Federal PBM Reform and Employer Plans: What the 2026 Law Changes, and When

Why a 2029 law matters in 2026

When the PBM provisions passed in February, a lot of employers had the same reaction: "Great, that's 2029. We'll deal with it then." The problem is the calendar. Picture a plan that signs a new three-year PBM contract this fall. It runs through the end of 2029, past the date the new rules apply, and it was negotiated without any of them. Unless the contract has strong change-in-law language, that plan could spend its first year under the new law arguing with its PBM about what the old contract meant. The cheapest time to get these terms is before you sign.

Timeline

• January 30, 2026Department of Labor publishes a proposed PBM fee disclosure rule for self-insured plans.
• February 3, 2026Consolidated Appropriations Act, 2026 signed. Expanded compensation disclosure under ERISA 408(b)(2) is widely read as effective now.
• By about August 2027Implementing regulations and reporting guidance due within 18 months of enactment.
• 2028 plan yearMedicare Part D delinking takes effect (Medicare only).
• Plan years beginning on or after August 3, 2028Rebate pass-through, PBM reporting, participant notices, and innocent fiduciary rules apply to employer plans. January 1, 2029 for calendar-year plans.

Sources: Segal Morgan Lewis Mintz DOL.

What changes for employer plans

1. 100% rebate pass-through (ERISA plans)

PBMs must remit 100% of rebates, fees, alternative discounts, and other remuneration to the plan. A contract that doesn't comply is treated as unreasonable under ERISA section 408(b)(2), making it a prohibited transaction. Payments are generally due quarterly, within 90 days after each quarter, and plans can audit rebate arrangements, including those run through rebate aggregators. The plan fiduciary chooses the auditor, and the PBM can't pay for it. PBMs may still charge transparent fees for bona fide services. source source

2. Compensation disclosure for PBMs and other vendors

The 2021 disclosure rules for brokers and consultants now extend to nearly all health plan service providers, including PBMs, TPAs, stop-loss carriers, and other vendors. They must disclose direct and indirect compensation. source Many advisers read this as effective on enactment, pending Department of Labor guidance. source

3. An "innocent fiduciary" process

If a PBM fails to pass through what it owes, a fiduciary is protected only if it didn't know of the failure, demanded payment in writing after finding out, and notified the Department of Labor if the PBM didn't comply. source This doesn't replace the general duty to monitor vendors. source

4. Participant notices

Plans must notify participants each year that PBM reporting is available, and on request provide a summary and the per-claim difference between what the plan paid and what the pharmacy was paid. source

5. Penalties

PBMs face civil penalties of up to $10,000 per day for failing to report and up to $100,000 for knowingly providing false information. source

The new PBM reports

Detailed reports include, by drug: source

• The difference between what the pharmacy was paid and what the plan paid the PBM.
• Gross and net prices, and manufacturer rebates and fees received by the PBM.
• Utilization by channel (retail, mail, specialty) and whether PBM-affiliated pharmacies dispensed the drug.
• List-price benchmarks, plus spending by therapeutic class, high-cost drugs, and formulary rationale. source

This is the data that has historically been hardest for plans to get. Getting it is one thing; turning it into decisions is another. Plans will need someone to read these reports critically.

What the law doesn't do

• No commercial delinking. PBM compensation for employer plans isn't required to be a flat fee. source
• No outright spread pricing ban. Reports expose spread, but spread revenue isn't clearly covered by the pass-through requirement. source
• No point-of-sale rebate requirement. Rebates go to the plan, not necessarily to members at the counter. source
• No limits on affiliated pharmacies. PBM-owned pharmacies must be reported, not restricted. source

The pass-through requirement is written into ERISA. Public-sector and church plans that aren't subject to ERISA should check with counsel about which provisions apply to them.

The Medicare-only pieces

Several headline provisions apply only to Medicare Part D: PBM compensation limited to bona fide service fees (delinking) starting with the 2028 plan year, new "reasonable and relevant" pharmacy contract standards for 2029, and annual Part D PBM reporting starting in 2028. source They'll still matter to employers, because PBMs often apply what they build for Medicare across their books of business.

Other moving parts

• DOL proposed rule. Would require PBMs serving self-insured plans to make initial and semiannual compensation disclosures and allow audits. It was still a proposal as of mid-2026 and may need to be reconciled with the new law. source source
• FTC–Express Scripts settlement (February 2026). Commits Express Scripts to changes including benefit designs where member cost sharing reflects net prices, expanded reporting to plan sponsors, and less compensation tied to rebates and list prices. source
• Litigation. Participants have sued large employers over drug costs. See Fiduciary Duty and Pharmacy Benefits.

What to do now

The effective dates are in 2028–2029, but PBM contracts typically run three years. A contract signed or renewed this year will likely still be in force when the rules kick in. Morgan Lewis recommends building the reporting, pass-through, audit, and reconciliation terms into PBM agreements being negotiated now. source

Contract terms to ask for now

How to use the new reports

The reports are only valuable if someone reads them. A practical review cycle:

1. Reconcile money. Do rebate payments received match what the report says was earned?
2. Find spread. Where is the gap between plan cost and pharmacy payment largest, by drug and by channel?
3. Check affiliates. How much spend runs through PBM-owned pharmacies, and at what prices compared with other channels?
4. Benchmark. Compare net prices against independent, actual-cost benchmarks.
5. Act and document. Record what you found, what you asked the PBM to change, and the outcome.

Plans don't need to wait for the law to start this cycle. Many PBMs will provide similar data today on request, and the employer's right to its own claims data already exists.

PBM reform checklist for employer plans

1. Collect 408(b)(2) compensation disclosures from your PBM, TPA, and other plan vendors now.
2. Check your PBM contract dates and which renewals fall before plan years starting on or after August 3, 2028.
3. Write the new rules into contracts now full pass-through, quarterly remittance, reporting, audit rights, and no restrictions on data use.
4. Define rebates broadly to include fees, alternative discounts, and remuneration through aggregators.
5. Build a baseline of your pharmacy spend so you can measure what changes.
6. Plan who will read the reports and how findings feed into fiduciary decisions.
7. Prepare participant notices and the process for answering participant requests.
8. Track DOL guidance and the final PBM disclosure rule.

Frequently asked questions