Compliance – North Risk Partners

Second Quarter Benefit News Highlights

Jarrica Walston — Thu, 16 Jul 2026 17:01:20 +0000

This quarter’s benefits news highlights several important developments impacting employer-sponsored health and welfare plans, including new Medicare creditable coverage rules, increased HIPAA enforcement activity, updated employer mandate penalties, and evolving guidance on fertility benefits. We’re also monitoring key litigation and regulatory trends involving pharmacy benefit managers (PBMs), fiduciary enforcement priorities, and prescription drug transparency initiatives. Read on for timely updates and practical reminders to help you navigate compliance responsibilities and plan administration throughout the year.

1. IRS Sample Plan Language - Educational Assistance Program

The Internal Revenue Service (IRS) has issued Publication 5993, a sample plan document designed to help employers establish a compliant educational assistance program under Section 127 of the Internal Revenue Code. The sample plan provides a framework that satisfies IRS requirements while allowing employers flexibility to customize the language to match their plan offering. Read more here.

2. CMS Final Rule - Creditable Coverage Status & Disclosures

The Centers for Medicare & Medicaid Services (CMS) final rules were released with important updates impacting creditable coverage requirements. Notably for employer group health plans, disclosure to individuals and reporting to CMS is no longer required for account-based plans, including health reimbursement arrangements (such as ICHRAs), health savings accounts (HSAs), and flexible spending accounts (FSAs). In addition, beginning with 2027 determinations, plans must either apply the revised simplified determination method or obtain an actuarial determination to assess whether prescription drug coverage is creditable. Under the revised simplified method for 2027 plans, plans must meet the following criteria: (i) reasonable coverage for brand name and generic prescription drugs and biological products; (ii) reasonable access to retail pharmacies; and (iii) designed to pay on average at least 73% percent of participants’ prescription drug expenses. Read more here.

3. Good News for Employers in ERISA Litigation Over State PBM Regulation

Following the Supreme Court’s 2020 decision in Rutledge v. PCMA, which upheld Arkansas’ Pharmacy Benefit Manager (PBM) law against an ERISA preemption challenge, states have increasingly passed aggressive laws targeting perceived anti-competitive PBM practices. This has led to a wave of ERISA preemption lawsuits testing the limits of Rutledge, with PBMs and self-funded plans often succeeding in having portions of these laws struck down.

A recent example is the 6th Circuit’s April decision in McKee Foods Corp. v. BFP Inc., which challenged Tennessee’s PBM law. Rather than invalidating the entire law, the court focused on specific provisions (the Any-Willing-Provider (AWP) requirements and anti-steering/anti-incentive rules) and found them preempted. The court concluded these provisions interfered with plan structure and restricted plan design choices, going beyond the cost-related regulations permitted under Rutledge.

For employers, the decision reinforces the ability of self-funded plans and PBMs to use tools like preferred networks and tiered cost-sharing, even in states attempting to limit them. However, states are likely to continue enacting PBM regulations, and given the slow and unpredictable nature of ERISA preemption litigation, employers will need to monitor ongoing developments closely.

4. HIPAA Enforcement Action

Federal regulators recently penalized a self-funded employer health plan following a ransomware attack that exposed sensitive personal and health-related information. The enforcement action resulted in a $245,000 payment to the government along with a two-year corrective action plan requiring ongoing oversight and remediation efforts. The central issue was the plan’s failure to conduct a thorough and documented risk analysis, which is a foundational requirement under HIPAA’s Security Rule.

Regulators emphasized that organizations must identify where protected health information (PHI) is stored, assess vulnerabilities, and maintain clear documentation of their security evaluations. Lapses in these areas, particularly failing to analyze risks to electronic PHI, continue to be a common basis for enforcement actions, reinforcing the need for strong cybersecurity, formal risk analysis processes, and ongoing data governance practices.

5. 2027 Employer Mandate (§4980H) Penalties

Revenue Procedure 2026-22 updates the inflation-adjusted penalty amounts used to calculate employer shared responsibility payments (ESRPs) under the Affordable Care Act’s employer mandate provisions. For 2027, the IRS increased the annual penalty amounts to $3,780 ($3,340 in 2026) for §4980H(a) and $5,670 ($5,010 in 2026) for §4980H(b), based on healthcare premium growth data published by the Department of Health and Human Services. The adjustment is calculated using the “premium adjustment percentage,” which compares projected 2026 private health insurance premiums to 2013 baseline premiums.

6. EBSA Enforcement Priorities

The Department of Labor’s Employee Benefits Security Administration (EBSA) issued Field Assistance Bulletin 2026-01 in April to redefine its enforcement priorities and reduce what it views as “regulation by enforcement.” The guidance emphasizes focusing investigations on the most egregious misconduct and loyalty breaches, such as self-dealing or misuse of plan assets, rather than second-guessing fiduciaries’ good-faith prudence decisions. It also requires greater oversight by senior agency leadership for significant enforcement actions and aims to make investigations more timely, transparent, and consistent. The bulletin reflects a major philosophical shift in the Employee Benefits Security Administration's (EBSA) relationship with plan sponsors, fiduciaries, and service providers, particularly in areas like ESOP valuations and missing participant investigations. The long-term impact will depend on how consistently the new principles are implemented across regional offices.

7. Proposed Rule: Excepted Fertility Benefits

The Departments of Labor, Health and Human Services, and Treasury recently issued proposed regulations that would establish a new category of “excepted benefits” for certain fertility-related services offered through employer-sponsored health plans. If finalized, the rules would apply for plan years beginning on or after January 1, 2027. The proposal would allow qualifying fertility benefits to be offered outside of comprehensive major medical coverage and exempt them from many ACA, HIPAA, and other compliance requirements, with the stated goal of reducing regulatory barriers and expanding access to services such as IVF, fertility medications, fertility preservation, and related reproductive health treatments.

