TO:
Independent Insurance Brokers
FROM:
Fred Reish
DATE:
February 22, 2012
RE:
ERISA Section 408(b)(2) Disclosure Information and Sample Agreement
This memorandum provides an overview discussion about how the Department of Labor’s
408(b)(2) final regulation affects independent insurance brokers (Brokers) and includes a sample
agreement prepared by Fred Reish of the Drinker Biddle & Reath law firm (attached as Exhibit
A). This memorandum and the sample agreement are designed to be used as a starting point by
independent Brokers and their legal counsel in preparing service agreements between Brokers
and plan sponsors/fiduciaries of retirement plans, such as 401(k) plans, for which the Broker will
provide insurance brokerage services. The sample agreement is intended only to assist Brokers
and their legal counsel with respect to agreements for insurance brokerage services and not
securities brokerage. If a broker is providing securities brokerage services, this agreement
should not be used. Instead, an agreement with the broker-dealer addressing securities brokerage
services is appropriate.
The attached sample agreement has been prepared without regard to the law of any state.
Brokers should consult with their own legal counsel before incorporating any of the provisions in
the sample agreement into their own service agreement, or adopting or otherwise relying upon
the sample agreement for use in their practice. Further, Brokers should discuss with their own
counsel whether additional provisions are appropriate from a general legal compliance and/or
risk management standpoint. The Standard, Mr. Reish and Drinker Biddle & Reath shall not be
responsible or held liable for any Broker’s use of the sample agreement.
In reviewing the sample agreement, Brokers and their legal counsel should consider various
clarifications/options described in footnotes as well as definitions in the Glossary (attached as
Exhibit B).
This memorandum and the attached sample agreement are based on information available
and relevant DOL guidance issued as of February 22, 2012 and do not incorporate any
changes or revisions to the law or applicable regulations that may arise after that date.
Brokers should note that while Department of Labor (“DOL”) Final Regulation Section
2550.408b-2(c) (the “Regulation”) is a final regulation, the DOL has indicated that it will issue
proposed regulations regarding a summary or guide requirement. Thus, it is possible that a
summary requirement will be added and that brokerage agreements will need to be modified
accordingly. We doubt, however, that any such requirement will be in place before the
Regulation’s July 1, 2012 effective date.
The Regulation, which interprets Section 408(b)(2) of the Employee Retirement Income Security
Act of 1974 (ERISA) and Section 4975(d)(2) of the Internal Revenue Code (“IRC”), requires
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“covered service providers” to make advance written disclosure of their services, status, and
compensation.1 Under the Regulation, the definition of covered service provider includes
brokerage services provided to a participant-directed individual account plan with at least one
designated investment alternative. Further, the catchall definition of covered service providers
includes brokerage or other services provided to a plan for indirect compensation (as defined in
the Glossary attached as Exhibit B).
The failure of a covered service provider to comply with the provisions of the Regulation gives
rise to a prohibited transaction under ERISA and the IRC. The sample agreement is designed to
assist Brokers and their legal counsel in preparing agreements that comply with the requirements
of the Regulation. Thus, the attached sample agreement includes the required disclosures
generally applicable to Brokers. However, we should note that there are a number of additional
disclosures applicable to other covered service providers, such as recordkeepers and plan
fiduciaries who manage certain investments in which a plan may invest. As a result, this
agreement should not be used to satisfy the disclosures for other service providers. Further, as
the sample agreement was prepared for use by independent Brokers (i.e., standalone brokers with
no affiliates, subcontractors, or related entities), it may require significant changes if the Broker
is affiliated with other entities. Brokers should consult with legal counsel if they have any
affiliates providing other services to plans.
Additionally, the sample agreement is not appropriate for use by Brokers who are acting as a
registered investment adviser or who exercise control over plan assets, provide fiduciary
investment advice, have discretionary authority or control over administration of 401(k) plans, or
otherwise perform functions that may cause them to be considered a “fiduciary” as that term is
defined by ERISA Section 3(21). Further, the sample agreement is designed for insurance
brokers and their employees rather than independent contractors. The Regulation requires
disclosure of “a description of any compensation that will be paid among the covered service
provider, an affiliate, or a subcontractor…if it is set on a transaction basis (e.g., commissions,
soft dollars, finder’s fees or other similar incentive compensation based on business placed or
retained) or is charged directly against the covered plan’s investment and reflected in the net
value of the investment (e.g., Rule 12b-1 fees); including identification of the services for which
such compensation will be paid and identification of the services for which such compensation
will be paid and identification of the payers and recipients of such compensation (including the
status of a payer or recipient as an affiliate or a subcontractor).” Independent contractors are
considered subcontractors. Thus, independent contractors may require additional disclosures not
provided for in the sample agreement. If any of the foregoing assumptions do not apply to the
Broker’s particular situation, the sample agreement should be modified accordingly.
