How to Read Your Broker’s Compensation Disclosure Under CAA Section 202 (Line by Line)

Last updated: August 6, 2026 · By Rich Westermayer, Founder, BeneSmart Services

What You’ll Learn (TL;DR)

• What CAA Section 202 obligates your broker to disclose — and what it doesn’t.
• The four drafting habits that turn a transparency law into a filing formality.
• A line-by-line walkthrough of the six sections every disclosure contains.
• The 9-Point Disclosure Decoder Checklist — a 20-minute pass on your own document.
• Your three moves when the math doesn’t reconcile.

Written for: HR leaders, CFOs, and owners at 50–500 life employers who have a disclosure in a folder and have never read it.

Table of Contents

1. The Broker Compensation Disclosure Requirements, in Plain English
2. Why Your Disclosure Was Written to Be Filed, Not Read
3. Line by Line: The Six Sections of a Compensation Disclosure
4. The 9-Point Disclosure Decoder Checklist
5. A 210-Life Employer Who Read Theirs (Finally)
6. When the Numbers Don’t Reconcile: Your Next Three Moves
7. What a Disclosure Looks Like When Nobody’s Hiding
8. Frequently Asked Questions

The Broker Compensation Disclosure Requirements Under CAA Section 202, in Plain English

Direct answer: CAA Section 202 — codified as ERISA §408(b)(2)(B), 29 U.S.C. §1108(b)(2)(B) — requires brokers and consultants who reasonably expect $1,000 or more in compensation for services to an employer-sponsored group health plan to disclose their compensation — direct and indirect — in writing, reasonably in advance of the date the contract is entered into, extended, or renewed (DOL Field Assistance Bulletin 2021-03). The disclosure must describe the services provided and the compensation expected, including compensation paid by parties other than you (ERISA §408(b)(2)(B)(i); FAB 2021-03). It’s a disclosure obligation, not a cap: nothing in the provision limits what your broker can earn (Groom Law Group).

That last clause is the one nobody says out loud. Section 202 didn’t make broker compensation smaller. It made it visible — and only to the employer who bothers to look. Reviewing that disclosure isn’t a courtesy, either. Under ERISA §408(b)(2), a service arrangement is only exempt from the prohibited-transaction rules if the contract is reasonable and the compensation is no more than reasonable — and if the responsible plan fiduciary doesn’t receive the required disclosure, the arrangement itself can become a prohibited transaction (Groom Law Group; Morgan Lewis). That makes reading it a fiduciary question, not an HR one. A disclosure you never read is a disclosure you can’t defend.

BeneSmart Insight
Section 202 shifted the burden, not the cost. Your broker’s obligation is to hand you the document. Your obligation is to understand it. Only one of those two things is happening in most 50–500 life employers right now.

Why Your Disclosure Was Written to Be Filed, Not Read

Direct answer: Most compensation disclosures satisfy the letter of CAA Section 202 while defeating its purpose, using four drafting habits: range language instead of dollars, formula language instead of arithmetic, “may receive” instead of “will receive,” and indirect compensation separated from direct compensation. The document is technically compliant and practically unreadable. The statute itself permits compensation to be expressed as “a monetary amount, formula, or a per capita charge” or “any other reasonable method” — DOL guidance allows ranges but states that “more specific, rather than less specific, compensation information is preferred whenever it can be furnished without undue burden” (FAB 2021-03).

Consider who drafts these: compliance teams, at scale, for hundreds of employer clients at once, with one goal — survive a Department of Labor look-back. Readability for a 210-life manufacturer in St. Louis isn’t on the requirements list. Clarity creates questions. Questions create negotiations. Negotiations create fee pressure.

So the villain isn’t a person. It’s a document standard — a house style that became the norm because nobody on the employer side pushes back on it. Four habits define it:

1. Range language. “3% to 6% of premium” instead of “$62,400.” A range isn’t a number; it’s a refusal to commit to one. (For where that range comes from and what it costs, see our flagship breakdown of the hidden costs of health insurance broker commissions.)
2. Formula language. “Calculated as a percentage of premium as determined by carrier schedules.” You’ve been handed a variable, not a value.
3. Conditional language. “May receive.” “Is eligible to receive.” Everything is hypothetical until the check clears.
4. Structural separation. Direct compensation on page 2. Indirect compensation — overrides, bonuses, persistency credits — on page 6, different heading, different unit of measurement. Adding them together is left as an exercise for the reader.

BeneSmart Insight
If you cannot add up your disclosure to a single dollar figure in under five minutes, the document has done its job — for your broker.