The proposed rule builds on the agencies’ October 2025 FAQ guidance, which clarified that employers could already structure certain fertility benefits through existing excepted-benefit arrangements, such as excepted benefit HRAs, limited EAPs, and independent non-coordinated coverage. The new proposal creates a dedicated framework for fertility benefits and establishes four primary requirements for coverage to qualify as an excepted benefit: (1) the fertility coverage must either be insured or otherwise “not an integral part” of the employer’s group health plan; (2) substantially all covered services must relate to the diagnosis, mitigation, or treatment of infertility or infertility-related reproductive health conditions and generally be provided by licensed medical professionals; (3) the benefit must be subject to a $120,000 lifetime maximum (indexed for medical inflation); and (4) plans must provide a written notice describing the fertility coverage, limitations, provider access, and claims procedures.

Employers interested in expanding fertility offerings, carving out stand-alone fertility programs, or reducing compliance complexity may want to begin evaluating how their current programs align with the proposed framework and whether alternative benefit structures could become more feasible under the new rules, while continuing to closely monitor the rulemaking process and any changes made as the agencies move toward final regulations.

8. TrumpRx Expansion

On May 18, the White House released a Fact Sheet that announces an expansion of TrumpRx.gov to include more than 600 generic medications, allowing Americans to compare discounted cash prices for common drugs across pharmacies and delivery providers such as Amazon Pharmacy, Cost Plus Drugs, and GoodRx. The initiative is intended to increase price transparency and competition by helping consumers compare insurance co-pays against direct cash prices while supporting the administration’s broader “Most-Favored-Nation” prescription pricing strategy. The fact sheet also highlights prior agreements with pharmaceutical companies and foreign governments aimed at lowering U.S. drug prices and states that TrumpRx.gov will focus on widely used medications while excluding controlled substances and certain specialty drugs.

Keep in mind, TrumpRx should be viewed as a supplemental option that will primarily benefit those who are uninsured, not a replacement for existing pharmacy benefits. The primary focus should be on educating employees about when using a TrumpRx discount may be helpful versus when using their insurance benefit is likely the better option.

9. Handling Employee Contributions During Unpaid Leaves of Absence

If the leave of absence is unpaid or not being paid through payroll (e.g., short-term disability or workers’ compensation), it is advisable to have a process for obtaining the employee contribution and to communicate that process accordingly.

An employer can generally offer the following options to an employee to collect employee contributions while the employee is on leave:

Pre-pay on a pre-tax basis (this cannot be the sole option);
Pay during the leave on an after-tax basis; or
Catch-up contributions on a pre-tax basis upon return from leave.

In practice, pre-payment is often not feasible because employers may not have enough notice before the leave begins. As a result, some employers require employees to make payments while on leave to avoid collection issues later, particularly if the employee is on an extended leave of absence or ultimately does not return to work. Other employers allow employees to catch up on missed contributions upon return from leave, which may allow those contributions to be made on a pre-tax basis.

If the employer determines a policy and communicates it, and the employee fails to make the employee contribution in accordance with the employer’s policy, the employer may terminate coverage, in some cases even retrospectively subject to any carrier restrictions.

FMLA requires that coverage cannot be canceled for nonpayment of premium unless two conditions are met: 1) The employee must be allowed a 30-day grace period from the date the premium is due; and 2) No later than 15 days before the employer.

Intends to cancel the coverage for nonpayment. If coverage is canceled for nonpayment of premiums during FMLA leave, the coverage must be available for reinstatement when the employee returns to work. While COBRA is generally not available following termination of coverage due to nonpayment, if the employee does not return to work at the end of the FMLA leave, the employee must be offered COBRA, even if the coverage was canceled for nonpayment of premium.

For non-FMLA leave, employers have more flexibility with payment policies. The employer should still clearly communicate payment expectations, including method, due dates, and any grace periods or notifications that will be made available, but the employer is not specifically required to provide a grace period or notification prior to termination of coverage. That being the case, many employers may choose to follow whatever payment procedures are put in place for FMLA-protected leave for consistency and ease of administration.

10. Mid-Year Election Changes - When Can Employees Add Coverage?

Any time an employee requests to add coverage for themselves or a family member mid-plan year (outside open enrollment), we first look to HIPAA special enrollment rules. If a HIPAA special enrollment event is triggered, a group health plan is generally required to allow mid-year enrollment so long as enrollment is timely requested.

HIPAA special enrollment rights are only triggered for the following events: (i) Loss of coverage (loss of eligibility, not voluntary termination or termination due to nonpayment); (ii) Acquisition of a new dependent through marriage, birth or adoption; or (iii) Becoming newly eligible for a Medicaid or CHIP subsidy.

HIPAA special enrollment rights apply to group health plans, but not to excepted benefits or non-medical benefits. While most plans other than major medical are not required to allow mid-year enrollment, some plans (e.g., dental or vision plans) may be written with special enrollment rights similar to those under HIPAA.

It is important to distinguish between HIPAA special enrollment events and §125 permitted election change events, as these are often grouped together as “qualifying life events” but serve different purposes. HIPAA special enrollment events are more limited in scope and represent the only situations in which a group health plan is legally required to allow mid-year enrollment. In contrast, §125 events are broader and allow employees to change their existing pre-tax elections mid-year. A HIPAA special enrollment event also qualifies as a §125 event.

11. PCORI Fees - Updated 2nd Quarter Form

The Form 720 for the second quarter is now available, so employers with self-funded group health plans that ended during 2025 can go ahead and report and pay the PCORI fees using Form 720 (with revision date June 2026).

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While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

Individual Coverage HRAs (ICHRAs)

Greta Wilson — Tue, 14 Jul 2026 18:10:49 +0000

Individual Coverage Health Reimbursement Arrangements (ICHRAs) are employer-funded health plans that allow tax-favored reimbursement of individual health insurance premiums, including Medicare, and other qualifying medical expenses. Unlike traditional group health plans, ICHRAs shift plan selection to employees while allowing employers to maintain cost control and reduce administrative complexity. Employees purchase their own individual health coverage or enroll in Medicare, and employers reimburse eligible expenses up to a defined amount.