While the Regulation does not require that the disclosures be included in a written agreement,
from a risk management standpoint we consider it a best practice for Brokers to have a written
agreement and believe it makes sense to include the disclosures in the Broker’s agreement. That
being said, since the Regulation takes effect July 1, 2012 for existing as well as new
1
As defined in the Glossary (attached as Exhibit B), compensation is anything of monetary value, including money,
gifts, awards, etc. However, non-monetary compensation valued at $250 or less, in the aggregate, during the term of
the arrangement is not included.
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relationships, rather than have existing clients execute new agreements with the required
disclosures, Brokers may decide to provide a separate written disclosure to existing clients by
July 1, 2012. Such disclosures may be done electronically. However, for risk management
purposes the Broker should discuss with counsel procedures to document such disclosure. For
example, Brokers should consider having a method in place to verify receipt of the disclosure
and to retain records of the disclosure. Thus, for existing relationships, Brokers must disclose
the current services and compensation by July 1, 2012; for new relationships (and for extensions
or renewals of pre-existing relationships), on July 1, 2012 and thereafter Brokers will need to
provide the services and compensation disclosures reasonably in advance of entering into the
arrangement (or extension or renewal).
The sample agreement includes amendment language designed to allow the Broker to make
changes to the agreement by providing sufficient advance notice, in accordance with Department
of Labor Advisory Opinion 97-16A (the “Aetna Opinion”). Under the Aetna Opinion, a Broker
may be subject to a fiduciary claim if the agreement gives the Broker power to unilaterally
change its fees under the agreement. By tracking the advance notice requirements and giving the
responsible plan fiduciary an opportunity to terminate the agreement and find a new provider
before the amended fee takes effect, under the Aetna Opinion, Brokers can avoid this fiduciary
issue. Alternatively, Brokers could provide that the agreement, including the fee provisions, can
only be amended by a writing signed by both the Broker and the responsible plan fiduciary.
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Exhibit A
SAMPLE
INSURANCE BROKER SERVICE AGREEMENT1
Plan Sponsor:
__________________________________
[name]
__________________________________
[address]
__________________________________
__________________________________
[email address]
Plan:
__________________________________
[name of plan]
Insurance Broker:2
__________________________________
__________________________________
__________________________________
Date:
_______________________, 20________
The Plan Sponsor, as the responsible plan fiduciary for the Plan, engages the Insurance Broker
(“Broker”) to provide the services described in this Agreement according to the terms of this
Agreement.3
1.
Fiduciary Authority. The Plan is a participant-directed plan and the Plan Sponsor has the
authority to designate investment alternatives under the Plan and the related trust, and to
enter into an Agreement with third parties to assist in these and related duties. In this
capacity, the Plan Sponsor (or to the extent the Plan Sponsor has delegated its investment
authority to an investment committee, the committee) is referred to as the “Client.”
1
This sample agreement is based on information available and relevant DOL guidance issued as of February
22, 2012 and does not incorporate any changes or revisions to the law or applicable regulations that may arise
after that date.
2
This sample agreement was prepared for an individual or entity licensed as an insurance broker and not a securities
broker-dealer or as a registered representative broker-dealer.
3
Under Department of Labor Final Regulation section 2550.408b-2(c) (the “Regulation”), disclosures must be made
to the “responsible plan fiduciary,” who is “a fiduciary with the authority to cause the plan to enter into, or extend or
renew, the contract or arrangement.” If the plan sponsor does not have such authority, the agreement should be
revised to reflect the proper party. Typically, for small plans, an executive officer acting on behalf of the plan
sponsor is the responsible plan fiduciary. However, as plans get larger, they usually operate through plan
committees. In such a case, the plan committee is likely the responsible plan fiduciary. If the trustee is a
discretionary trustee who has authority to hire an insurance broker, the trustee could be the responsible plan
fiduciary.
