are covered and, if so, how to get into compliance. The FAB essentially indicates that the DOL will not pursue enforcement where a service provider has made a good faith, reasonable interpretation of the rules.

Key Takeaways

The FAB confirms that the scope of this law is broad. Before plan service providers decide that the new CAA disclosures to not apply to them, they may want to carefully review the list of specific services covered in the CAA to confirm that compliance is not required and document the basis for such conclusion.

© 2023 Foley & Lardner LLPNational Law Review, Volume XII, Number 13

About this Author

Nick J. Welle, Foley, Employment Benefits Lawyer, qualified retirement plans attorney
Senior Counsel

Nick Welle is an associate and business lawyer with Foley & Lardner LLP. His practice is focused on health and welfare plans. He also assists clients with qualified retirement plans, including defined benefit and defined contribution plans.

Mr. Welle advises employers, insurers, and brokers concerning the federal laws governing health and welfare plans, including the Affordable Care Act (ACA), Employee Retirement Income Security Act (ERISA), Internal Revenue Code (Code), Health Information Portability and Accountability Act (HIPAA), Mental...

Special Counsel

Kate Morgan is special counsel in the Business Law Department at Foley & Lardner LLP. Kate is based in the firm’s San Francisco office where she is a member of the Insurance and Health Care Practices. 

Kate focuses her practice on complex multistate health insurance, and health care regulatory challenges. She has more than 10 years’ experience at both in-house and top-tier international law firms. She is experienced in managing the intricacies of the Affordable Care Act (ACA), state health insurance and managed care laws, and the relationship between the two.

Kate has...

Hannah Demsien Business Attorney Foley Lardner

Hannah Demsien is an associate with Foley & Lardner LLP and a member of the firm’s Business Law Practice.

Hannah focuses her practice primarily on, employee benefits, executive compensation, and insurance.

Before attending law school, Hannah worked in Chicago as a legal assistant for an immigration law firm, helping corporate clients sponsor foreign workers for permanent residency. As a law student, Hannah served as a legal intern for several government offices in Wisconsin, focusing on insurance and employee benefits. Additionally, she was a summer associate in the firm’...

Alyssa D. Dowse Employee Benefits Attorney Foley & Lardner Law Firm Chicago, IL
Special Counsel

Alyssa Dowse is a special counsel with Foley & Lardner LLP, where she focuses her practice on employee benefits and executive compensation. Alyssa has experience in all areas of employee benefits, including qualified retirement plans, health and welfare plans, and executive compensation.

Alyssa's employee benefits work includes advising for-profit and tax-exempt employers on the design, implementation, and administration of employee benefit plans, including 401(k) plans, 403(b) tax-deferred annuity plans, pension plans, nonqualified deferred compensation plans, wellness programs...