Section 202 Disclosure Requirements
CAA Section 202 amended ERISA Section 408(b)(2) to require brokers and consultants to disclose direct and indirect compensation to plan fiduciaries before entering into or renewing a contract. The disclosure must include: (1) a description of services to be provided; (2) a statement of whether the broker/consultant is a fiduciary; and (3) all direct and indirect compensation expected to be received.
What Must Be Disclosed
| Compensation Type | Examples | Disclosure Required? |
|---|---|---|
| Direct compensation | Commissions, fees paid directly by the plan | Yes |
| Indirect compensation | Overrides, bonuses, contingent compensation from carriers | Yes |
| Compensation from related parties | Fees from affiliated vendors | Yes |
| Non-monetary compensation | Gifts, entertainment, travel | Yes (if >$250) |
| Compensation from third parties | Referral fees, placement fees | Yes |
Fiduciary Review Obligation
Compliance Note
Plan fiduciaries must review broker/consultant disclosures and determine whether the compensation is reasonable for the services provided. This is not a rubber-stamp exercise — fiduciaries must actually evaluate whether the compensation is reasonable. Document the review process and the basis for the reasonableness determination. Failure to review disclosures is itself a fiduciary breach.