When Do ICHRAs Make Sense?

ICHRA adoption has grown as employers look for alternatives to traditional group health plans. It can be especially attractive for employers struggling with participation requirements, high turnover, or geographically dispersed workforces. Employers that have experienced rising premiums due to unfavorable claims experience may also find value in transitioning to individual coverage, where rates are community-based rather than employer-specific.

ICHRAs provide a way to extend benefits to part-time employees or other populations that are not typically eligible for group health coverage. An ICHRA can also serve as a strategy to meet employer mandate requirements under §4980H for applicable large employers.

How Does Funding and Reimbursement Work?

ICHRAs provide employers with significant flexibility in determining contribution amounts and eligible expenses. There are no minimum or maximum funding requirements, allowing employers to align contributions with budget goals or affordability requirements under the employer mandate.

Reimbursements can be structured to cover insurance premiums, other qualifying medical expenses, or both. However, all reimbursements must comply with IRS substantiation rules, requiring appropriate documentation before payment is made. Employers may also choose whether unused amounts carry over from year to year or are forfeited at the end of the plan year.

For ICHRAs providing premium reimbursement, which they typically do, employers can require employees to pay premiums upfront and then request reimbursement, but many employers streamline the process through direct payment arrangements or reimbursement tools.

What Are the Core Design & Compliance Requirements?

To receive reimbursements through an ICHRA, employees and any covered dependents must be enrolled in individual health insurance or Medicare. Enrollment must be substantiated both annually and each time expenses are submitted for reimbursement.

Employers must offer ICHRAs consistently within defined classes of employees, such as full-time, part-time, salaried, hourly, seasonal, or employees working in a specific geographic location. It is not possible to offer an ICHRA solely to those who are Medicare-eligible. Employers cannot offer employees a choice between a traditional group health plan and an ICHRA within the same class.

ICHRAs require advance notice to eligible employees, generally at least 90 days before the start of the plan year. This notice is intended to help employees understand how the ICHRA works and how it may impact eligibility for subsidies through the public Marketplace.

Are There ACA Employer Mandate or Reporting Considerations?

For applicable large employers, ICHRAs can be used to satisfy §4980H offer of coverage requirements. An ICHRA qualifies as an offer of minimum essential coverage, and if structured correctly, can also meet affordability and minimum value standards.

Affordability is determined based on the cost of the lowest-cost silver plan available to the employee, reduced by the employer’s ICHRA contribution. If the remaining cost to the employee falls within IRS affordability thresholds, the coverage is considered affordable. Safe harbor methods based on the federal poverty level, rate of pay, or Form W-2 wages may be used to confirm affordability.

Applicable large employers offering ICHRAs must report offer of coverage information on Form 1095-Cs. In addition, since an ICHRA is a self-funded minimum essential coverage, any size employer offering an ICHRA must report ICHRA enrollment information on Form 1095-Bs or Form 1095-Cs (Part III).

How do ICHRAs Interact with Premium Tax Credits?

The availability of an ICHRA affects an employee’s eligibility for premium tax credits (PTCs) through the Marketplace. If an ICHRA offering is affordable, the employee (and any eligible dependents) will not qualify for a PTC, even if they decline the ICHRA. If the ICHRA offering is not affordable, the employee may choose between enrolling in the ICHRA or receiving a PTC but cannot receive both.

Are There Any Additional Compliance Considerations?

ERISA

ICHRAs are group health plans subject to ERISA, meaning they must comply with plan documentation and reporting requirements. However, individual policies purchased by employees can remain outside ERISA if the employer does not endorse specific carriers and meets certain safe harbor requirements.

COBRA

COBRA continuation coverage applies to ICHRAs, although it is often not a practical option due to cost. Employers must still offer COBRA continuation for the ICHRA following qualifying events, allowing participants to continue accessing reimbursements if they elect coverage and pay the COBRA premium.

HSA Eligibility

ICHRA design can also impact health savings account (HSA) eligibility. Plans that reimburse only premiums generally preserve HSA eligibility, while broader reimbursement designs may disqualify participants from contributing to an HSA unless the ICHRA is designed to be post-deductible or available solely to reimburse excepted benefits (e.g., dental or vision expenses).

PCORI

ICHRAs are subject to various nondiscrimination rules and other compliance requirements, including PCORI fees, Medicare Secondary Payer rules, and age discrimination considerations. Employers must ensure that plan design does not disproportionately favor highly compensated employees or otherwise create compliance risks.

Summary

ICHRAs offer a flexible alternative to traditional group health plans by allowing employers to define contributions while giving employees greater control over their health coverage choices. When properly designed and communicated, they can provide cost predictability for employers and meaningful choice for employees. However, successful implementation requires careful attention to eligibility rules, affordability standards, and ongoing compliance obligations.

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Form 5500s for Health & Welfare Plans

Greta Wilson — Tue, 14 Jul 2026 18:04:22 +0000

The Form 5500 Series is part of ERISA’s reporting and disclosure framework and serves as a key compliance tool for the Department of Labor (DOL), plan participants, and other government agencies. For health and welfare plans, the Form 5500 is an annual filing that provides information about an employer’s ERISA benefit plans, including medical, dental, vision, life and more.

These filings are publicly available and are used to monitor compliance, evaluate benefit trends, and ensure transparency for plan participants. While retirement plans are also subject to Form 5500 requirements, this summary focuses on health and welfare plans.

Which Plans Must File

Form 5500 filing requirements apply to benefit plans that are subject to ERISA. Most employer-sponsored health and welfare benefits fall into this category.

In general, an unfunded ERISA plan, where claims and plan expenses are paid out of the employer’s general assets, must file a Form 5500 if there are 100 or more participants at the beginning of the plan year. Participant counts include covered employees and certain former employees (such as COBRA participants), but do not include spouses or dependents.

