CAA 2021 broker compensation disclosure — the $1,000 rule
CAA 2021 §202 expanded ERISA §408(b)(2) fee disclosure to group health plan service providers. Brokers, consultants, TPAs, and other service providers reasonably expected to receive $1,000 or more must disclose their direct and indirect compensation in writing — before the contract is executed. The disclosures populate Schedule C of Form 5500, where non-disclosure flags become public.
The $1,000 disclosure threshold
CAA 2021 §202 requires covered service providers to a group health plan to disclose their compensation in writing to the responsible plan fiduciary before the contract is executed, when the service provider reasonably expects to receive $1,000 or more in direct or indirect compensation in connection with the services.
The threshold applies per service provider, not per plan. A benefits broker, an ERISA consultant, a TPA, a PBM, and a wellness vendor could all be separately covered if each crosses $1,000. The threshold also captures indirect compensation — so a broker compensated entirely through carrier-paid commissions is still subject to the disclosure if those commissions are reasonably expected to exceed $1,000 in connection with the plan.
What the written disclosure must cover
The disclosure must address the following content categories. A missing category is a defective disclosure even if the rest is clean.
- Services to be provided. Specific description.
- Direct compensation. Stated as a dollar amount or as a formula sufficient to allow calculation.
- Indirect compensation. Override commissions, bonuses, contingent compensation, awards from third parties (carriers, vendors, PBMs).
- Manner of receipt. Paid by carrier? Billed to plan? Deducted from premium?
- Conflicts of interest. Affiliations, ownership interests, arrangements that could affect the recommendation.
- Volume / production tiers when commissions tier based on book size or retention.
Required content of the written disclosure.
Self-assessment for orientation only. The written §202 disclosure itself is the broker's or consultant's responsibility; this checklist helps the plan fiduciary confirm the document covers each required category before the contract is executed.
The disclosure feeds Schedule C
The compensation amounts the broker discloses under §202 are the same data points that populate Schedule C of Form 5500 the following year. A clean §202 disclosure produces a clean Schedule C. A missing or defective §202 disclosure typically surfaces on Schedule C as either a non-disclosure indicator or a partial disclosure that doesn't reconcile to the carrier's own records.
The Schedule C non-disclosure indicator is the most-cited filter in ERISA fee-litigation discovery. A flagged Schedule C in a subsequent year is, in many cases, traceable back to a missed §202 disclosure at contract execution.
Re-disclosure on renewal or material change
The disclosure isn't one-and-done. The plan's service provider must furnish updated disclosure on contract renewal and within 60 days of any material change to the disclosed information — for example, a change in the commission rate, the addition of a new contingent-bonus program, or a change in the parties paying indirect compensation.
The plan fiduciary's job is to confirm the disclosure was received before signing, retain a copy with the contract file, and confirm updated disclosures track contract renewals year-to-year.
What happens if the broker won't disclose
The Departments' position: a service provider that refuses to provide the §202 disclosure is providing services in violation of ERISA, and continuing the relationship without obtaining the disclosure is a fiduciary breach by the plan administrator. The plan's response should be to (1) request the missing disclosure in writing, (2) document the refusal if one occurs, and (3) consider terminating the contract if the disclosure isn't furnished within a reasonable time.
A persistent refusal-to-disclose pattern eventually surfaces on Schedule C the following year. The Fiduciary Fitness Audit on BenefitsLedger flags Schedule C non-disclosure as a Concern when present.
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- Consolidated Appropriations Act 2021 §202 — Service Provider Disclosure — Statutory basis for the broker / consultant compensation disclosure obligation.
- DOL EBSA — Field Assistance Bulletin 2021-03 — Departments’ transitional guidance on the §202 disclosure rule.
- ERISA §408(b)(2) — Reasonable arrangements with parties in interest — Underlying ERISA framework for service-provider compensation reasonableness.