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Beginning December 27, 2021, as part of the Consolidated Appropriations Act (CAA), covered service providers (CSPs) like insurance brokers and consultants must disclose all compensation to clients if they expect to receive $1,000 or more in direct or indirect compensation for providing their services. This will allow employers to see exactly how brokers earn money which can help inform plan decisions.
Brokers and consultants will be required to disclose specific information to plan fiduciaries in writing including description of services provided and how compensation will be received. A disclosure must be made no later than the date that is reasonably in advance of the date on which the contract is entered into, extended, or renewed. Plan fiduciaries will be responsible for enforcing these requirements, and they are subject to fines if they don’t report a CSP’s failure to disclose in a timely manner.
In a fully insured plan, the responsibility for plan compliance is usually with the insurance carriers. For self-funded plans, legal responsibility for plan compliance typically falls to the employer. However, many employers with self-funded plans utilize a third-party administrator (TPA), who is better positioned to handle these requirements. Whether you’re fully insured or self-funded, employers should ensure their insurance carrier or TPA is preparing to comply with the new requirements of this new law. If neither is applicable, the employer will need to begin preparations of their own.
Download the bulletin for more details.