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2.
Disclosures. Before this Agreement is entered into, Broker provided the Client with
certain disclosures concerning its services and compensation, and Client acknowledges
that it received such disclosures sufficiently in advance of entering into the arrangement
evidenced by this Agreement to make an informed decision to engage Broker. The
information in this Agreement is intended to serve as the Broker’s disclosure for purposes
of DOL Regulation Section 2550.408b-2.
3.
Services. Broker agrees to provide the services described in Appendix A to Client, the
Plan and the Plan participants (the “Services”). Client acknowledges that Broker has no
responsibility to provide any services other than with respect to insurance contracts and
policies.4
4.
Compensation.5
5.
(A)
The compensation of the Broker for the performance of the Services is described
in Appendix B. The commissions paid to Broker shall reflect a charge against the
Plan’s investment.
(B)
Unless agreed to in writing by the parties, Broker will not receive any other
compensation, direct or indirect, for its services under this Agreement. If Broker
receives any other compensation for the services, Broker will disclose the amount
of such compensation, the services provided for such compensation, the payer of
such compensation, and a description of Broker’s arrangement with the payer to
Client in accordance with Section 7(B).
Limitations on Functions. Client acknowledges that:
(A)
In performing the Services, Broker is not acting as a fiduciary either within the
meaning of ERISA or under the Investment Advisers Act of 1940.
(B)
In performing the Services, Broker does not act as, nor has Broker agreed to
assume the duties of, a trustee or the Plan Administrator, as defined in ERISA,
and Broker has no discretion or responsibility to interpret the Plan documents, to
determine eligibility or participation under the Plan, or to take any other action
with respect to the management, administration or any other aspect of the Plan.
(C)
Broker does not provide legal or tax advice.
(D)
Broker is entitled to rely upon all information provided to Broker, whether
financial or otherwise, by Client, Client’s representatives or third-party service
providers to Client or the Plan without independent verification. Client agrees to
4
Broker should discuss with legal counsel whether this list of exclusions should be augmented or otherwise revised.
Under the Regulation, Broker is required to disclose all compensation (direct or indirect), which Broker (and/or its
affiliates or subcontractors) reasonably expect to receive in connection with the services under this agreement. For
example, if Broker (or an affiliate) will receive compensation payments from the insurance companies, the amount
of, or formula for calculating, such compensation must be disclosed as well as the payer of the indirect
compensation, the manner of receipt, the services provided for the compensation, and a description of the
compensation arrangement.
5
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promptly notify Broker in writing of any material change in the financial and
other information provided to Broker and to promptly provide any such additional
information as may be reasonably requested by Broker.
6.
7.
Representations of Client. Client represents and warrants as follows:6
(A)
It is the “responsible plan fiduciary” for the control and/or management of the
assets of the Plan, and for the selection and monitoring of service providers for
the Plan. Broker is entitled to rely upon this statement until notified in writing to
the contrary.
(B)
The person signing the Agreement on behalf of Client has all necessary authority
to do so.
(C)
The execution of this Agreement and the performance thereof is within the scope
of the authority authorized by the governing instrument and/or applicable laws.
The signatory on behalf of Client represents that the execution of the Agreement
has been duly authorized by appropriate action and agrees to provide such
supporting documentation as may be reasonably required by Broker.
(D)
The Plan and related Trust permit payment of fees out of Plan assets. Client has
determined that the fees charged by Broker are reasonable and are the obligation
of the Plan; however, if Client desires, it may pay the fees directly, rather than
with Plan assets.7
Representation of Broker. Broker represents as follows:
(A)
It has the power and authority to enter into and perform this Agreement.
(B)
It will disclose, to the extent required by DOL Regulation Section 2550.408b-2,
to Client any change to the information in this Agreement required to be
disclosed by Broker under DOL Regulation Section 2550.408b-2(c)(1)(iv)(A)
through (D) and (G) as soon as practicable but no later than 60 days from the date
on which Broker acquires knowledge of the change (unless such disclosure is
precluded due to extraordinary circumstances beyond Broker’s control, in which
case the information will be disclosed as soon as practicable).8
(C)
If the responsible plan fiduciary or plan administrator requests information related
to this Agreement and any compensation or fees received in connection with this
Agreement in order for the Plan to comply with the reporting and disclosure
6
Section 6 lists common client representations. Broker should review the provisions with counsel to determine if
they are appropriate or should be revised.
