Benefits broker
A benefits broker is a licensed intermediary who helps you select, negotiate, and renew group benefit plans, then stays involved through enrollment and carrier issues.
Broker work concentrates around renewal and open enrollmentOpen enrollment. Open enrollment is the annual window when employees elect, change, or waive benefit coverage for the coming plan year.Click to open the term, yet the role runs all twelve months. Compliance support is common as well, covering plan documents, required notices, and filing deadlines. A broker is not a substitute for legal or tax counsel. Nothing requires you to use one: you can contract with carriers directly, and some employers do for a single line of coverage. A broker advises on plan selection and placement, while a third-party administratorThird-party administrator (TPA). A third-party administrator (TPA) is a contracted firm that performs benefit plan administration, such as claims processing, but does not insure the plan.Click to open the term performs ongoing administration.
How is a broker paid, and why does it matter?
Commission is not free money: the amount already sits inside the rate you and your employees pay. Federal law requires brokers and consultants to disclose expected direct and indirect compensation to the group health plan fiduciary. The disclosure comes before the contract is entered, once expected compensation reaches the threshold in the rules. It lets you judge whether a recommendation tracks the group’s interest. Ask for it and read it against the service the group actually receives.
| ARRANGEMENT | HOW IT WORKS |
|---|---|
| Commission | Built into the premium the carrier charges; usually names no deliverables |
| Direct fee | You pay the broker directly; usually names deliverables |
| Both | Some groups see both, across different lines of coverage |
- 29 U.S.C. §1108, Exemptions from prohibited transactions
- Field Assistance Bulletin No. 2021-03: Temporary Enforcement Policy Regarding Group Health Plan Service Provider Disclosures Under ERISA Section 408(b)(2)(B)
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.