Plans that are funded (funds segregated in a separate account or trust – e.g., a VEBA) must file regardless of size. In addition, plans sponsored through a multiple employer welfare arrangement (MEWA) are subject to filing requirements even if participant counts are below 100.

Certain arrangements are not subject to ERISA and therefore do not require a Form 5500. These include plans sponsored by government or church employers, certain voluntary benefits with minimal employer involvement, and common payroll practices such as PTO or sick leave paid from the employer’s general assets.

Filing Deadlines and Process

Form 5500 filings are due on the last day of the seventh month following the end of the plan year, including short plan years. For calendar year plans, this typically means a July 31 deadline. Employers may request an automatic extension of up to 2½ months by filing Form 5558, extending the deadline to October 15 for calendar year plans.

All filings must be submitted electronically through the DOL’s EFAST2 system. Employers may prepare filings directly using the DOL’s online tools or work with third-party vendors such as consultants, accountants, or legal advisors. Individual filing credentials are obtained through Login.gov and are tied to individuals rather than specific companies.

Determining the Number of Filings

A separate Form 5500 is required for each ERISA plan. However, employers have flexibility in defining what constitutes a single plan through plan documentation. Many employers use a WRAP document to bundle multiple benefits, such as medical, dental, vision, and life insurance, into one ERISA plan.

Bundling benefits can significantly simplify reporting by allowing a single Form 5500 filing, provided the combined plan meets the filing threshold. Without a WRAP document, each benefit may be treated as a separate plan, potentially requiring multiple filings.

For employers operating within a controlled group, a single Form 5500 may be filed for a shared plan, with one entity designated as the plan sponsor. In contrast, multiple employer welfare arrangements (MEWA) may require separate filings depending on how the plan is structured and governed.

Form Structure and Required Information

The Form 5500 consists of a main body and, where applicable, supporting schedules. The main body includes three parts:

Plan year, plan type, and filing type (e.g., first, final, amended);
Plan identifiers (e.g., plan name, number, and effective date), plan sponsor and plan administrator’s name, EIN and contact information, participant counts at start and end of plan year, codes to indicate what types of benefit are offered, plan funding details, and which schedules, if any, are attached; and
Indication of whether the plan is a MEWA required to file a Form M-1.

Additional schedules may be required depending on how the plan is funded and administered. Fully- insured plans require Schedule A, which includes insurance-related information provided by carriers. If the insurance company does not automatically furnish a Schedule A, it is the employer’s responsibility to request one. Should the carrier fail to provide a Schedule A, the employer must still complete the Schedule A to the best of their ability and indicate that the carrier failed to provide the required information.

With unfunded, self-funded plans, often only the Form 5500 main body is required, and no schedule attachments are necessary.

When multiple benefits are combined under a WRAP document, the filing must reflect the entire plan, including total participant counts and all applicable benefit types and funding sources.

Penalties and Correction Programs

Failure to file a required Form 5500 can result in significant penalties. Under ERISA, penalties can accrue daily and reach substantial amounts if left unaddressed. A filing that is rejected is treated as not filed until corrected.

To encourage compliance, the DOL offers the Delinquent Filer Voluntary Compliance Program (DFVCP), which allows employers to submit late filings with significantly reduced penalties. This program is generally available only if the employer takes action before being contacted by regulators.

Summary Annual Report (SAR)

Employers that file a Form 5500 may also be required to distribute a Summary Annual Report (SAR) to plan participants. The SAR is a simplified summary of the Form 5500 and includes basic financial and plan information, along with participant rights. In practice, SAR requirements most commonly apply to fully-insured plans (most self-funded plans are exempt). The SAR must generally be distributed within nine months after the end of the plan year, or within two months after an extended filing deadline. Distribution must comply with ERISA disclosure rules, which allow delivery by mail, hand, or electronically under certain conditions.

Key Takeaways

Form 5500 compliance is an important component of ERISA plan administration and requires careful attention to plan structure, participant counts, and funding arrangements. Employers should regularly review their benefit structure, confirm whether filing thresholds are met, and ensure that filings are completed accurately and on time.

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Do Interns & Temporary Employees Have to Be Offered Benefits?

Jarrica Walston — Mon, 20 Apr 2026 19:03:23 +0000

Employers often assume that an offer of coverage is not required for short-term or temporary positions, but that is not always the case. Whether an employer is hiring summer interns, hiring seasonal employees to keep up with increased demand at a certain time of year, or hiring to temporarily fill a position while another employee takes a leave of absence, these employees are often expected to work full-time hours, and therefore, the question arises: Does the position require an offer of coverage?

To answer this question, three factors must be considered:

Is the employer an applicable large employer (ALE)?

If the employer is an ALE, are they utilizing the look-back measurement method or the monthly measurement method?

If the employer is an ALE utilizing the look-back measurement method, are the temporary employees considered seasonal under §4980H?

Small Employers

For a small employer (i.e., has fewer than 50 full-time equivalents and thus is not an ALE), there is no obligation to make an offer of coverage to temporary employees. Small employers have broad flexibility to design benefit eligibility rules as desired, subject to any applicable state law. That being the case, small employers who utilize temporary employees and would prefer not to offer coverage to them should ensure that their plan eligibility rules specifically exclude that category of employees. Otherwise, a temporary employee meeting the plan eligibility requirements (e.g., working 30 or more hours per week) could argue that they are entitled to an offer of coverage.

Applicable Large Employers (ALEs)

ALEs (50 or more full-time equivalents) have to be a little more careful, at least in regard to their group medical plan. For benefits other than major medical, the employer could choose to handle eligibility rules as suggested above for small employers; however, the employer risks §4980H penalties if temporary employees are full-time and are not offered medical coverage. Whether temporary employees are considered full-time for §4980H purposes may depend on whether the employer is using the monthly measurement method or the look-back measurement method. Keep in mind that the method chosen must generally be used for all employees, or at least all hourly employees (it is possible to differentiate methods between hourly and salaried employees).

