DOL Finalizes PBM Fee Disclosure Rule: What Employers Need to Know
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Article Summary
The DOL's final PBM fee disclosure rule requires pre-contract compensation disclosures and ongoing reporting for large self-insured health plans, and it expands audit rights. Learn who's covered, key dates, and what employers should do now to prepare.
The Department of Labor has finalized its rule requiring pharmacy benefit managers (PBMs) and their affiliated brokers and consultants to provide compensation disclosures to large, self-insured employer health plans. For employers, the rule provides greater visibility into PBM compensation by requiring written disclosures before a contract is signed and gives plan fiduciaries audit rights to verify these disclosures.
Key Takeaways
- Who Must Comply? PBMs and PBM-affiliated brokers and consultants that expect at least $1,000 in compensation from large, self-insured group health plans.
- What Must be Disclosed? Written disclosure of expected direct and indirect compensation before a contract is signed, extended or renewed, then a report of actual compensation every six months (or quarterly upon request by the plan).
- What Audit Rights Do Plans Have? The plan chooses the auditor, and PBMs cannot limit the audit to a sample or impose restrictive conditions.
- When Does the Rule Apply? The rule takes effect 60 days after Federal Register publication and applies to plan years beginning on or after July 1, 2027.
- What are the Current Compliance Expectations? The underlying statutory disclosure duties under ERISA section 408(b)(2)(B) have applied since February 3, 2026, and DOL expects good-faith compliance now.
The Rule at a Glance
|
Topic |
Covered plans |
Covered service providers |
Initial disclosure |
Ongoing disclosure |
Audit rights |
Fiduciary relief |
Effective date |
Applicability |
|---|---|---|---|---|---|---|---|---|
|
What the final rule says |
Self-insured group health plans of large employers (generally 100+ employees) and large plans (generally 100+ participants), as defined in ERISA section 726 |
PBMs and PBM-affiliated brokers and consultants that expect $1,000 or more in compensation, whether they work directly or through affiliates, agents or subcontractors |
In writing, reasonably in advance of entering into, extending or renewing the contract |
Actual compensation received, within 30 days after each six-month period (quarterly if the plan requests) |
Plan picks the auditor; PBMs cannot impose restrictive conditions or limit review to a sample |
Protection for plan fiduciaries when a provider fails to disclose required information, provided the fiduciary takes the required follow-up and reporting steps.
|
60 days after publication in the Federal Register |
Plan years beginning on or after July 1, 2027 (January 1, 2028 for calendar-year plans) |
What PBMs Must Disclose
Every initial disclosure starts with a description of each pharmacy benefit management service, followed by the compensation the provider reasonably expects to receive. The rule sorts that compensation into two buckets that mirror the statute:
- Direct compensation: what the plan itself pays the provider.
- Indirect compensation: everything from other sources, including rebates, fees, alternative discounts and other remuneration from drug manufacturers; spread compensation (the gap between what the plan pays and what the PBM reimburses the pharmacy); pharmacy recoupments such as clawbacks; price protection payments; and any other compensation the provider reasonably expects but has not specifically listed.
The semiannual reports use the same categories but show what the provider actually received, not what it expected.
The DOL included these disclosure requirements because manufacturer payments are often tied to a drug's list price, creating incentives that may influence PBM formulary decisions. Greater transparency into those payments allows plan fiduciaries to evaluate potential conflicts of interest and assess whether formulary decisions and compensation arrangements are aligned with the interests of the plan and its participants.
Audit Rights and the Innocent Fiduciary Exemption
The DOL's preamble notes that PBMs often impose restrictions on audit rights, such as limiting records to sample-only records, requiring auditor approval, and determining the audit location. The final rule curtails these restrictions.
- Auditor choice: The plan has full discretion to pick its auditor.
- No restrictive conditions: PBMs cannot dictate audit location, cap the number of records, or block access to their contracts with pharmacies and drug manufacturers.
- No sampling limit: DOL declined to let PBMs confine audits to samples.
- Costs and confidentiality: Audit costs are apportioned between the plan and the PBM. PBMs may require reasonable confidentiality agreements.
If a provider fails to furnish the disclosure, the innocent fiduciary exemption may protect the plan fiduciary, provided the fiduciary notifies DOL, asks the provider to correct the gap, decides whether to continue or end the arrangement, and documents the reason for that decision. The stakes are real: ERISA treats a contract that misses the disclosure conditions as a prohibited transaction, which can bring enforcement action and civil penalties for fiduciaries and providers alike.
How this Fits with the Consolidated Appropriations Act, 2026
Three layers now apply, on different timelines:
|
Applies from |
February 3, 2026 |
Plan years beginning on or after July 1, 2027 |
Plan years beginning on or after August 3, 2028 |
|---|---|---|---|
|
Requirement |
Amended ERISA section 408(b)(2)(B) requires covered service providers, including PBMs and certain affiliated brokers and consultants, must furnish required compensation disclosures to qualify for the prohibited transaction exemption. The DOL has stated that it expects good-faith compliance pending the applicability date of the final rule. The rule also confirms that service providers beyond PBMs, including third-party administrators, are covered under section 408(b)(2)(B).
|
The DOL's PBM fee disclosure final rule establishes detailed disclosure content, timing, compensation reporting, audit rights, and fiduciary relief procedures
|
ERISA § 408(b)(2)(C) requires PBMs to pass through 100% of rebates, fees, alternative discounts and other remuneration. ERISA section 726 requires a retrospective drug-spend report every six months |
|
Who it reaches |
All ERISA group health plans, any size |
Large self-insured plans (generally plans with 100+ participants or sponsored by employers with 100+ employees).
|
Pass-through: plans served by PBMs. Section 726 reports: large self-insured plans (large fully insured plans can opt in) |
What Employers Should Do Now
While the rule applicability date is still more than a year away, many plans will be negotiating or renewing PBM contracts well before then. Taking the following steps now can help position your plan for compliance:
- Confirm your status. Check whether your medical plan is self-insured and whether it meets the 100-employee or 100-participant thresholds.
- Map your vendors. List your PBM, TPA, brokers, consultants and any affiliates, and ask each whether it considers itself a covered service provider under section 408(b)(2)(B).
- Ask for disclosures early. Build compensation disclosure requests into your next RFP and renewal rather than waiting for the applicability date.
- Review audit language. Compare your PBM contract with the Final Rule on auditor selection, sampling, location, data access and confidentiality terms.
- Document your process. Record who reviews disclosures, how often, how you judge reasonableness, and the steps you will take if a provider falls short.
- Ask your advisor, too. PBM-affiliated brokers and consultants are covered, so request your own advisor's compensation disclosure as part of the same review.
Have questions about how the rule applies to your plan? Your OneDigital advisor can help you identify which service providers are subject to these requirements and what disclosures to request.