What are the Disclosure and Response Timeframes?

All of this information must be provided to the plan by the broker or consultant in a reasonable timeframe, in advance of when the contract or arrangement is either entered into or renewed. Additionally:

  • Should any compensation change, or if any relevant information is modified, the broker or consultant must notify the plan fiduciary of the changes as soon as is practical, but not more than 60 days after the broker or consultant becomes aware of the changes. If there are any extraordinary circumstances beyond the CSP’s control that prohibit the notification prior to 60 days, the disclosure must be provided as soon as is reasonably possible.
  • Brokers must correct inadvertent errors and omissions within 30 days of discovery.
  • Broker must respond to any written request made by the client within 90 days.
  • If the broker fails or refused to disclose, the employer must request disclosure in writing. If the broker fails or refuses to respond to the written request, the client must submit a formal notice to the Department of Labor within 30 days.

Failure to Disclose

Should the broker fail to provide the required information within the time allotted, there are consequences for both the plan’s fiduciary as well as for the service provider.

First, the services arrangement would no longer qualify for the statutory exemption under ERISA section 408(b)(2) and would result in a prohibited transaction under ERISA. Additionally, the service provider could face its own potential liability under ERISA’s civil enforcement provisions that allow for imposition of equitable relief against a service provider for knowingly participating in a prohibited transaction. whose arrangements result in a prohibited transaction.

Second, ERISA also permits the Secretary of Labor to assess civil penalties against a service provider whose arrangements result in a prohibited transaction.


Doesn’t the Form 5500 Already Provide Disclosure?

Those familiar with the Form 5500 may be wondering why the annual filing doesn’t satisfy adequate disclosure obligations. The answer, simply, is that from a complete disclosure perspective the 5500 form is limited in its scope.

Among other things, the 5500 form is only required to be filed for groups with 100 or more employees. The CAA requires disclosure on all groups where compensation equals or exceeds $1000 in a calendar year, which extends the requirements to all but the smallest groups. Additionally, information on the 5500 form does not include compensation from service fees, supplemental commissions, marketing fees, pharmacy rebates, nonmonetary compensation and a variety of other forms of compensation.

In essence, the CAA provision is more far reaching and comprehensive in nature than the 5500 form requirements.