If an ALE is using the lookback measurement method…

Temporary employees that meet the §4980H definition of "seasonal" (see below) may be subject to an initial measurement period of up to 12 months, which prevents them from ever being considered full-time. Either they will not average enough hours to be considered full-time over the entire initial measurement period, or they will terminate employment prior to the beginning of the associated stability period. But temporary employees who do not meet the definition of seasonal and are expected to average full-time hours require an offer of medical coverage after the plan waiting period to avoid incurring potential penalties under §4980H.

Seasonal Employee

§4980H defines a "seasonal employee" as an employee in a position for which the customary annual employment is 6 months or less. The reference to customary means that by the nature of the position, an employee in this position typically works for a period of 6 months or less, and that period should begin each calendar year in approximately the same part of the year (such as summer or winter). In other words, if an employer hires temporary employees throughout the year to help with projects as needed, or hires temporary employees who typically work beyond 6 months, then those employees cannot be classified as seasonal.

If an ALE is using the monthly measurement method…

For employers utilizing the monthly measurement method, any employee (including temporary employees) is considered full-time if they achieve 130 or more hours of service per month. If a temporary employee is expected to average full-time hours, even on a short-term basis, an offer of medical coverage is required after the plan waiting period to avoid potential penalties under §4980H.

Penalty Risk for ALEs

An ALE can avoid the bigger §4980H(a) penalty if coverage is offered to 95% or more of full-time employees each month. So, if temporary employees are full-time (and not considered seasonal for employers using the lookback measurement method) and not offered medical coverage, the employer could face a penalty under §4980H(a) if temporary employees make up 5% or more of the total full-time employee count during any particular month. A penalty under §4980H(a) is calculated monthly as follows for 2026: (full-time employee count - 30) x $278.33.

Even if the temporary employees make up less than 5%, the employer is still at risk for the §4980H(b) penalty at a cost of $417.50/month (in 2026) for each full-time temporary employee who is not offered medical coverage and enrolls in subsidized coverage through a public Marketplace.

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ERISA Fiduciary Duties

Jarrica Walston — Mon, 20 Apr 2026 18:55:43 +0000

Recent class action lawsuits have put a renewed spotlight on employers' ERISA fiduciary responsibilities when sponsoring health and welfare plans. Employers that offer ERISA-covered benefits are expected to maintain sound governance practices, make informed decisions, and actively oversee vendors and fees, while also ensuring plan terms are followed and communications are clear and accurate. As fiduciary litigation continues to evolve, these cases serve as a timely reminder that employers must play an active role in managing their benefit plans prudently and in the best interests of plan participants.

ERISA Fiduciary Duty Basics

ERISA §404 outlines the duties of a plan fiduciary and requires fiduciaries to perform their duties:

solely in the interests of participants and beneficiaries;

for the exclusive purpose of providing plan benefits, or for defraying reasonable expenses of plan administration;

with the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use; and

in accordance with the documents and the instruments governing the plan insofar as those documents and instruments are consistent with ERISA.

ERISA fiduciary duties include, among other things, administering the plan in accordance with plan documentation, including eligibility rules and claims procedures; providing participant disclosures; choosing and monitoring vendors to help administer the plan; and properly handling plan assets.

See further guidance from the Department of Labor's publication here.

It is not always clear whether a particular action or decision will rise to the level of a fiduciary breach. Rather than focusing on any single choice in isolation, the full set of facts and circumstances and how the plan is managed overall should be considered. For example, selecting a vendor that is not the lowest-cost option is not, by itself, a breach of fiduciary duty if the vendor provides additional value or services that benefit the plan. Similarly, conducting appropriate due diligence and documenting the decision-making process can help demonstrate that a decision was reasonable and prudent, even if the outcome ultimately differs from what was expected.

Who is a Plan Fiduciary?

Employer-sponsored plans subject to ERISA should have a named fiduciary. Typically, this is an individual, or sometimes a committee of people, working for the plan sponsor with decision-making authority. However, fiduciary status can also flow from the plan functions performed by a person who is not otherwise named as a fiduciary. It is not a person's title, office, or other formal designation that determines fiduciary status. Specifically, under ERISA §3(21), a person is a "fiduciary" with respect to an employee benefit plan to the extent that the person:

exercises any discretionary authority or discretionary control respecting management of the plan or exercises any authority or control respecting management or disposition of plan assets;

renders investment advice for a fee or for any other compensation, direct or indirect, or has any authority or any responsibility to do so; or

has discretionary authority or discretionary responsibility in the administration of the plan.

Employer Responsibilities

Employer plan sponsors have an obligation to operate their ERISA-covered health and welfare plans in compliance with applicable legal requirements and to oversee plan administration prudently. This includes clearly documenting plan terms and administrative procedures, communicating those terms to participants, and following established procedures in practice. While insurance carriers and vendors play a significant role-particularly for fully-insured plans-the employer retains fiduciary responsibility for oversight of the plan.

One of an employer's most important responsibilities is to conduct due diligence when selecting plan vendors and then to monitor those vendors' actions. Employers must also ensure that vendors are paid only reasonable and necessary fees. Recent laws and regulations-such as the Consolidated Appropriations Act, 2021 (CAA) and the Transparency in Coverage (TiC) rules-have increased the importance of effective vendor oversight. Many of these requirements cannot be satisfied without vendor cooperation. For example, prescription drug data collection (RxDC reporting) and non-quantitative treatment limitation (NQTL) comparative analyses often rely on information held by carriers, TPAs, or PBMs. Although employers may delegate administrative functions to third-party vendors, fiduciary responsibility for selecting and monitoring those vendors remains with the employer as plan sponsor.

As greater pricing, fee, and performance information becomes available to employers and the public, employers may be expected to consider and appropriately respond to that information when making plan decisions. While increased transparency can benefit both employers and participants, it may also heighten fiduciary expectations around monitoring costs, vendor performance, and plan design decisions.

