The Consolidated Appropriations Act of 2021 (CAA-21) established a requirement for brokers and consultants providing services to ERISA-covered group health plans to disclose their direct and indirect compensation to a responsible plan fiduciary (typically the employer plan sponsor). The disclosure must be provided in writing, reasonably in advance of entering into, extending, or renewing a contract or arrangement for services. The requirement, effective December 27, 2021, generally applies when a broker or consultant reasonably expects to receive $1,000 or more in total direct and indirect compensation in connection with the arrangement.

The Department of Labor (DOL) issued temporary enforcement guidance in December 2021 related to broker compensation disclosure requirements for group health plans which is still in effect today. The guidance refers to similar requirements applicable to brokers and consultants who transact employers’ retirement/pension plans, which have existed since 2012. The guidance can be found in DOL Field Assistance Bulletin 2021-03: Field Assistance Bulletin No. 2021-03 | U.S. Department of Labor

On February 3, 2026, the Consolidated Appropriations Act of 2026 (CAA-26) was signed into law, expanding the compensation disclosure requirements to a much broader range of service providers serving ERISA-covered group health plans. CAA-26 did not specify a separate effective date or transition period for the expanded requirements. In the absence of further guidance, a reasonable interpretation is that the expanded requirements apply to contracts or arrangements entered into, extended, or renewed on or after February 3, 2026. However, the DOL has not yet issued guidance specifically addressing the expanded requirements, including their effective date. Employers and service providers must therefore rely on the statutory language and existing DOL guidance, where applicable, while awaiting further clarification.

Covered Plans

The disclosure requirements apply broadly to ERISA-covered group health plans, regardless of plan size, grandfathered status, or whether coverage is fully-insured or self-funded. This includes medical, dental, and vision plans, as well as health reimbursement arrangements (HRAs), health flexible spending accounts (FSAs), and other arrangements that provide medical care. The requirements generally do not apply to welfare benefit plans that provide only non-health benefits, such as life insurance or disability coverage. However, where an arrangement also provides medical care, such as certain employee assistance programs (EAPs), the disclosure requirements may apply.

Covered Service Providers

CAA-21

The CAA-21 disclosure requirement applies to brokers and consultants if they are reasonably expected to earn at least $1,000 in compensation, direct or indirect, from the services provided to the plan. The $1,000 threshold applies to the total compensation reasonably expected to be received in connection with the arrangement, including both direct compensation paid by the plan or employer and indirect compensation received from third parties.

The scope of service providers subject to the compensation disclosure requirements is not limited to entities that are licensed as (or that market themselves as) brokers or consultants. Whether a service provider is subject to the disclosure requirements depends on the nature of the services provided and the compensation expected to be received.

Who is a Covered Service Provider?

A “covered service provider” is a service provider that enters into a contract or arrangement with the covered plan and reasonably expects $1,000 or more in compensation, direct or indirect, to be received in connection with providing one or more of the following services:

• Brokerage services “to a covered plan with respect to selection of insurance products (including vision and dental), recordkeeping services, medical management vendor, benefits administration (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness services, transparency tools and vendors, group purchasing organization preferred vendor panels, disease management vendors and products, compliance services, employee assistance programs, or third party administration services,” or
  
  
• Consulting services “related to the development or implementation of plan design, insurance or insurance product selection (including vision and dental), recordkeeping, medical management, benefits administration selection (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness design and management services, transparency tools, group purchasing organization agreements and services, participation in and services from preferred vendor panels, disease management, compliance services, employee assistance programs, or third party administration services.”

CAA-26

CAA-26 significantly expanded the categories of service providers subject to the compensation disclosure requirements. In addition to brokers and consultants, the requirements now extend to providers of various administrative, management, compliance, and other services furnished to ERISA-covered group health plans, provided the applicable compensation threshold is met. Employers should review their existing service provider arrangements, identify vendors potentially subject to the expanded requirements, and determine when contracts are scheduled for renewal or extension. They should also incorporate compensation disclosure reviews into the process for engaging new service providers.

* Stop-loss insurance is generally purchased by the employer, with premiums paid by the employer and reimbursements made directly to the employer rather than the group health plan. Under these circumstances, there may be a reasonable argument that the stop-loss arrangement is a contract with the employer rather than a service provided to the plan and therefore is not independently subject to the disclosure requirements. However, the analysis may differ if premiums are paid using plan assets, reimbursements are made to the plan or its trust, or the arrangement otherwise involves services provided directly to the plan. 

† CAA-26 also established separate, more detailed compensation disclosure requirements specifically applicable to pharmacy benefit managers (PBMs). These requirements address PBM compensation and other remuneration and include additional transparency and audit provisions. The interaction between these PBM-specific requirements and the broader ERISA service provider disclosure requirements is not yet entirely clear. Because the PBM-specific provisions have a later applicability date, PBMs may be subject to the general ERISA compensation disclosure requirements before the more detailed PBM-specific requirements take effect.

Compensation

The required description of compensation or cost “may be expressed as a monetary amount, formula, or a per capita charge for each enrollee or, if the compensation or cost cannot reasonably be expressed in such terms, by any other reasonable method, including a disclosure that additional compensation may be earned but may not be calculated at the time of contract if such a disclosure includes a description of the circumstances under which the additional compensation may be earned and a reasonable and good faith estimate if the covered service provider cannot otherwise readily describe compensation or cost and explains the methodology and assumptions used to prepare such estimate.” 

