Brokers Need ‘Good Faith Effort’ On New Disclosure Rules: HAFA Speaker

The Consolidated Appropriations Act of 2021 requires most brokers and consultants providing services to ERISA-covered group health plans to disclose to plan fiduciaries (typically, the plan sponsor), in writing, any and all direct or indirect compensation they receive for providing services to the plan.

Jeff Pepper of Diceros Law gave a rundown on how the law pertains to health insurance brokers during a webinar for Health Agents for America.

What Are The Covered Services Under The Act?

Covered services, Pepper said, include product selection, recordkeeping services, benefits administration, pharmacy benefit management services, wellness services, compliance service, employee assistance programs and third-party administrators.

What Information Must Be Disclosed?

The act requires the following information to be disclosed, Pepper said.

• A description of the services to be provided to the plan according to the contract or arrangement.
• A statement that the agent, broker or consultant expects to provide services pursuant to the contract or arrangement to the plan as a fidicuary.
• A description of all direct and indirect compensation that the agent, broker or consultant reasonably expects to receive for the services provided.
• Identification of the services for which indirect compensation will be received, and identification of who pays that indirect compensation.
• A description of how compensation is shared among agents, brokers or consultants and affiliates or subcontractors.
• A description of any compensation that will be paid among agents, brokers or consultants in connection with services provided on a transaction basis (such as commissions or finder’s fees).
• A description of any compensation that the agent, broker or consultant reasonably expects to receive in connection with the contract’s or arrangement’s termination.

Contracts or arrangements entered into before Dec. 27, 2021, are not subject to the disclosure requirements until the contract is renewed or extended, Pepper said.

“Right now, the Department of Labor is not taking a heavy hand with this,” he said. “They are looking for agents and brokers to put forth a good faith effort.”

Agents, brokers and consultants must respond to any written request for disclosure information from the plan fiduciary within 90 days. If there is no response within 90 days, the plan fiduciary must submit a formal notice to the DOL within 30 days to avoid a prohibited transaction from taking place. The plan fiduciary must decide whether to terminate the contract or arrangement with the agent, broker or consultant.

The agent, broker or consultant may also be liable for civil penalties under ERISA for failure to disclose.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].