Early 2026 brought two major federal actions that reshape how pharmacy benefit managers (PBMs) are regulated and how plan fiduciaries oversee prescription drug benefits.
- January 30, 2026: The Department of Labor (DOL) issued proposed rules that would require PBM fee disclosures to ERISA self-funded group health plans.
- February 3, 2026: Congress enacted the Consolidated Appropriations Act, 2026 (CAA 2026), which goes further by mandating 100% rebate pass-through, expanded reporting, and new participant disclosures.
Together these changes send a clear message that PBM arrangements are no longer something plan sponsors can treat as too technical or complicated to understand. Fiduciaries are expected not only to obtain PBM data but to evaluate it, document decisions, and monitor PBM performance over time.
DOL Proposed PBM Disclosure Rules
Scope of the Proposed Rules
The proposed rules apply to PBMs serving ERISA self-funded (including level funded) group health plans. They also apply to related entities that expect to receive at least $1,000 in direct or indirect compensation in connection with PBM services. This may include affiliated brokers, consultants, rebate aggregators, group purchasing organizations, and even affiliated pharmacies. The proposed rules do not apply to fully insured plans.
Core Disclosure Requirements
PBMs would be required to provide advance, detailed disclosures of all expected compensation and the methods used to calculate it. This includes administrative fees, per-member or per-claim fees, manufacturer rebates and fees, spread pricing revenue, payments to affiliates, data or service fees, and any other direct or indirect compensation.
Audit rights
Plans must have the right to audit the accuracy of these disclosures at least annually and fiduciaries may choose the auditor.
Fiduciary implications and timing
The DOL stops short of declaring that PBMs are fiduciaries. However, it does raise expectations for plan fiduciaries to review the PBM disclosures, assess reasonableness of compensation, identify conflicts, understand cost drivers, and monitor PBM performance. If finalized as proposed, the rule would apply to plan years beginning on or after July 1, 2026. For calendar year plans, that is January 1, 2027.
Consolidated Appropriations Act of 2026
The Consolidated Appropriations Act of 2026 (CAA 2026) applies to ERISA self-funded group health plans and to insurers providing fully insured ERISA plans. Most provisions take effect for plan years beginning on or after August 3, 2028, which means January 1, 2029, for calendar year plans.
Enhanced PBM Reporting for Self-Insured Large Employers and Large Plans
PBMs must provide self-insured group health plans offered by large employers (at least 100 employees) and large plans (at least 100 participants) with detailed, drug level reporting at least semiannually (or quarterly upon request). These reports must include information such as plan paid vs. pharmacy paid amounts, details about participant cost-share, and pharmacy network data. Large fully insured health plans can opt into receiving the reports.
Summary Reporting Required for All Plans
Entities providing pharmacy benefit management services must provide every plan, regardless of size or funding, with a summary document containing most of the information included in the enhanced reports for large employers and large plans. This summary must be furnished on the same semiannual/quarterly schedule and is intended to give all plan fiduciaries a usable overview of drug spending, pricing, and PBM compensation.
Participant Disclosures and Access Rights
Entities providing pharmacy benefit management services must provide every plan (self-insured or fully insured) with a summary document that the plan can provide to participants and beneficiaries upon request. Every plan must give written annual notice to participants explaining the new reporting requirements and informing them of their rights to access PBM related information. Participants and beneficiaries may request specific claim level information for claims incurred by the participant or beneficiary.
Mandatory 100 Percent Rebate Pass-Through
PBMs must pass through all rebates and discounts from drug manufacturers to self-funded plans and to insurers for fully insured plans. Payments must be made quarterly, within 90 days after the end of each quarter.
Penalties
Failure to comply can result in civil monetary penalties of up to $10,000 per day during which the violation continues or the information is not disclosed.
What This Means for ERISA Fiduciaries
The CAA 2026 raises the bar on PBM oversight. Under ERISA, plans can only contract with “parties in interest” like PBMs if the arrangement is reasonable and the compensation is reasonable under §408(b)(2). Now under the CAA 2026, a PBM contract cannot be considered “reasonable” unless the PBM agrees to 100% rebate pass through and meets the disclosure requirements. Historically, many plan sponsors relied heavily on consultants or market norms when evaluating PBM contracts. Going forward, that will be difficult to defend. Now that detailed data will be available, fiduciaries are expected to:
- Understand how their PBM is paid
- Evaluate conflicts of interest
- Assess whether compensation aligns with services provided
- Monitor performance over time
Plan fiduciaries will have more visibility and with that comes more responsibility.
Comparison: DOL PBM Disclosure Rule vs. CAA 2026 PBM Reform
The DOL proposed rules are narrower and focused on disclosure to self-funded ERISA plans. The CAA 2026 applies to both self-funded and fully insured ERISA plans, mandates complete rebate pass through and adds participant notice requirements. Because the DOL proposed its rules before the CAA 2026 was enacted, it is likely the final DOL rules will be adjusted to coordinate with the CAA 2026.
| Topic | DOL Proposed PBM Disclosure Rule | CAA 2026 PBM Reform |
| Who it applies to | Self-funded ERISA group health plans | Self-funded and fully insured ERISA group health plans |
| Effective date | If finalized as proposed, plan years beginning on or after July 1, 2026 (calendar year plans: January 1, 2027) | Generally, plan years beginning on or after 30 months after enactment (calendar year plans: January 1, 2029) |
| Primary focus | PBM compensation disclosure and fiduciary oversight; audit rights | 100% rebate pass-through, expanded reporting, participant access and notices, audit rights |
| Penalties | No explicit civil penalties; enforcement via ERISA prohibited transaction consequences | Explicit civil penalties (e.g., up to $10,000/day for non-disclosure) and ERISA exposure for unreasonable arrangements |
| Participant rights | None specific to the DOL proposed rules | Annual notices; access to plan level summaries and claim level spread data |
Employer Takeaways
The federal focus on PBM transparency is a shift in expectations. Plan sponsors will have more visibility, and they are expected to use it. The responsibility now extends beyond obtaining data to understanding it and acting on it through prudent PBM selection, ongoing monitoring, and well documented decisions.
Employer Action Steps
All Employers: Every plan sponsor, regardless of funding type, should:
- Identify all PBM related service providers
- Adopt a simple fiduciary review process to evaluate compensation, conflicts and performance
- Issue required annual participant notices and provide PBM summary documents upon request
- Monitor upcoming agency guidance and adjust contracts or processes, as needed
Self-Insured Plans (including level funded): Self-funded employers will receive the full set of PBM reports automatically. They should:
- Update PBM contracts to require 100% rebate pass through, required disclosures and audit rights
- Run RFPs or renegotiate if current PBMs will not agree to compliant terms
- Review reports each cycle and document conclusions
- Coordinate participant requests for summaries and claim-level data
Fully Insured Plans: Fully insured employers have fewer operational requirements but still have fiduciary duties. They should:
- Decide annually whether to opt-in to enhanced PBM reporting (if a large plan)
- Confirm the carrier’s PBM contract meets rebate pass through and disclosure rules
- Review carrier provided summaries and document oversight
- Ensure annual notices are delivered to participants
Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources.
The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog. © 2026 Sequoia Consulting Group. All Rights Reserved.
