The Consolidated Appropriations Act, 2026 (CAA) (H.R. 7148), passed into law and signed by the president on February 3, 2026, added sweeping mandates to ERISA related to the provision of pharmacy benefit management services to ERISA-covered group health plans. (See previous coverage here.) In addition to the reporting obligations contained in section 6701 of the CAA, section 6702, amending ERISA section 408(b)(2), imposes new requirements for ERISA health plan contracts and arrangements for pharmacy benefit management services to be deemed "reasonable" for purposes of qualifying for a prohibited transaction exemption and expands the types of service providers and services covered by the prohibited transaction exemption fee disclosure requirements for health plans added to ERISA in 2020. Below is a summary of the key provisions in section 6702.

100 Percent Passthrough Requirement

The section 6702 amendments state that in order for a contract or arrangement (or the renewal or extension of a contract or arrangement) between a covered plan and a covered service provider (or between a sponsor of a covered plan and a covered service provider), through a health insurance issuer offering group health insurance coverage, a third-party administrator, an entity providing pharmacy benefit management services, or other entity, for pharmacy benefit management services to be "reasonable" for purposes of the section 408(b)(2) prohibited transaction exemption, the entity providing pharmacy benefit management services: 

must remit 100 percent of rebates, fees, alternative discounts, and other remuneration received from any applicable entity that are related to utilization of drugs or drug spending under such health plan or health insurance coverage, to the group health plan or, in the case of a health insurance issuer offering group health insurance coverage in connection with a group health plan, to the health insurance issuer offering group health insurance coverage on behalf of the plan."

The amendment also conditions "reasonableness" on the entity providing pharmacy benefit management services not entering into a contract for pharmacy benefit management services that does not provide for the 100 percent passthrough. 

Further, the rebates, fees, alternative discounts, and other remuneration must be remitted to the plan or issuer on a quarterly basis. To facilitate compliance with these provisions, rebate aggregators and group purchasing organizations must remit rebates to the entity providing pharmacy benefit management services not later than 45 days after the end of each quarter. Records of rebates and the other forms of remuneration must be available to plans for annual audits and plans must be given access to rebate contracts with rebate aggregators or drug manufacturers, subject to reasonable confidentiality restrictions. 

Responsible Plan Fiduciary Exemption

The new statutory provisions provide an exemption to "responsible plan fiduciaries" from the prohibited transaction rules found in ERISA section 406(a)(1) (C) and (D) with regard to failures to adhere to the new 100 percent passthrough requirements. Section 406(a)(1)(C) prohibits a fiduciary from causing a plan to engage in a transaction for the direct or indirect furnishing of goods, services, or facilities between the plan and a party in interest, whereas section 406(a)(1)(D) bars direct or indirect transfers to, or use by or for the benefit of a party in interest, of any assets of a plan. According to the new provisions, which track existing conditions for limiting fiduciary liability under the section 408(c)(2) fee disclosure rules, a plan fiduciary who did not know that a covered service provider failed or would fail to make the required 100 percent passthrough remittances and reasonably believed that the covered service provider remitted the required amounts will not violate ERISA section 406(a)(1)(C) or (D) if, upon discovering that failure, the fiduciary requests in writing that the covered service provider remit such amounts and, in situations where that written request is not honored by the covered service provider, notifies the Secretary of Labor within 90 days. 

It is anticipated that the existing Department of Labor (DOL) reporting structures covering fiduciary reports of fee disclosure failures by covered services providers will be expanded to also address 100 percent passthrough remittance failures.

Clarification of "Covered Service Provider"

The section 6702 amendments also significantly clarify and expand the definitions of a "covered service provider" and the covered services that are subject to the section 408(b)(2) health plan fee disclosure requirements. Among other things, the types of services that render a party a "covered service provider" under the fee disclosure rules are not just "brokerage services" and "consulting" as the 2020 ERISA amendments state, but now include any of the following services, including when the services are rendered by an affiliate or a subcontractor:

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."

The reference to "Brokerage services" in section 408(b)(2)(B)(ii)(I)(bb)(AA) was also expanded to "Services (including brokerage services)."

The amendments also state that when an entity providing services to a plan contracts with a service provider for pharmacy benefit management services, the contract is considered an indirect furnishing of goods and services between a covered plan and the service provider for pharmacy benefit management services for purposes of the prohibited transaction provisions in ERISA section 406(a)(1)(C).

Future Rulemaking

The DOL is tasked with promulgating regulations to implement certain aspects of these new provisions. The agency will likely work to ensure consistency between its new proposed rule on PBM fee transparency and these new requirements under the CAA.

Miller & Chevalier's ERISA team will address future rulemaking, guidance, and implementation of these statutory provisions in alerts and in our weekly employee benefits newsletter, The ERISA Edit. If you have questions or would like more information about these significant new ERISA requirements impacting plan sponsors, fiduciaries, group health plans, and plan service providers, contact Miller & Chevalier Member and ERISA Practice Lead Joanne Roskey.

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