The CAA’s Broker Compensation Disclosure Rule: A 2026 Compliance Checklist

Your benefits broker may be earning more from your health plan than you realize, and under federal law, they’re now required to tell you exactly how much, from whom, and in what form.

Section 202 of the Consolidated Appropriations Act of 2021 (CAA 2021) introduced one of the most significant transparency requirements in the history of employer-sponsored benefits: a mandatory compensation disclosure obligation for brokers and consultants who service group health plans governed by ERISA. The rule has been in effect since December 27, 2021 — but employer awareness of what it actually requires, and what to do with the information once received, remains uneven at best.

That gap is a problem. The disclosure requirement exists precisely to protect plan sponsors in their role as ERISA fiduciaries. If you’re not reviewing what your broker discloses, you’re not fulfilling that obligation — and you may be paying more for services than the market warrants.

Here is what the rule requires, what employers are expected to do with the disclosures, and how to build this into your 2026 compliance calendar.

What the CAA 2021 Broker Disclosure Rule Requires

Under ERISA Section 408(b)(2), as amended by CAA 2021, any broker or consultant who reasonably expects to receive $1,000 or more in direct or indirect compensation in connection with providing services to a group health plan must provide a written disclosure to the plan fiduciary (typically the employer) before the contract or arrangement is entered into, extended, or renewed.

This requirement applies to brokers and consultants servicing medical, dental, vision, pharmacy, and other welfare benefit plans covered by ERISA. It does not apply to excepted benefits such as standalone dental or vision plans in certain configurations, or to plans with fewer than two participants who are current employees — but for the vast majority of employer-sponsored group health plans, it applies in full.

What Must Be Disclosed

The disclosure must include:

1. A description of the services to be provided This covers all services the broker or consultant will render in exchange for compensation — plan placement, renewal negotiation, compliance support, employee communication, claims advocacy, and any other service.

2. A statement of whether the broker will serve as a fiduciary The broker must explicitly state whether they are acting as a plan fiduciary with respect to any of the services provided. Most commercial brokers are not plan fiduciaries — that status matters because it affects the legal standard they’re held to.

3. All direct compensation This includes commissions paid by the carrier or insurer, fees paid directly by the employer, and any other compensation flowing directly from the plan or plan sponsor to the broker.

4. All indirect compensation This is the category that historically created the most opacity in broker relationships. Indirect compensation includes override commissions, volume bonuses, administrative fees, marketing allowances, consulting fees paid by carriers or vendors, and any other form of payment that a broker receives from a party other than the plan or plan sponsor in connection with the plan.

5. Compensation paid among brokers and consultants If the compensation arrangement involves multiple parties — for example, a general agent who receives a portion of the broker’s commission — those arrangements must also be disclosed.

6. Compensation for referrals to other service providers If the broker receives compensation for referring the plan to a TPA, PBM, wellness vendor, or any other service provider, that referral compensation must be disclosed.

7. Compensation received in connection with recordkeeping services This is particularly relevant for plans that bundle health and retirement benefits administration through a single vendor.

Why This Rule Was Enacted — and What It Means for Your Fiduciary Duty

The broker compensation disclosure requirement did not emerge in a vacuum. It was modeled closely on a parallel rule that has applied to retirement plan service providers since 2012 (the ERISA Section 408(b)(2) regulations for plan investment services). Congress recognized that the same opacity that had historically distorted the retirement plan market — where brokers had financial incentives to steer employers toward higher-cost products — existed equally in the group health plan market.

As a plan fiduciary under ERISA, an employer has a legal obligation to ensure that plan service providers are receiving no more than “reasonable compensation” for the services they provide. You cannot make that determination if you don’t know what your broker is being paid — or by whom.

That’s the core logic of the rule: transparency enables fiduciary oversight. A plan sponsor who receives the disclosure and files it away without review hasn’t satisfied their fiduciary obligation. The disclosure is meant to trigger an assessment.

What Employers Are Actually Required to Do

The disclosure obligation sits with the broker, not the employer. But the employer’s responsibility begins when the disclosure is received. Specifically, ERISA fiduciaries are expected to:

• Review the disclosure for completeness. Does it cover all the elements listed above? If the disclosure is vague, incomplete, or omits indirect compensation, that is a red flag — not a technicality to overlook.
• Request additional information if needed. The regulation explicitly provides that if a plan fiduciary determines that a disclosure is incomplete or inaccurate, they must request the missing information in writing. If the broker fails to respond within 90 days, the plan sponsor must report the failure to the DOL.
• Assess whether the compensation is reasonable. This doesn’t require a formal procurement process every year, but it does require a genuine evaluation. What are comparable brokers charging for similar services in your market? Is the value of the services received proportionate to the total compensation — direct and indirect — that the broker is earning?
• Document the review. ERISA fiduciary obligations are ultimately demonstrated through process, not outcomes. Your plan file should contain the broker’s disclosure, your team’s review, any follow-up correspondence, and your conclusion on the reasonableness of compensation.