7
Broker must disclose the manner in which compensation will be received. See Appendix B of this sample
agreement regarding the manner of receipt.
8
Under the Regulation, Broker is required to disclose changes (material or not) to the required service, status and
compensation disclosure information within 60 days unless delayed due to extraordinary circumstances beyond
Broker’s control. While such a provision is not required to be in the agreement, we generally believe it is good to
include as a reminder to the Broker. Broker is also required to update the investment information regarding
designated investment alternatives annually.
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requirements of Title I of ERISA and the regulations, forms and schedules issued
thereunder, it shall make a written request to Broker at least thirty (30) days in
advance of the due date for such reporting or disclosure. Upon receipt of such
written request and in accordance with ERISA Regulation Section 2550.408b2(c)(1)(vi)(A), Broker will disclose such information reasonably in advance of
such due date, unless such disclosure is precluded due to extraordinary
circumstances beyond the Broker’s control, in which case the information will be
disclosed as soon as practicable.
(D)
If Broker makes an unintentional error or omission in disclosing the information
required under ERISA Regulation Section 2550.408b-2(c)(1)(iv), a change to
such information as described in part 7(B) hereof and disclosed pursuant to
ERISA Regulation Section 2550.408b-2(c)(1)(v)(B), or information required
under ERISA Regulation Section 2550.408b-2(c)(1)(vi) as described in part 7(C)
hereof, Broker will disclose to Client the corrected information as soon as
practicable but no later than thirty (30) days from the date on which Broker
knows of such error or omission.9
8.
Liability. Broker will perform the Services described in Appendix A and shall not be
liable for any liabilities and claims arising thereunder, unless directly arising from
Broker’s intentional misconduct or gross negligence.10
9.
Termination. Either party may terminate this Agreement upon [_______]11 days prior
written notice to the other party. Such termination will not, however, affect the liabilities
or obligations of the parties arising from transactions initiated prior to such termination,
and such liabilities and obligations (together with the provisions of section 8 and
subsections 5(D) and 10(H)) shall survive any expiration or termination of this
Agreement. Upon termination, Broker will have no further obligation under this
Agreement to act or advise Client with respect to services under this Agreement.
10.
Miscellaneous.12
(A)
Notices. Any and all notices required or permitted under this Agreement shall be
in writing and shall be sufficient in all respects if (i) delivered personally, (ii)
mailed by registered or certified mail, return receipt requested and postage
prepaid, or (iii) sent via a nationally recognized overnight courier service to the
address on the first page of this Agreement, such other address as any party shall
have designed by notice in writing to the other party.
9
Brokers must disclose errors and omissions within this timeframe in order to avoid having an inadvertent error or
omission cause a prohibited transaction. Further, including this information allows the Broker to make the
correction.
10
Brokers should consider whether a different standard of care (e.g., ordinary care) should be used. We have not
included any indemnity provision. Brokers should consult with their own counsel and internal policies regarding
whether an indemnity provision is appropriate.
11
Broker must determine how much notice to require for termination of the agreement.
12
Section 10’s miscellaneous provisions are meant to provide Broker with common language included in service
agreements. However, Broker should discuss with counsel whether such provisions are appropriate for Broker.
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Client expressly agrees to accept electronic communication of any notice, advice,
or report in lieu of a printed copy, including applicable disclosure documents and
disclosures required under ERISA section 408(b)(2) at the email address listed
above or such other email address as Client may designate in writing to Broker.
Client may revoke this consent at any time by providing notice to Broker
pursuant to this Section 10(A).
(B)
Assignability. This Agreement is not assignable by either party hereto without the
prior written consent of the other party.
(C)
Effect. This Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective heirs, successors, survivors, administrators and
assigns.
(D)
Entire Understanding and Modification. This Agreement constitutes and contains
the entire understanding between the parties and supersedes all prior oral or
written statements dealing with the subject matter herein. This Agreement can be
amended or modified by the written consent of the parties.
(E)
Severability. If any one or more of the provisions of this Agreement shall, for any
reason, be illegal or invalid, such illegality or invalidity shall not affect any other
provision of this Agreement and this Agreement shall be enforced as if such
illegal or invalid provision had not been contained herein.
