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The Department of Labor (DOL) recently released a final rule requiring detailed disclosure of pharmacy benefit manager (PBM) compensation for large, self-insured ERISA health plans, according to The National Law Review. Effective PBM compensation disclosure is now a central component of fiduciary oversight for self-insured plans, requiring employers to gain clear visibility into revenue streams that were previously difficult to quantify.
Key Takeaways
The Final Rule mandates that large, self-insured ERISA plans receive detailed disclosures regarding PBM compensation.
Responsibility extends beyond traditional PBMs to any TPA or insurer contracting to provide pharmacy benefit services to the plan.
Compliance requires coordination with service providers to secure audit rights and data-sharing clauses before the 2028 deadline.
This regulation complements, but does not replace, the reporting requirements under the Consolidated Appropriations Act (CAA).
What Is the New Requirement for PBM Compensation Disclosure?
For years, the complex web of rebates, spread pricing, and administrative fees associated with pharmacy benefits has been notoriously opaque. The DOL’s new rule aims to change this by utilizing ERISA’s “prohibited transaction” exemption framework. Under this rule, PBMs and other pharmacy service providers must provide sufficient information to plan fiduciaries to allow them to assess whether the compensation paid is reasonable.
The rule is not merely a request for documentation; it is a regulatory expectation that fiduciaries will use this information to conduct due diligence. As noted by the Department of Labor, the initiative is designed to force transparency in revenue streams, ensuring that employers know exactly what they are paying for—and how those fees compare to market standards.
Why TPAs and Insurers Are Now in Scope
A critical point for HR and finance leaders to understand is that this rule applies to the entity contracting with the plan, not just the PBM itself. If your plan uses a Third-Party Administrator (TPA) or an insurer that subcontracts to a PBM, that TPA or insurer is considered the "covered service provider."
The DOL has made it clear: you cannot simply pass the buck by claiming the PBM is responsible for the reporting. Your TPA is obligated to provide the necessary data to the plan fiduciary. This means that if your current contract with an insurer or TPA lacks the necessary audit clauses or data-sharing provisions, you are at risk of non-compliance. Employers must evaluate their current vendor relationships to ensure they have the contractual leverage to demand this information.
Comparing Regulatory Obligations
It is easy to conflate these new DOL requirements with the reporting mandates of the Consolidated Appropriations Act (CAA). While both pursue the goal of PBM transparency, they operate under different timelines and scopes.
Feature DOL Final Rule CAA Provisions
Primary Focus
Reasonableness of compensation Drug spending & pass-through
Scope
Large, self-insured ERISA plans Broad employer plan reporting
Effective Date (Calendar Year)
January 1, 2028 January 1, 2029
Managing these dual streams of compliance requires a strategic approach. We often see employers struggle to reconcile these systems because they attempt to treat them as a single reporting task. In practice, the DOL rule is about fiduciary due diligence—the ability to look at a contract and decide if the fees are fair—while the CAA is about administrative reporting to federal agencies.
Practical Steps for Plan Fiduciaries
As you prepare for the 2028 implementation, the focus should shift from simple reporting to contract governance. Start by identifying exactly who is providing pharmacy management services for your plan. If you are in a level-funded or self-funded arrangement, your exposure is likely higher.
Reviewing Service Agreements
Check your current Service Agreements for:
Audit Rights:
Do you have the right to audit the PBM’s claims and fee structures independently?
Data Access:
Are you guaranteed access to the granular compensation data that the DOL now mandates be disclosed?
Remedies:
If your TPA fails to provide the required data, what contractual recourse do you have?
Most standard contracts are heavily tilted in favor of the vendor. Now is the time to request amendments to ensure your plan’s fiduciary obligations are protected before the regulatory deadlines arrive.
Avoiding the "Passive Fiduciary" Trap
The biggest risk we see in our PEO/ASO advisory work is the "passive fiduciary" mindset. Many employers assume that because they have hired a professional TPA or PBM, their compliance burden is handled. The DOL’s recent actions signal the end of that assumption. Regulators expect the plan sponsor to take an active, informed role in selecting and monitoring service providers.
If you don’t understand the economics of your pharmacy benefit arrangement, you cannot prove that you have met your fiduciary duty. We advise clients to treat PBM contracts with the same level of scrutiny applied to retirement plan providers. This includes benchmarking fees, understanding revenue-sharing models, and periodically re-testing the market to ensure the arrangement remains competitive.
Evaluating Your Pharmacy Benefit Governance
Greater transparency is a welcome development, but it creates a new administrative burden for employers. The challenge is ensuring that your contracts provide the data you need without forcing you into a administrative logjam. If you are unsure how your current plan arrangements align with these new disclosure expectations, reach out to a BRG advisor for a objective review of your vendor agreements and contact our team today.
This article is general operational guidance, not legal advice. Requirements change, so confirm current rules with qualified counsel before acting.
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