Section 408(b)(2) Frequently Asked Questions

The recently expanded Section 408(b)(2) for employer-sponsored group health and welfare plans was passed into law on December 27, 2020 and became effective as soon as December 27, 2021. At Frost Insurance, we are committed to transparent communication with our customers about the services we provide and the compensation we receive for those services. We believe that what you pay matters, and it shouldn’t be buried in the fine print.

Below are some frequently asked questions about the regulation and what it means for you. If you have additional questions or would like to learn more about how Frost Insurance can help you navigate the complexities of your group health plan, please give us a call at (866) 227-2099.

The Consolidated Appropriations Act of 2021 was signed into law on December 27, 2020. Within that law, Section 202 expanded existing ERISA §408(b)(2) and mandates that agent, broker and consultant compensation on all group health plans and individual health insurance policies be proactively disclosed for arrangements entered into, renewed or extended on or after December 27, 2021.

The law requires service providers to disclose direct or indirect compensation of $1,000 or more prior to the beginning of a plan year, and creates an obligation to update the group about changes in compensation that occur during the year.

While this new disclosure requirement applies to service providers, including insurance agents and employee benefit plan consultants, it also extends to the plan administrator and plan fiduciaries for ERISA covered plans1. For most single employers, the plan fiduciary is considered the employer itself, or a named fiduciary such as the owner or CEO. The compensation disclosure requirement applies to all employers sponsoring group health plans, regardless of the size of the plan, including fully insured policies and self-funded arrangements, which includes level-funded plans.

In other words, if you are a private employer sponsoring a group health plan for your employees, your ongoing responsibilities to monitor your service providers have now been expanded. Existing law, under ERISA, maintains that it is the duty of the employer sponsoring the group health plan to ensure that all service provider fees are reasonable and transparent. Employers must also initiate a change in service providers if they are paying excessive amounts, or not receiving great service.

With the passage of the Consolidated Appropriations Act, these existing obligations are now expanded to further require employers to obtain a specific, written disclosure that includes a description of services and information about which service providers are receiving direct or indirect compensation of $1,000 or more for servicing their group health plan.

We recognize that our customers may be short-staffed, stretched thin, and rely on us to guide them through their responsibilities. Our customers choose to work with Frost Insurance because we are a trusted partner to help navigate changes in the law, and we have fully complied, in good faith, with the requirements for health and welfare plans under ERISA §408(b)(2), in return.

     1 Note that while the disclosure requirement is not applicable to non-ERISA plans (church plans, or plans sponsored by nonfederal governmental entities such as municipalities or school districts), it does apply to private employers with even just one employee, and most nonprofit plans.

The law requires disclosure of direct commissions and consulting fees paid for health and welfare plans such as medical, dental and vision plans. This includes amounts paid for stop-loss commissions, referral fees paid for placing business with vendors such as pharmacy benefit managers, third-party administrators or other service providers, and indirect compensation such as bonuses and overrides.

The Consolidated Appropriations Act requires that employers, acting as the responsible plan fiduciary, terminate future services with a service provider who did not comply with the employer’s written request for compensation disclosure within 90 days. Further, the employer, as the responsible plan fiduciary, must notify the U.S. Department of Labor of the covered service provider’s failure to comply.

At this time, the exact format to notify the DOL of the failure has not been announced.

At Frost Insurance, our customers will find our mission statement and core values are more than just words on a page. They reflect our dedication to transparency, integrity and providing excellent service at a fair price.

We are confident that the value we provide through long-term relationships based on top-quality service, high ethical standards and safe, sound assets should be easy to explain and we are ready to have this conversation now with our customers even as the regulatory agencies finalize the details of the disclosure requirements.

We have created this landing page as a resource for our customers and prospective customers to return to for the latest updates. Please bookmark this page and check it often.

Our customers received written correspondence explaining the requirement, as well as the compensation disclosure itself, effective with those renewing their policies and plans on or after December 27, 2021. If your mailing address has recently changed, please reach out to your dedicated Frost Insurance account management team to update your contact information.

If you have additional questions or would like to learn more about how Frost Insurance can help you navigate the complexities of your group health plan, please give us a call at (866) 227-2099.

Please note that this information is provided to you for general informational purposes only and should not be considered an individualized recommendation or personalized advice. No warranty or representation, express or implied, is made by Frost Insurance Agency, Inc. or Frost Bank, nor does Frost Insurance Agency, Inc. or Frost Bank accept any liability with respect to the information set forth herein. Distribution hereof does not constitute legal, tax, accounting, investment, insurance or other professional advice. Recipients should consult their professional advisors prior to acting on the information set forth herein. The distribution or receipt of this information does not create a professional relationship or a contract between the recipient and either Frost Insurance Agency, Inc. or Frost Bank.