When it comes to a broker, employers should look for someone who keeps them informed about important issues related to their company. Recent legislation has made transparency not just good business practice but also the law for covered service providers (CSP). 

Beginning December 27, 2021, as part of the Consolidated Appropriations Act, covered service providers – insurance providers, benefits brokers, agents, and consultants – are required to disclose any compensation they expect to receive over $1,000.  Meaning employers will be able to see precisely how and where brokers are making money.

The new law is specific about how, when, and for what reason CSPs are required to disclose both direct and indirect compensation, but your plan’s fiduciary has the additional responsibility of policing the CSP’s disclosures, making sure they are accurate and up to date. 

The insurance carrier is generally responsible for plan compliance in a fully insured policy. Under self-funded arrangements, legal responsibility for plan compliance will fall to the employer or a third-party administrator. In the end, whether an organization is fully insured or self-funded, they should make sure their insurance carrier or TPA is ready to meet the demands of this new legislation.

What does that mean for you as an employer?

Understanding how much a broker is being paid makes it easier to evaluate your return on investment and have honest conversations about the services you need.  If your Health & Welfare Plan has over 100 employees enrolled in any single benefit, you are already required to file an IRS Form 5500 where both direct and indirect compensation is already disclosed.   In this case, you already know how much and from whom your broker is being paid.  The transparency law is an additional reporting responsibility to this requirement.   Employers with under 100 employees will now be seeing all broker compensation, something that may not have been provided in the past.  It will also give employers a better understanding of how pricing is structured for each broker so they can make an informed decision about who to trust with their business.

It is important to note that the fiduciary – which is often the employer if your company’s plan is self-funded – is responsible for ensuring that your service provider is in compliance with this new law.  So, it is a good idea, regardless of how your plan is structured, to be aware of the reporting obligations and timelines and check in with your service provider if you haven’t had any communication about their compensation levels.

For employers, greater broker transparency can enable more informed decision-making. For employees, it implies getting the best, most cost-effective benefits and services for their unique circumstances.  For best results overall, choose a broker that prioritizes transparency and puts their clients first. 

Has your benefits broker informed you of the new laws around compensation disclosure?  If not, you don’t need to stay in the dark. At Total Employee Benefits, we want you to feel confident that you are getting the value and service you deserve. We strive to keep our clients up to date on the latest in regulation and compliance to help you protect your most valuable asset – your employees.