(F)
Headings. All headings used herein are for ease of reference only and in no way
shall be construed as interpreting, decreasing or enlarging the provisions of this
Agreement.
(G)
Applicable Law; Forum.13 The laws of the State of ______________ shall govern
this Agreement in all respects, including but not limited to the construction and
enforcement thereof, unless otherwise preempted or superseded by federal law,
including--but not limited to--ERISA.
(H)
Arbitration Agreement.14 To the extent permitted by law, all controversies
between Client and Broker, which may arise out of or relate to any of the services
provided by Broker under this Agreement, or the construction, performance or
breach of this or any other Agreement between Broker and Client, whether
entered into prior to, on or subsequent to the date hereof, shall be settled by
binding arbitration in _______________, _____________ County,
______________, under the Commercial Arbitration Rules of the American
Arbitration Association. Judgment upon any award rendered by the arbitrator(s)
shall be final, and may be entered into any court having jurisdiction.
13
This agreement is not designed to meet any particular state law requirements. Broker should discuss state law
issues with counsel, including without limitation applicable state insurance laws.
14
Broker should consult with counsel to determine if an arbitration provision is appropriate. We have included
sample language to consider if Broker wants to include an arbitration provision.
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(I)
Amendment Process. The Agreement may also be modified, including without
limitation the services to be provided by Broker or the fees charged by Broker, in
the manner set forth herein and consistent with the procedure described in
Department of Labor Advisory Opinion 97-16A.
Broker may propose to increase or otherwise change the fees charged, to change
the services provided or otherwise modify this Agreement by giving Client
reasonable advance notice of the proposed change. The notice shall be given in
the manner described in this Agreement. The notice will (1) explain the
proposed modification of the fees, services or other provisions; (2) fully disclose
any resulting changes in the fees to be charged as a result of any proposed change
in the services or other changes to this Agreement; (3) identify the effective date
of the change; (4) explain Client’s right to reject the change or terminate this
Agreement; and (5) state that pursuant to the provisions of this Agreement, if
Client fails to object to the proposed change(s) before the date on which the
change(s) become effective Client will be deemed to have consented to the
proposed change(s).
If Client objects to any change to this Agreement proposed by Broker, Broker
shall not be authorized to make the proposed change. In that event Client shall
have an additional sixty (60) days from the proposed effective date (or such
additional time beyond 60 days as may be agreed by Broker) to locate a service
provider in place and instead of Broker. If at the end of such additional sixty (60)
day period (or such additional time period as agreed by Broker), the parties have
not reached Agreement on the proposed changes, this Agreement shall
automatically terminate.
(J)
Waiver of Limitation. Nothing in this Agreement shall in any way constitute a
waiver or limitation of any rights which Client or Plan or any other party may
have under ERISA or federal or state securities laws.
The parties have caused this Agreement to be executed by their duly authorized officers as of the
date set forth above. This Agreement shall not be binding on Broker until accepted by it, in
writing, as indicated by its signature below.
Plan Sponsor:*
Insurance Broker15:
__________________________________
_________________________________
By:________________________________
By:_______________________________
Print Name: _________________________
Title: _____________________________
Title: ______________________________
15
The signature line is for the Broker firm. If the firm also wants the individual broker to sign, an additional
signature line could be added providing that the agreement is “acknowledged” by the individual broker.
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*The Plan Sponsor is signing this Agreement both as the employer that sponsors the Plan and as
the fiduciary responsible for selecting the Plan’s investments and engaging its service providers.
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APPENDIX A16
SERVICES
Broker will perform the following insurance brokerage services:
(i)
Provide brokerage services for the investment of plan assets as directed by Client.
(ii)
Provide Client with general research, financial information and data, in the course of
Broker’s business as an insurance broker, to assist Client in the selection and monitoring
of the plan’s investments, provided that the selection and monitoring of investments and
the removal and replacement of investment is Client’s sole responsibility.
(iii)
Meet, as mutually agreed, with Client to review the investment information and the
services offered to the Plan and to educate Client on investment issues.
(iv)
Upon Client’s request, consult with Client regarding the selection of Plan providers;
provided that the selection and/or replacement of providers shall be Client’s sole
responsibility.
(iv)
Upon Client’s request, meet with employees to provide financial education, including
explaining the terms and operation of the Plan.
(v)
Conduct enrollment meetings for Plan participants and assist in the education of the
participants in the Plan about investment alternatives available under the Plan and general
investment principles.
