One of the employee benefits items tucked into the recently-passed Consolidated Appropriations Act, 2021 (the “Act”) will soon require group health plan service providers to issue fee disclosures.
Service providers to retirement plans have been required to provide fee disclosures – the ERISA 408(b)(2) disclosures – to plan sponsors for the past 10 years. The disclosures are part of the “reasonable compensation” exemption that keeps the arrangement from being a prohibited transaction. Until now, the 408(b)(2) fee disclosure rules have not applied to health and welfare plans; the “No Surprises Act” portion of the Act changes that next year.
The new fee disclosure rules will apply to any direct or indirect compensation of $1,000 or more for brokerage services and consulting services to a group health plan. Each service provider must provide fee disclosures to the plan fiduciaries in compliance with these rules. Otherwise, the arrangement will be considered a prohibited transaction. The new requirements will apply beginning one year after the date of enactment of the Act, so appear to apply December 27, 2021.
For more information about other employee benefits provisions in the new legislation, see our recent alert.