On October 29, 2026, the Department of Labor (DOL) finalized a rule requiring pharmacy benefit managers (PBMs), and PBM-affiliated brokers and consultants, to disclose their compensation to fiduciaries of large self-funded health plans. The disclosures provide plan fiduciaries with compensation information to help determine whether a PBM contract is “reasonable” under ERISA §408(b)(2). The rule also gives plans a right to audit the disclosures.
Applicability
| Plan Type | Detailed Disclosures Under This Rule? |
| Self-funded, average 100+ participants (employees) in the prior calendar year (“specified large employer”) | Yes |
| Self-funded, average 100+ participants (employees) in the prior plan year (“specified large plan”) | Yes |
| Self-funded, below 100 participant (employee) averages as listed above. | No, but the general statutory disclosures (ERISA §408(b)(2)(B)) still apply |
| Fully insured | No, the rule reserves these plans for future action |
Limited-scope dental and vision plans and Taft-Hartley (union) plans are covered if they meet the size tests.
Key Dates
| Milestone | Date |
| Rule applies | Plan years beginning on or after July 1, 2027 |
| Good-faith enforcement relief (statutory disclosures) | February 3, 2026 (enactment date of the CAA) until the applicability date |
| Rebate pass-through and new ERISA §726 drug-spending reports | Plan years beginning on or after Aug 3, 2028 |
What PBMs Must Disclose
Before a contract is signed, extended, or renewed (90 days in advance for renewals and extensions) a disclosure must be provided that includes the following information:
- Services provided and direct compensation, by service
- Manufacturer rebates, fees, and discounts, in total and by drug, showing what the plan receives and what the PBM keeps
- Spread compensation, by drug and pharmacy channels (retail, mail, specialty), and any incentives steering members to PBM-affiliated pharmacies
- Copay claw-backs and other retroactive pharmacy adjustments
- Price-protection agreements
- Compensation payable on termination
- Any other compensation, with payer and arrangement
- Formulary placement incentives, alternatives left off the formulary and why, and the PBM’s authority to change the formulary
- Net drug prices by drug and channel, or a verifiable pricing methodology
- ERISA fiduciary status, if applicable
- A statement of audit rights
Every six months (or quarterly on request), within 30 days of period ending a disclosure must be provided that includes the following information:
- Actual compensation received or expected, across the same categories
- An explanation of any category exceeding its estimate by 5% or more (or a lower threshold agreed in writing)
Amounts must be stated in dollars. Estimates are allowed if based on good-faith assumptions. Disclosures must be in plain language, and a machine-readable file is available on request.
Audit Rights
- At least once per year, on written request
- The plan selects the auditor, and the PBM cannot limit the choice
- The PBM must provide claims and transaction-level data and its contracts with pharmacies, manufacturers, and rebate aggregators
- The plan pays for the auditor, and the PBM is obligated to provide the information without imposing fees. The PBM cannot pay for the auditor.
- The PBM must acknowledge the request within 10 business days and produce the data within 60 days, absent extraordinary circumstances
- Audits are optional, and fiduciaries may weigh cost against likely benefit
Fiduciary Responsibilities
The rule includes protection for plan fiduciaries if a PBM fails to comply. To rely on the protection, the following must apply:
- The failure was not known to the plan sponsor, and the plan sponsor reasonably believed the PBM complied.
- When the failure is discovered, a correction in writing is requested from the PBM by the plan sponsor.
- The plan sponsor makes notification to the DOL if the PBM does not comply within 90 days.
- The plan sponsor documents the decision of whether to terminate or continue the contract, and the basis for that decision.
The DOL states that this documentation should not be a “check the box exercise.”
Upcoming Related Changes
The Consolidated Appropriations Act, 2026, adds two further requirements for plan years beginning on or after August 3, 2028:
- PBMs must pass through 100% of rebates, fees, alternative discounts, and other remuneration to the plan.
- PBMs must provide semiannual drug-spending reports to large plans.
The DOL kept the disclosure requirements in this rule so plans can see how those payments are handled.
Key Takeaway
Employers sponsoring large self-funded plans should prepare to receive detailed PBM compensation disclosures. Plan sponsors are expected to review these disclosures to ensure the compensation their PBM service provider receives in connection with the plan is reasonable as required by ERISA.
The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.
