On 2/24/2005, the Department of Labor (DOL), Division of Coverage, Reporting and Disclosure issue an Advisory Opinion (AO) to Fortis Benefits Insurance Company regarding their inquiry on certain annual reporting requirements under ERISA. Specifically, they sought guidance on information to be provided to plan administrators on commission and fees paid to brokers, agents and other persons for disclosure on Schedule A Form 5500. The AO details the legal obligation that insurance companies and other organizations that provide benefits under ERISA plans must disclose to plan administrators. The AO states that “…commissions and fees required to be reported on Schedule A include all commissions and fees directly or indirectly attributable to a contract or policy between a plan and an insurance company, insurance service or similar organization…” They went on to further define the reportability of other compensation arrangements. To wit,” …Similarly, classifying fees or commissions attributable to a contract or policy as “profit-sharing” payments, delayed compensation, or as “reimbursements” for various marketing or other expenses would not justify a failure to disclose such amounts…Insurers must provide plan administrators with a proportionate allocation of commissions and fees attributable to each contract for which a Schedule A must be filed…In satisfying that obligation, any reasonable method of allocating commissions and fees to policies and contracts is acceptable, provided the method is disclosed to the plan administrator.” While many questions still remain with regard to the details of these requirements, it seems quite clear that the issuance of Schedule A information that we provide to plan administrators is about to undergo a major alteration. If your organization has “override, marketing or profit-sharing” arrangements in place, it is not too early to contact your legal representative to determine your reporting obligations. To view the complete AO go to: http://www.dol.gov/ebsa/regs/aos/ao2005-02a.html

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