Under ERISA §408(b)(2) and the Consolidated Appropriations Act, 2021 (CAA-21), brokers, consultants, and other “covered service providers” who expect to receive $1,000 or more of direct and indirect compensation from group health plans must disclose that compensation and enumerate the services it pays for. However, Pharmacy Benefit Managers (PBMs) largely argued that the CAA-21 did not require them to provide §408(b)(2) disclosures.
With the passage of the Consolidated Appropriations Act, 2026 (CAA-26), Congress officially now requires PBMs and other health plan service providers to also produce §408(b)(2) group health plan compensation disclosures to health plan sponsors. There is no delayed effective date, so the change is effective upon the law’s passage in early February, 2026.
Fiduciaries of ERISA group health plans must request these disclosures and evaluate compensation for reasonableness before entering into, renewing, or extending any contract for group health plan services, including for compensation related to pharmacy benefit management services. Failing to do so means the fiduciary of the plan is entering into a prohibited transaction under ERISA.
Applies to:
ERISA group health plans, (small or large, fully-insured or self-funded), paying $1,000 or more to a broker, consultant, or other covered service provider. Only governmental and church plans are exempt from ERISA.
The CAA-26 expands the disclosure requirement to PBM service providers and consultants receiving $1,000 or more in compensation.
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