The Most Common Compliance Gaps Employers Have in 2025

Despite the rule being in effect for several years, a number of employer-side gaps persist:

• Disclosures received but not reviewed. Many employers receive a disclosure document at contract renewal and treat it as a routine administrative item — signed, filed, forgotten. Without a documented review, the employer hasn’t satisfied their fiduciary obligation.
• Indirect compensation not disclosed. Some brokers disclose direct commissions but underreport or omit indirect compensation such as carrier volume bonuses or vendor referral fees. Employers who don’t know to look for indirect compensation will miss this. If your broker’s disclosure lists only a commission percentage and nothing else, ask explicitly whether they receive any compensation from parties other than the carrier.
• New arrangements not triggering fresh disclosures. The disclosure requirement applies not just to new contracts but to renewals and material changes in existing arrangements. If your broker adds a new service or changes their compensation structure mid-year, an updated disclosure is required.
• Failure to document the reasonableness assessment. Even employers who review the disclosure often don’t document that they did so — or record any conclusion about whether the compensation is reasonable. That documentation is your audit protection.
• Assuming the carrier handles disclosure compliance. The broker is responsible for the disclosure — not the carrier, not the TPA. The plan sponsor’s obligation is to receive, review, and act on that disclosure.

2026 Compliance Checklist: Broker Compensation Disclosure

Use this checklist at each contract renewal and at any point your broker arrangement materially changes:

Confirm you have received a written disclosure from your broker or consultant before the contract is signed or renewed

Verify the disclosure covers all required elements: services description, fiduciary status, direct compensation, indirect compensation, referral fees, and any compensation shared among brokers

Identify all sources of indirect compensation — ask your broker explicitly if the disclosure does not address volume bonuses, override commissions, or vendor referral arrangements

Assess reasonableness of total compensation relative to the scope and quality of services received; document your conclusion

Compare to market benchmarks — request proposals from one or two alternative brokers every two to three years to validate that compensation is competitive

Request updated disclosures when services change, compensation structures change, or new vendors are introduced through broker referral

Store all disclosures and review documentation in your plan fiduciary file alongside your plan documents, SPD, and other ERISA records

If disclosure is incomplete, send a written request for the missing information and document that you did so

What to Ask Your Broker Directly

Beyond reviewing the formal disclosure, the following questions — asked directly and documented in writing — will surface any remaining gaps:

1. Do you receive any compensation from carriers, TPAs, PBMs, or other vendors connected to our plan, beyond what is reflected on our invoice?
2. Does your agency receive volume-based bonuses or override commissions from any carrier on our plan?
3. Do you receive any fees for referring us to our current TPA, PBM, wellness vendor, or other service providers?
4. Is any portion of your compensation shared with a general agent, wholesaler, or another intermediary?
5. Will you provide an updated disclosure if your compensation changes or if we add new plan services during the plan year?

A broker operating transparently and in your interest will answer these questions directly. Vague or evasive responses are themselves a data point worth acting on.

The Strategic Opportunity Inside a Compliance Requirement

There’s a practical upside to taking this requirement seriously that goes beyond ERISA compliance: employers who conduct genuine compensation reviews routinely discover they are overpaying for broker services — or that their broker’s compensation structure creates incentives that don’t align with the employer’s cost-management goals.

A broker earning a percentage-of-premium commission, for example, has a structural incentive tied to your premiums staying high. A broker paid a flat fee for services has no such incentive. Understanding how your broker is compensated is the first step in understanding whether their incentives are aligned with yours.

Some of the most sophisticated mid-market and large employers have moved to fee-based broker arrangements precisely because the disclosure process revealed that their prior commission-based arrangements were generating significant undisclosed compensation — and that the broker’s interests were not fully aligned with reducing plan costs.

Bottom Line

The CAA 2021 broker compensation disclosure rule gives employers a direct window into how their benefits advisors are paid — from every source. That transparency is both a legal requirement and a strategic tool.

Before your next renewal, confirm you have a complete written disclosure, review it carefully for indirect compensation, assess whether total broker compensation is reasonable, and document that process. If your broker can’t tell you clearly and completely how they’re compensated for working on your plan, that conversation is overdue.

At Taylor Benefits Insurance Agency, we operate on a transparent compensation model and provide full CAA-compliant disclosures to every client. If you have questions about what your current broker is earning, or whether your plan’s service arrangements represent fair value, we’re available for a no-obligation conversation.