(vi)
Other services as follows:17
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
16
Under the Regulation, Broker must disclose the services it will provide under the agreement. It is important that
Broker carefully consider and disclose what services will be provided. We have included sample services based on
common provisions but Broker must determine whether the descriptions reflect what it will do and/or if other
services should be listed.
17
Broker should do one of the following: (1) add additional service(s), (2) delete this reference, or (3) put “none”
after the colon.
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APPENDIX B
COMPENSATION SCHEDULE18
The Broker will receive commissions from the insurance company in accordance with the
schedule set forth below.
Broker will receive commissions in connection with the services provided pursuant to the
terms of this Agreement. All commissions received by Broker reflect a charge against the Plan’s
investment. The formula for determining the amount of those commissions and the manner in
which those commissions are paid is described below. All commissions are calculated with
reference to “basis points” (or “bps”). One basis point is equal to .01% of the amount at issue.
Thus, for example, 50 basis points is equal to .50%.
[Broker will need to complete this Appendix as appropriate. For example, Broker may
include “custom commissions” specifically agreed upon by the Broker and the responsible plan
fiduciary. The schedule should include the timing and amount (or formula) for such commission
payments. Alternatively (or in addition), the Broker may provide for standardized commissions
varying by class of investment. Consider the following sample standardized schedule:]
Deposit-Based (basis points)
Class
Transfer
1st Year
Recurring
Asset-Based (basis points)
2nd Year and 1st Year
on Recurring
2nd Year and
on
[Under the heading marked “Deposit-based (basis points),” commissions calculated on the basis
of amounts transferred to a group annuity contract are described in the column marked
“Transfer.” Under the same heading, any applicable commissions calculated on the basis of the
18
With respect to Compensation, under the Regulation, Broker must disclose:





the direct and/or indirect compensation it reasonably expects to receive. Either the amount or a formula
(e.g. an asset-based fee schedule) can be used to disclose the compensation;
the manner in which the compensation will be received;
whether Broker expects to receive any compensation in connection with termination of the agreement;
how any prepaid amounts will be calculated and refunded upon termination; and
with respect to indirect compensation, the services being performed for the indirect compensation, the
payer, and a description of the compensation arrangement.
If Broker has independent contractor representatives whose compensation is commission-based or is charged
directly against the plan’s investments, this agreement should be revised to separately disclose the representative’s
compensation.
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deposits into the Plan (for example, employee deferrals and employer contributions) are
described in the column marked “1st year recurring.” Any applicable commissions calculated on
the basis of the Plan’s deposits in the second and subsequent year are described in the column
marked “2nd year and on recurring.” Under the heading “Asset-based (bps),” commissions
calculated on the basis of total amount of plan assets in the first year and in subsequent years are
described in the columns marked “1st year” and “2nd and on,” respectively. Asset-based
commissions are calculated on a monthly basis and distributed to Broker quarterly.]
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Exhibit B
GLOSSARY
Set forth below are definitions that may be useful in reviewing the Sample Agreement with
respect to the Regulation:
Affiliate – A person or entity who directly or indirectly controls, is controlled by, or is under
common control with, a covered service provider; or is an officer, director, or employee of, or
partner in, the covered service provider.
Compensation – Anything of monetary value (for example, money, gifts, awards, and trips).
Covered Plans – ERISA-governed retirement plans other than SEP IRAs and SIMPLE IRAs.
Individual retirement accounts are not covered plans. Additionally, 403(b) plans that were
frozen before January 1, 2009 are excluded from the definition of covered plans.
Covered Service Provider – A service provider that enters into an arrangement with a plan and
reasonably expects to receive $1,000 or more in compensation, direct or indirect, in connection
with the services described in the Regulation.
Direct Compensation – Compensation received directly from the covered plan.
Indirect Compensation – Compensation received from any source other than the covered plan,
the plan sponsor, the covered service provider, an affiliate, or a subcontractor.
Responsible Plan Fiduciary – A fiduciary with authority to cause the covered plan to enter into,
or extend or renew, the contract or arrangement.
Subcontractor – Any person or entity (or an affiliate of such person or entity) that is not an
affiliate of the covered service provider and that reasonably expects to receive $1,000 or more in
compensation for performing one or more services for the covered plan.
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