February 2022 Employee Benefits Compliance Alert
Release Date: February 16, 2022
Broker Compensation Disclosure
We want to provide you with a general overview of a new federal law that requires brokers, such as Fred C. Church, who sell health insurance or provide services related to health insurance for your business or school to disclose their compensation to you in addition to the services you receive in return for the compensation. Congress passed this law with the belief that it is important for employers who sponsor health insurance to have more information about how their brokers are compensated so they can ascertain whether the compensation and fees paid to their brokers are reasonable and what services are actually being provided to the employers by the brokers.
What health insurance brokers or advisors have to do concerning their compensation:
For new contracts entered into or renewed on or after December 27, 2021, where a broker’s direct or indirect compensation is $1,000 or more, the broker must disclose the compensation to an individual employed by the client who has the authority to enter into the contract for health insurance or health insurance-related services. This individual is referred to in the law as a “fiduciary.” In addition to disclosing the broker’s compensation, the broker must also disclose the services that the client receives. Brokers have the option to disclose their compensation on a per-employee/plan member basis, where practical.
What is understood to be health insurance:
Generally, a group health plan sponsored by an employer may include medical plans, vision and dental plans, an EAP, HRAs, and FSAs.
Why is this new law important to your organization?
Although the law obligates brokers to disclose their compensation to clients, the law also subjects clients/sponsors of health plans to potential fiduciary duty penalties if clients who sponsor health plans do not insist on broker disclosure compliance or fail to monitor their receipt of the broker compensation disclosures to ensure that broker compensation is transparent and reasonable.
Fred C. Church compensation and the services we provide:
Where practical, we will disclose our compensation on a per-employee, per-month basis. In return for the privilege of being your broker, we will provide you with consulting and health plan design advice, we may solicit multiple quotes on a particular line of coverage or service, we may negotiate insurance rates with carriers, and we may also provide wellness guidance. We also provide employee benefit compliance advice, answer your compliance-related questions, conduct compliance reviews, alert you to new developments in the field, and provide timely and substantive webinars on employee benefit compliance topics. Finally, if your company is large enough, we will provide assistance with 5500 filing.
Fred C. Church greatly values the trust you place in us as your broker, and we look forward to working with you and addressing any questions you may have about broker compensation disclosure.
Note: This alert constitutes compliance advice from the Fred C. Church Agency as your employee benefits broker and does not establish an attorney-client relationship with the recipient, who is free to consult with legal or tax counsel of their own choosing.