Line by Line: The Six Sections of a Compensation Disclosure

Direct answer: ERISA §408(b)(2)(B) requires a disclosure to cover a defined set of content elements — the covered plan and provider, a description of services, direct compensation, indirect compensation (including the payer and the arrangement it’s paid under), the manner of receipt, and related terms (FAB 2021-03). In practice, nearly every disclosure written to those requirements organizes them into the same six sections. Read them in order, and in each look for the phrase that converts a fact into a range, a variable, or a maybe.

Pull your document out. Here’s what each section is for.

1. Covered Plan and Contracting Parties

What it says: Names the plan, the sponsor, and the covered service provider — plus affiliates or subcontractors.
What to look for: Affiliates. If the disclosure names a subsidiary general agency, an MGU, or a captive brokerage entity, compensation can legitimately flow there and be described as someone else’s revenue. Ask whether any named affiliate is compensated in connection with your plan.

2. Description of Services

What it says: What you’re paying for — placement, renewal marketing, compliance support, enrollment, claims advocacy.
What to look for: Services you’ve never received. If the disclosure claims compliance consulting and dedicated claims advocacy and you’ve used neither, you’re paying for shelf space. This section is your leverage.

3. Direct Compensation

What it says: What you pay the broker, directly or through premium.
What to look for: The unit. Dollar figure, PEPM, or percentage? Convert everything to annual dollars before you go further. On a $1.5 million plan, a commission in the industry-standard 3%–6% band works out to roughly $45,000–$90,000 a year — a number most employers have never seen written down in one place.

4. Indirect Compensation

What it says: Compensation from anyone other than you — carriers, TPAs, PBMs, general agents, stop-loss MGUs.
What to look for: The section that matters most and gets read least. Override bonuses, persistency credits, market-share and growth bonuses, and contingent commissions all live here, usually described qualitatively (“the firm participates in carrier incentive programs”) rather than numerically. We break each one down in The 5 Hidden Revenue Streams Your Broker Doesn’t Put on an Invoice.

5. Manner of Receipt

What it says: How compensation is paid — built into premium, billed separately, netted against fees.
What to look for: “Included in premium.” Those three words mean the cost is invisible on every invoice you’ll ever receive — which is why so few CFOs can say what their broker earned last year.

6. Term, Termination, and Notice of Change

What it says: How long the arrangement runs and what happens when compensation changes.
What to look for: Whether a compensation change triggers a new written disclosure, and how fast. Under the statute, changes to the disclosed information must be disclosed as soon as practicable, and no later than 60 days from the date the service provider learns of the change, absent extraordinary circumstances (Groom Law Group). If your document is silent on this, your disclosure has an expiration date nobody mentioned.

BeneSmart Insight
Section 4 is where the money hides and Section 5 is where it becomes invisible. If you only have ten minutes with your disclosure, spend them there.

The 9-Point Disclosure Decoder Checklist

Direct answer: Run these nine checks, in order, on your own compensation disclosure. Seven can be answered from the document itself; two require a direct question to your broker. If you can’t finish the pass in about 20 minutes, the disclosure isn’t doing what Section 202 intended.

1. Do you have one? If no written disclosure exists for your current contract term, stop. That’s the entire finding.
2. Was it provided before your contract was signed, extended, or renewed? The statute requires disclosure reasonably in advance of the date the arrangement is entered into, extended, or renewed (FAB 2021-03). Timing is part of the requirement.
3. Can you convert every figure to annual dollars? Percentages, PEPMs, and per-policy amounts all become one number. Write it on the front page.
4. Is direct compensation a specific amount or a range? If it’s a range, ask for the actual figure paid last plan year. They have it.
5. Is indirect compensation numeric or narrative? Narrative descriptions of “carrier incentive programs” are the most common gap. Ask what your plan contributed to them.
6. Are stop-loss, PBM, ancillary, and voluntary lines disclosed separately? One combined figure can hide four differently structured arrangements.
7. Are affiliates or subcontractors named — and compensated? See Section 1 above.
8. Does the services list match the services you receive? Mark every line item you haven’t used in 12 months.
9. What triggers a new disclosure? The 60-day change-disclosure rule above is your baseline; find the change-notification language and calendar your renewal against it.

BeneSmart Insight
Nine checks. Twenty minutes. The most expensive document in your benefits file is also the one most likely to have never been opened.

A 210-Life Employer Who Read Theirs (Finally)

A manufacturing employer in the Midwest, roughly 210 covered lives, brought us their disclosure during a Find Your Fit call. They had received it. They had filed it. Nobody had read past page two.

Direct compensation listed a percentage of premium. The indirect section, four pages later, referenced participation in carrier incentive programs with no dollar figure attached. Their incumbent broker was earning 6.5% of premium on roughly $2.1 million in annual spend — about $136,500 a year once someone finally did the arithmetic and wrote it down.

