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May 2022  Volume 20, Number 5        


The CAA’s New Broker Compensation Disclosure Rules Are Now in Effect

On December 27, 2021, the new regulations pertaining to broker compensation disclosure laid out in the Consolidated Appropriations Act of 2021 (CAA) went into effect. As a result, brokers must report any form of commission or compensation they expect to receive throughout the year that equals $1,000 or more, and non-cash compensation that equals $250 or more.

These disclosure rules target service providers that work with ERISA-covered group health plans. Previously, only brokers and consultants working with retirement plans were obligated to provide these types of compensation disclosure.

What Information Should Be Provided in the Disclosure

According to the law, any broker or consultant who reasonably expects to be directly or indirectly compensated with a cumulative minimum of $1,000 must disclose compensation equivalent to or greater than $250 for the services they provided the plan. This applies to any form of payment, whether direct, indirect, transaction-based, or non-cash.

The disclosure will have to include the following information, at a minimum:

  • A description of the provided services
  • A statement regarding whether the broker is currently acting or will act as a plan fiduciary
  • An explanation of any current or future payments to the broker, such as:
    • Fees paid by the plan
    • Indirect compensation arrangements, such as incentive payments, along with the identity of the payee and details regarding the provided services Transaction-based compensations, such as commissions and finder’s fees, along with the identities of the payer and payee
    • Any compensation connected to the contract termination
    • Any conditional compensation. Brokers can express the compensation they receive using any reasonable method, including in monetary terms, as a formula, or as a per capita charge.

When Should the Disclosure Be Made?

Brokers and Consultants Must submit the disclosure before entering, amending, or extending a service contract. This way, the plan fiduciary can assess whether the compensation is reasonable before the agreement goes into effect or is renewed or extended.

Furthermore, any changes to the compensation data provided must be disclosed as quickly as possible. Generally, the broker must disclose the information within 60 days of identifying the changes. However, if they receive a written request for information, they have 90 days to respond.

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In this issue:

This Just In ... President Biden Urges Congress to Pass the Paycheck Fairness Act

How the Ukraine Crisis is Affecting the US Workforce

Should Preventative Care Be an Essential Benefits Component?

DOL Announces Increase in FMLA Audits – Employers Should Be Ready

The CAA’s New Broker Compensation Disclosure Rules Are Now in Effect



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