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Compensation disclosures: finally some actionable info

Updated: Apr 21, 2023

The recent Field Assistance Bulletin released by the US Department of Labor had in it clarification as well as further complexity when it comes to compensation disclosures for brokers and consultants. It cleared up the fact that brokers who expect to receive compensation of $1,000 or more are now required to disclose this info in advance of entering into a contract with a client. This is meant to clear up any potential conflicts of interest because of a broker receiving compensation from sources other than the plan or the plan sponsor. This compensation could take the form of:

· broker fees

· commissions

· indirect compensation such as referral fees.

Who does this new disclosure requirement apply to, exactly?

Brokers, consultants, advisors. There are many different names for the job you do. Officially, ERISA sets out two categories it terms “covered service providers” that the new disclosure requirements apply to:

· providers of brokerage services

· consulting services.

Beyond this, the DOL’s new disclosure policy applies to parties who are reasonably considered to be covered service providers (under section 408(b)(2)(B)).

Further complexity arises within the work EB brokers do when you consider the implications for BOR letters. The date these go into effect for the purposes of the compensation disclosure can either be when the BOR is submitted to the carrier or when the “renew as is” application is signed.

However, that is not always the case. If you have had clients renew after December 27, 2021, then you use the date they signed the application. If it was before this date, for the purposes of compensation disclosure, their signed application would likely not apply until the next plan year or whenever you renew your policies with them.

Which adds an interesting layer of complexity to the challenging work brokers already do.

Overcoming complexity

If you're receiving compensation as a broker, you'll need to include this in your disclosure by using what the Department of Labor terms a “good faith, reasonable interpretation” of the rule.

Basically, disclosing the methods of compensation that you're being paid such as a flat amount, or maybe a percentage of premiums that are paid, is now the rule.

At Benefits Compliance Solutions, we suggest if you're not sure how much your compensation will be in advance you need to use some sort of reasonable and good faith estimate. The important thing here is disclosing your compensation.

There is so much more in the Field Assistance Bulletin that you really need to look at to help you optimize the work your brokerage does. And if you are interested in helping your clients navigate the increasingly complex EB landscape successfully, we can help. As you well know, when your clients succeed, so do you.

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We help benefits consultants eliminate fines, penalties, and lawsuits for their employer clients. We use proven tools, technology, and process to increase the compliance capabilities across the entire EB practice to transform you into a highly profitable, competent, elite EB organization. Click here to learn more about working with us directly. Click here to learn more about our online program, BCS Transform.

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