Minimizing Risk of Fiduciary Liability

The following are some steps employers can take to minimize the risk of fiduciary liability:

Governance & Oversight

Create a benefits committee charged with meeting regularly (e.g., quarterly)

Implement written committee procedures and document plan-related decisions

Vendor Selection & Monitoring

Improve the process of selecting and monitoring vendors/service providers

Consider and compare multiple vendors

Include a compliance responsibility analysis as part of the vendor selection process

Review vendor contracts and consider indemnification provisions

Fees & Plan Assets

Ensure that only reasonable and necessary fees are paid for vendor services, taking into account the scope, quality, and value of the services provided

Ensure participant contributions are appropriately collected, timely handled, and used solely for the benefit of plan participants

Compliance & Risk Management

Perform regular compliance assessments (e.g., ERISA, COBRA, HIPAA, ACA, etc.)

Consider purchasing fiduciary liability insurance

Documentation

Maintain written records of committee meetings, vendor evaluations, compliance reviews, and key fiduciary decisions

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Consolidated Appropriations Act, 2026 (CAA 26)

Jarrica Walston — Mon, 20 Apr 2026 18:48:31 +0000

The Consolidated Appropriations Act of 2026 (CAA 26), which was signed by the President on February 3, 2026, reshapes how pharmacy benefit managers (PBMs) will operate in the employer group health plan market. The statute creates new federal transparency, reporting, rebate remittance, and fiduciary compliance requirements across the Public Health Service Act (PHSA), ERISA, and Internal Revenue Code, thereby broadly affecting all group health plans.

The legislation aims to:

Increase transparency into drug pricing, spreads, and rebate flows

Ensure that 100% of drug rebates and remuneration are passed back to plans

Expand fiduciary oversight and enforcement mechanisms

Most provisions take effect for plan years beginning 30 months after enactment (e.g., January 2029 for calendar year plans) and will apply to contracts entered into or renewed after that time. For employers and brokers, these changes may affect PBM contracting, fiduciary oversight, and compliance responsibilities well before the effective date as contracts are reviewed and renegotiated.

Overview of PBM Reporting Requirements

Contract Restrictions - Applicable to All Group Health Plans

A group health plan or carrier (or PBM acting on its behalf) may not enter into or renew a contract with an "applicable entity" (e.g., drug manufacturer, wholesaler, rebate aggregator, affiliated entity) unless that entity agrees to provide necessary information for required PBM reporting without limits or delay.

PBM Reporting - Requirements Vary by Group Size and Funding

The statute establishes PBM reporting obligations applicable to all group health plans, with additional, more detailed requirements for larger plans. PBMs must provide reports to plans semi-annually, or as often as quarterly upon plan request. The reports must be in plain language and machine-readable. All reports must comply with HIPAA privacy requirements and include only summary health information (aggregate and non-identifiable).

Failure to comply with the reporting and disclosure requirements risks potential penalties up to $10,000 per day. Knowingly providing false information risks penalties up to $100,000.

Large Employers/Plans

Large self-funded plans must receive detailed, drug-level (or claims-level) reporting. Large fully-insured plans do not automatically receive detailed reporting, but can opt in annually to receive the same reporting required to be provided to large self-funded plans. For this purpose, a large plan is one that is offered by an employer with 100 or more employees or a plan that has 100 or more participants.

The detailed reporting includes, among other items:

Drug-by-drug compensation paid by the plan to the PBM, PBM compensation paid to pharmacies, and the spread between those amounts

Net drug prices after rebates

Total rebates received (by the plan and PBM)

Participant cost-sharing

Formulary determinations

High-spend drug disclosures

Affiliated pharmacy pricing comparisons

All Plans

In contrast to the detailed reporting required for large plans, all group health plans must receive:

A plan-level summary designed to assist fiduciaries in evaluating PBM compensation and pricing structures.

A separate participant-facing summary containing only aggregate information that must be made available to plan participants upon request.

In addition to the participant-facing summary, plan participants may request their own claim-specific information. Employers will likely rely on their PBM or TPA to supply the necessary data for such requests and should ensure service agreements clearly address responsibility and response timelines.

Group health plans must provide an annual notice to participants regarding PBM reporting obligations and plan participants' right to request the summary reports and claim-specific information.

Rebate Pass-Through Requirements - ERISA Plans

A contract is not reasonable for purposes of compliance with ERISA §408(b)(2) unless 100% of rebates, fees, alternative discounts, and other remuneration tied to drug utilization are remitted to the group health plan (or carrier on behalf of the plan) on a quarterly basis, no later than 90 days after the end of each quarter. Whether the plan may retain the rebate or must share the rebates with plan participants may depend upon plan documentation, level of participant contributions, etc.

The statute also provides the plan with audit rights regarding rebates at least once per plan year, with the auditor selected by the plan fiduciary and not paid, directly or indirectly, by the PBM.

Expanded Compensation Disclosures - ERISA Plans

The Consolidated Appropriations Act of 2021 (CAA) included a requirement that brokers and consultants supplying services to ERISA-covered group health plans provide disclosures to plan fiduciaries where the broker or consultant reasonably expects to receive at least $1,000 in direct or indirect compensation. The disclosure is required to be made "reasonably in advance" of entering into a contract for services and must describe the services to be provided, indicate whether the service provider expects to be a plan fiduciary, and describe all forms of direct and indirect compensation the service provider expects to receive in connection with the arrangement, including the manner in which compensation will be received.

These disclosure requirements have now been clarified/expanded to include PBMs, TPAs, stop-loss insurers, and most other group health plan service providers. The statute does not provide a separate delayed effective date for this provision, so it could be interpreted to apply upon enactment to new or renewed service arrangements entered on a go-forward basis.

Plan fiduciaries must obtain these disclosures, evaluate whether compensation is reasonable, document their assessment, and monitor compliance on an ongoing basis. Failure to request or review required disclosures may create fiduciary risk.

