As part of that duty to monitor service providers and use of plan assets, courts have held that plan fiduciaries have implied authority under ERISA to obtain data and records necessary to carry out their oversight duties. In Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559 (1985), the Supreme Court held that the trustees of a pension plan were entitled under ERISA to audit records of employees that the employer claimed were not participants in the pension plan (and thus were not making contributions to the pension fund). The employer argued the trustee had no right to access records of non-covered employees; and the pension fund trust agreement did not expressly allow audits of records of non-covered employees. Nevertheless, the Court held that the agreement must be construed as consistent with the policies of ERISA, including allowing trustees/fiduciaries to access records necessary to protect the plan’s interests.

Costs and fees paid to covered service providers would appear to fall in the heart of the type of records that fiduciaries need to ensure that the plan is not being excessively or unreasonably overcharged for. In addition, in an effort to address a plan fiduciary’s potential inability to properly monitor service providers or functional fiduciaries — primarily due to contractual provisions which limit access to information like claims and rebate data — ERISA was amended by the CAA. The CAA promotes fiduciary access to data and helps plans effectively monitor service providers. Specifically, § 724 of the CAA prohibits plans from executing contracts with third-party administrators or other service providers offering access to a network of providers that directly or indirectly restricts the plan’s ability to electronically access de-identified data for each plan participant or beneficiary, on a per-claim basis. Those seeking to uphold the legality of the executive order would look toward the CAA.

Thus, both ERISA’s fiduciary requirements and Section 724 of the CAA entitle plan fiduciaries to data and other information necessary to carry out its fiduciary duty. The level and amount of compensation received by PBMs are a critical and necessary part of any plan sponsor or fiduciary’s oversight of the PBMs to ensure that they are not mismanaging or causing excessive costs to be paid by the plan. Accordingly, the executive order is likely not a departure from, but is instead consistent with existing ERISA fiduciary requirements.

PBMs have a duty to disclose all compensation they receive

The April 15, 2025 executive order would add to, and further strengthen, the above-mentioned legal obligations of PBMs to disclose its compensation to plan fiduciaries.

The executive order specifically directs the Secretary of Labor to promulgate regulations to achieve “transparency” as to “compensation received by” PBMs. Such proposed regulations would be based on its implementing statute, Section 408(b)(2)(B) of ERISA, which was amended by the CAA to require disclosure of all direct and indirect compensation received by “brokers” and “consultants” that provide services to employee benefit plans, including health benefit plans.

Although the terms “brokers” and “consultants” are not defined in the statute, there are areas of PBM services that overlap with what would typically be considered as “consulting” or “brokerage” work. For example, PBMs often provide formulary management and consulting services, and further provide group purchasing and contracting services, such as for drug manufacturer rebates. Thus, strong arguments exist that PBMs fall under the scope of the disclosure provisions in ERISA § 408(b)(2)(B). The executive order directs the DOL to further clarify that PBMs fall within the scope of ERISA’s disclosure requirements. It remains to be seen how the DOL will respond – the executive order requires that any new regulations be proposed by October 12, 2025.

Should the DOL enact the new regulation requiring disclosure of compensation by PBMs, it could make it easier for plan sponsors and other plan fiduciaries to discharge its fiduciary duties of oversight of the PBMs. The specific regulation proposed by the Secretary of Labor should be closely scrutinized to assess how it may impact the relation between plan sponsors, providers, and PBMs. Frier Levitt is actively monitoring this development and will issue a follow-up when the new regulations are posted by the DOL.

Conclusion

President Trump’s executive order represents the latest in a series of efforts to increase transparency and accountability within the drug supply chain. While many of its provisions align with existing fiduciary standards under ERISA and the CAA, the forthcoming Department of Labor regulations could mark a significant shift in the obligations of PBMs and their relationships with plan sponsors. As agencies move forward in implementing these directives, stakeholders should remain alert to the evolving regulatory landscape and prepare for potential changes in compliance obligations.