A generic disclosure describing a service provider's standard compensation practices may not be sufficient. Disclosures should be specific enough to allow the plan fiduciary to understand the compensation associated with their arrangement, including compensation attributable to different lines of coverage where applicable. If compensation may vary based on enrollment, utilization, or other factors, exact amounts may not always be available in advance, reasonable estimates, formulas, or compensation ranges may be acceptable, provided the methodology and assumptions are adequately explained. The DOL has emphasized that disclosures should provide sufficient information for plan fiduciaries to evaluate the reasonableness of compensation and identify potential conflicts of interest. Both direct and indirect compensation must be addressed.

Example of Indirect Compensation (from DOL Field Assistance Bulletin 2021-03)

The scope of indirect compensation is potentially broad and may require changes to existing disclosure practices. In the past, for example, service providers may not have disclosed compensation that they reasonably expected to receive from a third party provider in exchange for referring group health plan clients to the provider. In the DOL's view, this compensation—which is not paid directly by the group health plan—is an example of indirect compensation under the CAA-21 that must now be disclosed by covered service providers. In reviewing a service provider's efforts to comply with the CAA-21 disclosure requirements, the DOL will consider whether the provider's information disclosures were reasonably designed and implemented to provide the required information and transparency.

Timing of Disclosure

Generally, the compensation disclosure will be required annually. It must be made "reasonably in advance" of entering into a contract for services so that the employer (plan fiduciary) may review it to determine if the fee structure is reasonable. 

For cases of a Broker of Record (BOR) change, compensation must be disclosed on the earlier of the date the BOR was submitted to the carrier, or the date on which a group application is signed for insurance for the following plan year. 

In addition, a covered service provider must update or provide its disclosures:

• Within 60 days of learning of a change;
  
  
• Within 30 days after discovering any inadvertent errors; and
  
  
• Within 90 days of a written request.

Compensation disclosures must be provided in writing reasonably in advance of entering into, extending, or renewing a covered service contract or arrangement. This often results in annual disclosures for contracts that renew each year.

For broker of record (BOR) changes, compensation must be disclosed on the earlier of the date the BOR agreement is submitted to the carrier or the date a group application is signed for coverage for the following plan year.

In addition to the initial disclosure, covered service providers must:

• Report changes to previously disclosed information within 60 days of learning of a change;
  
  
• Correct errors or omissions within 30 days after discovery; and
  
  
• Provide certain additional compensation-related information requested in writing by a responsible plan fiduciary within 90 days.

Form of Disclosure

A covered service provider must furnish the required information in writing to a responsible plan fiduciary. The disclosure must describe the services provided, indicate whether the service provider expects to be a plan fiduciary, and explain the direct and indirect compensation expected to be received, including applicable payment arrangements.

The statute does not prescribe a specific disclosure form. Accordingly, the required information may potentially be included within the service contract itself rather than provided through a separate document, provided the contract contains all required disclosures and is furnished within the applicable timeframe. Regardless of the format, the objective is to provide the responsible plan fiduciary with sufficient information to evaluate the reasonableness of the compensation and identify potential conflicts of interest. 

Until additional guidance is issued, the DOL has indicated that compliance based on a good-faith, reasonable interpretation of the statutory requirements is acceptable. Existing DOL regulations and guidance applicable to retirement plan service provider disclosures may also serve as useful references.

Employer ERISA Fiduciary Responsibilities

ERISA requires plan fiduciaries to act prudently when selecting and monitoring service providers, including evaluating whether the compensation paid for services is reasonable. The compensation disclosure requirements under ERISA §408(b)(2)(B) are intended to provide fiduciaries with the information necessary to make these determinations. Compliance with the applicable disclosure requirements is also a condition for a covered service arrangement to qualify for the prohibited transaction exemption under ERISA §408(b)(2). If a required disclosure is not provided, the arrangement may fail to qualify for the exemption, potentially resulting in a prohibited transaction and related fiduciary liability. However, the statute provides conditional relief for responsible plan fiduciaries who take appropriate steps to address a service provider's failure to disclose.

There is no separate, fixed monetary penalty imposed on employers simply for failing to obtain a compensation disclosure. Nor would there seem to be a significant risk of DOL enforcement against an employer for merely not obtaining the disclosure where there was no evidence the compensation was otherwise unreasonable. Nevertheless, failure to obtain and review required disclosures may expose plan fiduciaries to potential prohibited transaction and fiduciary breach claims, particularly where service provider compensation is excessive or conflicts of interest are not appropriately evaluated. 

When a service provider fails to furnish required information, the statute provides a process through which the responsible plan fiduciary may protect themselves. Generally, the fiduciary must request the missing information in writing. If the service provider does not comply within 90 days of the request, the fiduciary must notify the DOL within 30 days following the expiration of that period. Importantly, following this process does not eliminate the fiduciary's broader responsibility to evaluate and monitor service providers or ensure that compensation is reasonable.

As a practical matter, employers should establish a process for obtaining and reviewing compensation disclosures when engaging new service providers and when existing arrangements are renewed or extended. Employers should also maintain copies of disclosures, document any follow-up requests, and review the information for potentially unreasonable compensation or conflicts of interest.