US Department of Labor announces enforcement policy on disclosure requirements for group health plan service providers

WASHINGTON – The U.S. Department of Labor’s Employee Benefits Security Administration today released Field Assistance Bulletin 2021-03 announcing a temporary enforcement policy regarding the new fee transparency disclosure requirements added to the Employee Retirement Income Security Act for persons providing brokerage services and consulting to ERISA group health plans.

The Consolidated Appropriations Act, 2021 included amendments of prohibited transaction exemption provisions in ERISA section 408(b)(2) that govern service provider arrangements with ERISA plans. The amendments require persons providing “brokerage services” or “consulting” to ERISA-covered group health plans to disclose detailed information to plan fiduciaries about the compensation that providers expect to be paid in connection with their services to the plan. Similar disclosure requirements already apply to pension plan service providers, and became effective in 2012 in the form of regulations issued by the department. Both the pension and group health plan disclosure provisions specifically focus on helping plan fiduciaries guard against conflicts of interest that may arise when plan service providers receive compensation from third-parties, so-called indirect compensation, by ensuring that plan fiduciaries receive complete and timely information about such compensation before they enter into, renew or extend service provider arrangements.

“The new disclosure requirements will help group health plans and their fiduciaries by shedding needed light on some of the complex and often opaque fee-sharing arrangements that unfortunately typify aspects of our healthcare system,” said Acting Assistant Secretary of Labor for Employee Benefits Security Ali Khawar.  “The Field Assistance Bulletin gives plans and their brokerage and consulting service providers some transitional flexibility as they build systems to implement the new disclosure requirements, but that flexibility depends on reasonable and good faith behavior.”

The disclosure requirements for group health plans applied beginning on December 27, 2021. The department understands that covered brokerage and consulting service providers have been working since the enactment of the new requirements to evaluate their existing disclosures and implement changes needed to make the required disclosure regarding their services and compensation in a way that complies with ERISA section 408(b)(2)(B). During that time a number of stakeholders approached the department with questions about the scope and execution of the new disclosure requirements.

FAB 2021-03 is intended to support the efforts of service providers who have been working diligently to comply with the new statutory requirements by providing stakeholders with an assurance that the department will be focused on helping service providers comply with the new requirements, and will focus its enforcement activities on cases in which covered service providers do not act in accordance with a good faith, reasonable interpretation of the statute. The FAB also contains a set of questions and answers that, pending further guidance, are designed to explain the department’s view about what constitutes a good faith, reasonable interpretation of the statute with respect to several key issues that had been raised by stakeholders.