August 28, 2024
On August 20, 2024, representatives Robert Scott and Mark DeSaulnier, ranking members, respectively, of the House Committee on Education and the Workforce and the Subcommittee on Health, Education, Labor, and Pensions, sent a letter to the DOL’s Employee Benefits Security Administration (EBSA) assistant secretary Lisa Gomez asking for increased oversight on group health plan service providers. In part, the letter stems from a springtime New York Times (NYT) investigation into a data analytics company, which alleged the company engaged in harmful business practices, including hidden service provider costs, lower provider reimbursements, and self-dealing compensation practices, which ultimately left plan participants footing the bill.
The letter emphasizes that ERISA plan sponsors have a fiduciary obligation to exercise prudence in the selection and monitoring of plan service providers and to ensure all plan fees and reimbursement practices are reasonable. It notes that despite the enactment of the CAA 2021 transparency regulations and, particularly, the service provider compensation disclosure requirements, the meaningfulness of such disclosures remains uncertain. Details from the NYT findings and pending lawsuits indicate that some plans and participants may still be incurring higher-than-expected costs.
The representatives asked EBSA to respond to specific questions related to the enforcement of CAA 2021 service provider disclosures, the applicability of service providers’ ERISA fiduciary duties, and a request for additional guidance on service provider disclosures. The letter also requests an update on the EBSA’s existing service provider working group.
The letter serves as an important reminder to plan sponsors of their ERISA fiduciary duties to prudently select and monitor their plan service providers and the compensation they receive. Specifically, sponsors should ensure they timely receive and carefully review the CAA 2021 compensation disclosures from their plan service providers and document the review process. As we have already seen with respect to retirement plans, establishing a prudent process for evaluating service provider compensation can greatly assist plan sponsors in responding to potential litigation regarding excessive fees or a regulatory inquiry. We will be closely monitoring for any additional EBSA guidance, updates, or enforcement actions undertaken in response to this request.
Scott, DeSaulnier Letter to DOL Re: MultiPlan
PPI Benefit Solutions does not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.
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