Broker Compensation Disclosure Reminder

With many group health plan renewals approaching, brokers or consultants will need to remember to provide the compensation disclosure passed into law with the Consolidated Appropriations Act, 2021 (CAA).

The Act included a ‘transparency provision’ that requires brokers and consultants to disclose any compensation they expect to receive and to describe the services they are providing for the compensation. This compensation disclosure must be provided to clients. The provision also includes disclosure in the individual market.

Beginning December 27, 2021, the disclosure is required if the broker or consultant expects to receive $1,000 or more in direct or indirect compensation for their services. This would be for the ‘plan year’ and would be specific to each client and should be reported to the client prior to the plan year renewal or new plan effective date.

The definition of a ‘group health plan’ includes the following:

• Group plans {medical, dental & vision)
• HRAs (if the broker/consultant is receiving compensation)
• ICHRAs (if the broker/consultant is receiving compensation)
• FSAs (if the broker/consultant is receiving compensation)

Life and disability benefits are not included within this requirement.

The disclosure is meant for the client only, not the Department of Labor (DOL).  But, if the broker fails or refuses to disclose, the plan is liable for a possible DOL penalty unless the employer reports the failure in writing to the DOL.

There are timing requirements with this provision, and they are as follows:

• Brokers must disclose the required information prior to the date the contract or arrangement is entered into, extended, or renewed (meaning prior to the plan year begin date or a new client that moved to the broker’s services mid-plan year)
• Brokers must disclose compensation changes within 60 days of being informed of any change
• Brokers must correct inadvertent errors and omissions within 30 days of discovery
• Brokers must respond to any written request made by the client within 60 days
• If the broker fails or refused to disclose, the employer (plan) must request disclosure in writing.  If the broker fails or refuses to respond to the written request, the client must submit a formal notice to the DOL within 30 days.

Amwins Connect has assembled tools and resources to support you with the broker compensation disclosures as well as with communicating the requirement to your clients. The Amwins Connect Broker Compensation Disclosure Toolkit can provide helpful information to assist a broker or consultant with this new process.

Next Steps For Brokers

1. View our webinar recording to get a refresher on the full requirements and review the Frequently Asked Questions document.
2. Inform your clients!  Use this as an opportunity to bring awareness to your client on the breadth of services you provide, the value you bring that allows them to strategize and manage costs for their business and let them know that you will be sharing with them what the compensation is related to your services.  
3. Leverage carrier provided compensation schedules.  Some carriers publish a compensation guide that encompasses commissions as well as contingent compensation calculations. You can refer to the Amwins Connect Commission Guide to start.  
4. Utilize the Customizable Broker Compensation Disclosure Template as a starting point to build your disclosure.
5. Important note: Track your disclosures!  Keep a record of the disclosures you have provided to your clients – what, when and to whom.  If you are going to require a signature on the disclosures, don’t forget to collect them after you’ve provided the document to your client and store them appropriately.