Summary

CAA 26 does not simply increase transparency, it meaningfully shifts leverage to plan sponsors while simultaneously increasing fiduciary accountability. Employers and brokers will need to balance new access to data with heightened expectations around oversight, documentation, and vendor management.

The statute directs the Secretary to issue regulations specifying a standard reporting format and other implementing guidance within 18 months of enactment. Employers should expect further clarification on reporting templates, coordination with existing transparency rules, and operational mechanics.

Note on Recent Proposed Regulations

On January 30, the Department of Labor (DOL) issued proposed PBM compensation disclosure rules. The rules are modeled on the ERISA broker compensation disclosure requirements but are much more detailed and would require extensive compensation reporting and new audit rights for covered plans. These rules would apply only to self-funded ERISA plans and were slated to take effect for plan years beginning after July 2026. There are some significant differences in the proposed rules and the CAA 26 legislation, and it's unclear what the DOL will do with its proposed rules following the passage of CAA 26. The DOL could withdraw or pause its proposed rules, proceed with the ERISA-based requirements on a faster timeline, or reissue revised regulations that more closely align with the statute. Until the DOL clarifies its approach, employers, brokers, and PBMs face uncertainty regarding the scope and timing of future compliance obligations.

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First Quarter Benefit News Highlights

Jarrica Walston — Mon, 20 Apr 2026 18:34:22 +0000

This quarter's benefits news highlights key compliance and administration issues that employers should keep on their radar, from updated HIPAA requirements and new privacy notice guidance to rising ACA cost limits and increased enforcement activity. We're also tracking important litigation trends and reporting reminders that could affect plan administration in the months ahead. Read on for timely updates to help you stay informed and prepared.

1. New HIPAA Rule Modernizes Claims Processing

This final rule establishes the first nationwide HIPAA standards for electronically exchanging health care claims attachments such as medical records and clinical data and requires the use of secure electronic signatures for those transactions. It replaces outdated manual processes like faxing and mailing with standardized electronic systems, improving efficiency, speeding claims processing, and enhancing data security across providers and insurers. Overall, the rule modernizes administrative workflows in healthcare and is projected to save the industry roughly $780 million annually while reducing burden and improving care delivery. Compliance, which will be handled primarily by carriers and TPAs on behalf of group health plans, is required by May 26, 2028. Read more here.

2. Changes to USPS Postmark Rules May Impact Benefit Administration

It's not often that postal rules affect employee benefits, but a recent change by the U.S. Postal Service (USPS) could impact certain benefit functions, particularly COBRA. Under the new USPS rules, the postmark reflects the date mail first undergoes automated processing, not necessarily the date it was dropped in the mail. Depending on location and processing timelines, this could occur one or more days after USPS receives the letter.

Many benefit deadlines rely on the "mailbox rule," which treats a document as delivered on the postmark date. That date determines whether submissions such as COBRA elections or premium payments are timely. For example, if a COBRA premium grace period ends March 30 and a participant mails payment that day, they may believe the payment is timely. But if USPS does not process the mail until April 1 or 2, the postmark will reflect that later date. Under the mailbox rule, the payment could be considered late, allowing the employer to terminate coverage for nonpayment. Because many participants mail COBRA forms or payments close to the deadline, this change could increase disputes where participants claim they mailed items on time, but the postmark shows otherwise. It remains to be seen whether courts will adjust the mailbox rule in response. In the meantime, employers may need to decide whether to continue relying strictly on the postmark or to adopt a more flexible approach.

3. ERISA Fiduciary Litigation Update

Recent ERISA litigation developments continue to highlight the growing scrutiny on employer health plan fiduciary practices, particularly related to prescription drug pricing and pharmacy benefit manager (PBM) oversight.

In Navarro v. Wells Fargo, a federal court dismissed claims alleging the company breached fiduciary duties by allowing excessive prescription drug pricing in its health plan. The court found plaintiffs lacked Article III standing because they failed to demonstrate a concrete financial injury. Conversely, Stern v. JPMorgan Chase will move forward after a court allowed claims alleging fiduciaries failed to prudently monitor PBM arrangements and allowed participants to pay inflated prices for generic drugs. Separately, new claims have been filed, reflecting an emerging trend in litigation that is expanding beyond plan sponsors to include benefits consultants and advisors. These cases reinforce the importance for plan fiduciaries to maintain strong governance, actively monitor vendors, and document efforts to meet ERISA's duties of prudence and loyalty.

4. Updated RxDC Instructions

CMS released updated instructions for prescription drug reporting (RxDC reporting) in late February. The instructions don't include any substantive changes. The latest instructions and templates can be found here.

Annual RxDC reporting is required by June 1 of each year. Reporting for 2025 data is due June 1, 2026. The reporting consists of a plan file (P2), eight data files (D1 - D8) and accompanying narratives. Most employer-sponsored health plans rely heavily on their carriers, TPAs, and PBMs to provide the data necessary, and in many cases, to submit the reporting to CMS on behalf of employer group health plans. To complete the reporting, carriers or TPAs may have reached out to employers asking for information about premium splits (employer and employee contributions) as well as other data required for the D1 file. Once this information is provided, the carrier, TPA, and/or PBM may handle the entirety of a group health plan's RxDC reporting. However, for employers who fail to timely respond with the requested data, or if the carrier/TPA is unwilling to help with the D1 file, the employer may have to submit a P2 and D1 file on their own. If assistance is needed with the P2 and D1 files, see Lumelight's solution here.

5. Updated Model Notice of Privacy Practices

The HIPAA Privacy Rule requires health plans and covered health care providers to develop and distribute a notice that provides a clear, user friendly explanation of individuals' rights with respect to their personal health information and the privacy practices of health plans and health care providers. As of February 16, 2026, these HIPAA covered entities are required to include information about specific restrictions on the use and disclosure of substance use disorder (SUD) patient records in their notice of privacy practices (NPP). The new model notice incorporating these changes was released by Health and Human Services (HHS) on February 13, 2026. Plan sponsors of self-funded group health plans should use an updated NPP for all future distributions. Insurance carriers will typically handle distribution of the NPP for fully-insured plans. Read more here.

