At long last, the Department of Labor has provided guidance on interpreting requirements imposed on group health plan fiduciaries as a part of the Consolidated Appropriations Act, or CAA. On December 27, 2020, Congress amended Section 408(b)(2) of ERISA through its enactment of the CAA. Section 408(b)(2) provides a prohibited transaction exemption for transactions between plans that are subject to Title I of ERISA and “parties in interest” with respect to such plan for the provision of services that are necessary for the establishment or operation of the plan, provided that the compensation paid by the plan to the provider is “reasonable.” One requirement for compensation to be considered reasonable for purposes of Section 408(b)(2) is that the plan fiduciary receive disclosure regarding the compensation received by the service provider. Prior to the CAA, these disclosure requirements only applied to certain retirement plan service providers. However, the CAA expanded these requirements to providers of brokerage or consulting services to group health plans who expect to receive $1,000 or more in direct or indirect compensation (“Covered Providers”). In addition to disclosing the direct compensation received from a group health plan for its services, Covered Providers must also disclose indirect compensation received from third parties. The disclosure is intended to ensure that plan fiduciaries are informed as to the potential for conflicts of interests as a result of, and the reasonableness of compensation in connection with, third-party payments received by a Covered Provider. The new rules imposed by the CAA took effect on December 27, 2021.
Shortly after these provisions of the CAA took effect (and more than a year after the passage of the CAA), the Department of Labor (“DOL”) released Field Assistance Bulletin 2021-03 (the “Bulletin”) on December 30, 2021, which states that the DOL will focus its enforcement efforts on cases where Covered Providers are not acting in accordance with a good faith, reasonable interpretation of the applicable requirements of Section 408(b)(2). The Bulletin also includes guidance in the form of several questions and answers. The Bulletin confirms that while compensation arrangements relating to the provision of services to pension plans and group health plans differ in many respects, Covered Providers may look to prior DOL guidance issued with respect to pension plans (where applicable) to determine their own obligations with respect to Section 408(b)(2). As a result, the DOL states that it does not believe that comprehensive regulations are needed, but will instead monitor the situation to determine whether (and what) additional guidance may be needed.