You can see right through us. And we’re totally fine with that.

For plan years beginning on December 27, 2021, or later, brokers and consultants will be held to new compensation transparency obligations under the Consolidated Appropriations Act (CAA). The CAA creates new requirements for brokers and consultants (referred to in the rules as “covered service providers” or “CSPs”) to disclose to ERISA-covered group health plan sponsors any direct or indirect compensation they may receive for referral of services.

We welcome the change. Our firm was started as an advisory-based alternative to the sales-focused entities that are prevalent in the marketplace. Over our 20-year history, we have observed a continued movement by most of our competitors ― including very large and previously independent consulting firms — toward a product and commission-driven business approach. We continue to focus on the transparent delivery of high value, conflict-free services.

The CAA requires CSPs to provide plan fiduciaries with information they need to assess reasonableness of total compensation, both direct and indirect, received by the CSP, its affiliates and/or its subcontractors. For this purpose, a CSP is an entity that enters into a contract with a plan and reasonably expects to receive $1,000 or more in direct or indirect compensation in connection with providing the listed services — regardless of whether the services will be performed, or compensation will be received, by the CSP, an affiliate, or a subcontractor.

The listed services and additional details are summarized in Ken Haneline’s overview here.

Over the coming months, we will have more to share on these requirements and what you as a plan fiduciary should expect from brokers and consultants.

One final note: these rules are intended to prevent the payment of excessive compensation to brokers and consultants. Ironically, they don’t require all compensation to be disclosed ― only compensation that may be paid by the plan (and not fees directly paid by the employer/plan sponsor). So, it may still be difficult for fiduciaries to easily determine how reasonable a given plan’s CSP’s compensation arrangement is compared to all compensation others are paying. Nonetheless, the newly disclosed compensation is likely to raise some eyebrows!