On January 29, 2026, the U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) released a proposed rule under the Employee Retirement Income Security Act (ERISA) service provider prohibited transaction exemption intended to bring transparency to the fees and compensation pharmacy benefit managers (PBM) receive. The proposal would apply to self-insured ERISA plans of any size, enabling plan fiduciaries to assess the reasonableness of compensation for the services.

To implement an executive order, DOL has proposed a regulation under ERISA section 408(b)(2) that would require PBMs to provide specific initial and semiannual disclosures to plan fiduciaries of employer-sponsored self-insured group health plans, according to a fact sheet. Further, the proposal would permit—but not require—plan fiduciaries to audit the disclosures annually, providing them with the tools to verify the accuracy of the information provided by PBMs. Finally, relief is proposed for plan fiduciaries in the event their PBM fails to meet its obligations under the regulation.

How the proposal would help employers

The proposal aims to help employers access clear, detailed information that helps them understand PBM compensation flows, negotiate and monitor PBM contracts, identify conflicts of interest and whether the PBM provides any services as a fiduciary and bring prescription drug costs down.

Covered service providers

Covered service providers are those who do the following (whether the services are performed directly or through affiliates, agents, or subcontractors)

• Contract with self-insured group health plans for PBM services  
• Offer advice, recommendations, or referrals regarding PBM services

Covered service providers must give the plan fiduciary initial disclosures about fees and compensation before starting, renewing, or extending a contract or arrangement.

Compensation

PBM compensation is often complex and unclear, making it difficult for plan fiduciaries to assess. Thus, PBM disclosure would be required for compensation that may come directly from the health plan sponsor, manufacturer rebates, rebate aggregators, copay claw-backs, formulary placement incentives, spread pricing, direct payments, price protections, and more.

PBM or other service provider failure to comply

The proposal includes an additional proposed administrative exemption for plan fiduciaries who take certain steps when a covered service provider fails to comply, such as notifying DOL if the service provider does not correct the failure.

Compensation Disclosures in Recent Government Funding Bill

The Consolidated Appropriations Act (CAA) 2026 (HR 7148) enacted February 3, 2026, clarified that compensation disclosure is required from all plan service providers. Because there was no effective date included in the law, the provision appears to be effective immediately, although DOL could announce enforcement relief.

In CAA 2021, Congress amended ERISA section 408(b)(2) to add disclosures that “covered service providers” specifically brokerage and consulting service providers must make to group health plans related to development of implementation of plan design.

In CAA 2026, Congress changed “related to” to include any of the following: “plan design, insurance or insurance product selection (including vision and dental), recordkeeping, medical management, benefits administration selection (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness design and management services, transparency tools, group purchasing organization agreements and services, participation in and services from preferred vendor panels, disease management, compliance services, employee assistance programs, or third-party administration services, or consulting services related to any such services.”

PBM Disclosure and Rebate Pass-Through

Other CAA 2026 provisions include:

• New PBM disclosure regarding drug claims, drug pricing details, enrollee spending, copay assistance applied, effect of rebates on drug spending, and more.
• Contract terms between PBMs and plan sponsors or employers must remit 100% of rebates, fees, alternative discounts, and other remuneration to the group health plan. Rebates must be fully disclosed and enumerated to the plans and must be remitted on a quarterly basis to the plan.
• PBMs must provide a summary document to the plan sponsor intended to provide information useful for purposes of selecting PBMs such as an estimated cost per participant.
• PBMs must include a summary document for plans to distribute to participants covering total net spending by the plan and total amount received in rebates, fees, alternative discounts, etc.

Comparing the law and the proposed rule

Both the proposed rules and the law have PBM disclosure and audit requirements. The proposed rule requires rebate disclosure but doesn’t have a rebate pass-through mandate like the law does.

Action Steps

Although compliance requirements are still a few years in the future, employers must ensure that they receive initial PBM reports, understand how to review them, and review how to fulfill their fiduciary responsibilities. Employers could also look ahead at contract expiration dates and work to familiarize themselves with potential contract provision changes.

Future clarification may help address if plan sponsors will be able to include the new notice requirements in an updated version of their summary plan descriptions (SPDs).

Next Steps and Timeline

PBM disclosures would give plan fiduciaries a helpful tool to fulfill fiduciary duties to their health plan participants and beneficiaries. Beyond transparency, many supporters of PBM reform hope that the disclosures will translate into contract negotiation strategies that lower drug coverage costs.

Next for the new law, DOL has 18 months to provide the “standard format” for reports and issue regulations with a deadline of approximately August 2027. The effective date is plan years beginning on or after August 3, 2028, which for calendar year plans is January 1, 2029.

Comments on the proposed rule are due April 15, 2026, after DOL issued an extension on February 27, 2026. DOL will review comments and eventually release a final rule. Rulemaking could be finalized as proposed or there could be changes based on feedback DOL receives. For instance, could “affiliates” expand beyond brokers to health insurance companies or other third party services outside of prescription drugs?

Resources comparing PBM disclosure proposed rule and enacted law

New Transparency Requirements for Pharmacy Benefit Managers: What Group Health Plan Sponsors Need to Know [Winston & Strawn]

PBM Reform Cheat Sheet: Chart Comparing the Recent Rules for Group Plans [Foley and Lardner]

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.