What changed wasn’t the number. It was that the number finally existed. We quoted the same scope of work at a flat $40 per employee per month — and the switch took roughly $36,000 a year in fixed costs off the plan without touching a single benefit.

BeneSmart Insight
Nobody had lied to them. Every figure was disclosed exactly as the law requires. It had simply never been assembled into a sentence a human being could react to.

When the Numbers Don’t Reconcile: Your Next Three Moves

Direct answer: If your disclosure is vague or doesn’t reconcile to a single annual dollar figure, you have three escalating moves: request a written supplement, request last plan year’s actual compensation in dollars, and put the reasonableness question in writing to create a record. None requires changing brokers.

Move 1 — Ask for the supplement. A short, non-adversarial email: “Please provide the total direct and indirect compensation your firm and any affiliates received in connection with our plan for the most recent plan year, in dollars.” A firm operating in good faith produces this in days.

Move 2 — Ask for the actual, not the estimate. Disclosures are forward-looking by design. Actuals are the accountability document. If the two diverge materially, that gap is the conversation.

Move 3 — Create a record. Document the request, the response, and your evaluation of whether the compensation is reasonable for the services delivered. This is the fiduciary posture ERISA’s prohibited-transaction exemption assumes: reasonable compensation, assessed by the plan fiduciary (Morgan Lewis). And if a provider simply won’t produce the disclosure, DOL guidance contemplates the fiduciary requesting it, and protects fiduciaries who escalate a refusal — including notifying the Department of Labor and considering termination of the arrangement (Groom Law Group). You’re not building a case against your broker — you’re building the file that shows you asked.

To be clear: you don’t have to fire anyone to do any of this. The most common outcome isn’t a broker change — it’s a better-aligned arrangement with the broker you already have. Reading the document isn’t aggression. It’s the job.

What a Disclosure Looks Like When Nobody’s Hiding

Fair challenge: it’s easy to critique a document standard. Harder to show your own.

When we quote an engagement, the compensation conversation happens before anything is signed — in dollars, on one page. Total annual fee, what’s included, what isn’t, what happens if headcount moves. No override collected on the side that you’d need page six and a magnifying glass to find. It’s why a Find Your Fit call starts with your plan and your disclosure instead of our pitch deck.

Want the whole process before you talk to anyone? Inside the Cost Containment Blueprint: What Actually Happens in Your First 90 Days With BeneSmart.

“I’ve never had an employer get angry about what their broker earns. They get angry about finding out by accident. Show the number first and the whole relationship changes.”
— Rich Westermayer, Founder, BeneSmart Services

Frequently Asked Questions

What are the broker compensation disclosure requirements under CAA Section 202?
CAA Section 202 — ERISA §408(b)(2)(B) — requires brokers and consultants to group health plans to disclose direct and indirect compensation, in writing, reasonably in advance of the arrangement being entered into, extended, or renewed (DOL FAB 2021-03). It applies to covered service providers reasonably expecting $1,000 or more in compensation.

Who has to provide a broker compensation disclosure?
Covered service providers — brokers, consultants, and certain other advisors — expecting $1,000 or more in compensation connected to their services, regardless of whether they market themselves as “brokers” or “consultants” (FAB 2021-03). The obligation to deliver sits with them; the obligation to review it sits with you.

What counts as indirect compensation?
Any compensation from a source other than the plan or plan sponsor: override bonuses, contingent commissions, persistency credits, market-share and growth bonuses, and compensation from carriers, TPAs, PBMs, general agents, and stop-loss MGUs.

Does CAA Section 202 limit how much my broker can be paid?
No. It requires disclosure, not a cap (Groom Law Group). Whether the compensation is reasonable for the services delivered is a separate question under ERISA §408(b)(2) — and it sits with the plan sponsor.

What if my broker won’t give me a compensation disclosure?
Request it in writing and document the request. Without the required disclosure, the arrangement can lose its prohibited-transaction exemption, and DOL guidance protects fiduciaries who escalate a refusal — including notifying the Department of Labor and considering termination (Groom Law Group). A refusal or indefinite delay is itself a finding, and it belongs in your plan file with the rest of your fee-reasonableness documentation.

How much does a typical benefits broker earn on a mid-sized plan?
Commissions in this market commonly run 3%–6% of premium. On a $1.5 million plan, that’s roughly $45,000–$90,000 a year before any indirect compensation is counted.

About the Author

Rich Westermayer — Founder, BeneSmart Services. Rich entered the benefits industry in 2013 and spent nine years working the carrier side of the business before going fully independent. He launched his own firm in 2017 and has led BeneSmart since 2022 as an independent, flat-fee alternative to commission-driven benefits brokerage for 50–500 life employers — and he personally leads every Cost Containment Blueprint engagement. Direct line: 314-265-5872.

Last updated: August 6, 2026