October 25, 2021

Volume XI, Number 298

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October 22, 2021

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ERISA Disclosure Requirements for Service Providers Extended to Group Health Plans

The recently enacted Consolidated Appropriations Act of 2021 (“CAA”) requires new disclosures for brokers and other consultants providing services to certain group health plans.  Under the CAA, “covered service providers” must disclose their “direct” and “indirect” compensation above $1,000 received during the term of the contract or arrangement to a responsible plan fiduciary of a “covered health plan.”

Previously, the DOL issued regulations pursuant to ERISA Section 408(b)(2) only requiring qualified retirement plans to disclose this information, specifically exempting group health and welfare plans.  The CAA amends ERISA Section 408(b)(2) to broaden the definition of “covered plan” to include “covered health plans”, and it requires the disclosure of direct and indirect compensation paid by “covered service providers” to such plans.

A “covered health plan” includes employee benefit welfare plans to the extent the plan provides medical care to employees or their dependents directly or through insurance, reimbursement, or other methods.  A “covered health plan” does not include a qualified small employer health reimbursement arrangement.

A “covered service provider” is defined to include entities that provide brokerage or consulting services for which the provider enters into a contract or arrangement with the covered plan and reasonably expects $1,000 or more in direct or indirect compensation.  The brokerage and consulting services include the selection of insurance products, recordkeeping services, medical management vendors, benefits administration (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness design and management services, transparency tools, group purchasing organization agreements, participation in and services from preferred vendor panels, disease management, compliance services, employee assistance programs, or third party administration services.

“Direct compensation” includes all compensation paid directly from the plan.  “Indirect compensation” is defined as compensation from any source other than the covered plan, the plan sponsor, the covered service provider, or an affiliate.  It also includes compensation from a subcontractor unless it is received in connection with services performed under a contract or arrangement with a subcontractor.

The new law details specific items that must be disclosed by the service provider to the plan fiduciary, including a description of the services provided and a description of all covered direct and indirect compensation.  The disclosure requirements will be effective December 27, 2021.

Group health plans should begin working in coordination with covered service providers to determine whether these new disclosure requirements will apply to them and, if so, what indirect compensation must be disclosed.  In preparing to comply with these new disclosure rules, affected parties may seek guidance in the disclosures practices that developed under Section 408(b)(2) in connection with qualified retirement plans.

© 2021 Proskauer Rose LLP. National Law Review, Volume XI, Number 41
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About this Author

Schelberg, Proskauer, portrait
Partner

Neal Schelberg, a partner in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group, is recognized nationally as a leading employee benefits lawyer. Neal was appointed by the U.S. Secretary of Labor to the Advisory Council on Employee Welfare and Pension Benefit Plans (the “ERISA Advisory Council”), where he served as Chair in 2014 and Vice Chair in 2013. 

Neal is a prolific author and a highly regarded speaker on employee benefits law topics. He is a co-author of the ERISA...

212-969-3085
Anthony S Cacace, Labor and Employment attorney, Proskauer Rose law firm
Associate

Anthony S. Cacace is an Associate in the Labor and Employment Department and a member of the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center. Anthony focuses on ERISA litigation and counsels plans and plan sponsors on a full spectrum of employee benefit issues.

Anthony represents employers, plan sponsors, plan trustees and other plan fiduciaries in lawsuits brought pursuant to ERISA, alleging claims for breaches of fiduciary duty, benefit claim denials, plan investment losses and improper plan amendments. He also represents plan clients during...

212-969-3307
Mary Grace Richardson Labor and Employment Attorney Proskauer New Orleans
Associate

Mary Grace Richardson is an associate in the Labor & Employment Department and a member of the Employee Benefits & Executive Compensation Group. She counsels clients on a myriad of issues related to employee retirement and health plans.

Mary Grace received her J.D. and diploma in comparative law, summa cum laude, from Louisiana State University Paul M. Hebert Law School. At LSU, she served as a senior editor of the Louisiana Law Review, was a member of the Board of Advocates, and was a member of the Order of the Coif....

504-310-4086
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