6. 2027 ACA OOP Maximums

The 2027 maximum out-of-pocket (OOP) limits that may be used for non-grandfathered group health plans under ACA rules. For 2027, the maximum OOP for self-only coverage is $12,000 (currently $10,150 for 2026) and the maximum OOP for family coverage is $24,000 (currently $20,300 for 2026). The guidance can be found here.

7. Updated HIPAA, MSP and SBC Penalties for Non-Compliance

The Department of Health & Human Services (HHS) announced updated penalty amounts for HIPAA, MSP, and SBC violations. The updated penalties can be found here.

For HIPAA privacy and security non-compliance, the updated penalties range from $145 for lack of knowledge to $2,190,294 for willful neglect.

For non-compliance with Medicare Secondary Payer (MSP) rules, including taking into account Medicare eligibility or incenting individuals to waive the employer's plan in favor of Medicare, the updated penalty is $11,823.

For failure to timely distribute a current summary of benefits & coverage (SBC), the updated penalty is $1,443.

8. EBSA 2026 Enforcement Priorities

The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) announced its national enforcement priorities for fiscal year 2026, focusing on issues that pose the greatest risk to plan participants and beneficiaries. Specific to health and welfare benefit plans, investigations will prioritize cybersecurity, access to mental health and substance use disorder benefits, surprise medical billing, and handling of employee contributions. EBSA also signaled a continued commitment to addressing abusive Multiple Employer Welfare Arrangements (MEWAs). Read more here.

9. Increased State-Level Mental Health Parity Enforcement

States are increasingly enforcing mental health parity laws and issuing record fines against health insurers for failing to provide mental health and substance use disorder coverage on par with medical/surgical benefits. Regulators have penalized plans like Kaiser Foundation Health Plan of Washington for not supplying adequate documentation or compliance evidence such as a non-quantitative treatment limitation (NQTL) comparative analysis, signaling tougher scrutiny of insurer practices under parity requirements. These actions reflect a broader state-level crackdown to hold insurers accountable for adhering to both state and federal mental health parity standards, aiming to improve access and equity in mental and behavioral health care. For employers offering self-funded health plans, this serves as a reminder that compliance with the Mental Health Parity and Addiction Equity Act (MHPAEA) requires a completed NQTL comparative analysis that must be maintained and made available upon request. See Lumelight's solutions here.

10. Updated HRSA Preventive Coverage Guidelines

Non-grandfathered group health plans must cover preventive services included in the updated HRSA-supported Women's Preventive Services Guidelines without cost-sharing under the ACA. The cervical cancer screening guideline has been revised for plan years beginning in 2027 to reflect current evidence-based recommendations for average-risk women aged 30-65. The guideline retains existing options (Pap tests, co-testing, and primary high-risk HPV testing every five years) and adds a recommendation that patient-collected (self-collected) hrHPV testing should also be covered. It also explicitly states that when additional testing (e.g., cytology, biopsy, extended genotyping) is clinically indicated to complete the screening process, those services are part of the cervical cancer screening guideline and must be covered accordingly. Read more here.

11. OCR Cybersecurity Newsletter

OCR (The Office for Civil Rights), a division HHS (Health & Human Services), released a newsletter further clarifying its focus on cybersecurity of PHI (protected health information). The newsletter underscores that system hardening is a core HIPAA compliance obligation, not merely a best practice. "System hardening" is the process of customizing electronic information systems to reduce the number of weaknesses and vulnerabilities that an attacker can exploit. OCR identifies three methods covered entities and business associates are expected to undertake in the process of system hardening:

Regularly patching known vulnerabilities

Removing or disabling unnecessary software and services

Properly enabling and configuring security controls.

OCR's expectation is that covered entities and business associates engage in regular review, documentation, monitoring and remediation. Read the newsletter here.

12. Marketplace Premium Tax Credits

Since Congress did not pass legislation before the end of 2025 to extend the enhanced premium tax credits, many individuals will face higher Marketplace premiums in 2026. Importantly, a change in the cost of individual health coverage does not trigger a HIPAA special enrollment event. As a result, group health plans are not required to allow mid-year enrollment, meaning affected individuals generally cannot move to an employer's plan until the next open enrollment period, unless the employer and carrier (or stop-loss vendor) choose to permit a more generous special enrollment opportunity.

In addition, federal agencies issued updated FAQs addressing premium tax credits. The guidance clarifies that repayment caps have been removed, which may significantly increase tax liability for individuals who receive excess premium tax credits. This can occur, for example, if an individual is ineligible due to the availability of employer-sponsored coverage or fails to provide accurate or updated household income information when enrolling in Marketplace coverage. The updated FAQs can be found here.

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Fourth Quarter Benefit News Highlights

Jarrica Walston — Sat, 10 Jan 2026 02:34:12 +0000

This quarter brought key updates in employee benefits—from new IRS guidance on ACA electronic reporting to final 2025 Forms 1094-C and 1095-C, plus important changes around ICHRA affordability. Read more to stay ahead of compliance shifts that could impact you and your employees.

1. ICHRA Affordability - Updated Premium Look-Up Table

The affordability of an ICHRA is tied to the lowest cost silver plan available on the public Exchange/Marketplace. The rates vary based on an employee’s worksite or residence, so CMS publishes premium data via a Look-Up Table for Federally-facilitated Exchanges and State-based Exchanges using the Federal Platform. Employers can use this information to help determine affordability for their ICHRA offering. Plan year data for 2019 – 2026 can be found here.

2. Trump Accounts - IRS Guidance

IRS Notice 2025-68 announces the IRS’s intent to issue proposed regulations implementing Trump Accounts (TAs)—a new type of IRA added under the One Big Beautiful Bill Act (OBBBA) that may be established for eligible minors. The notice provides some initial guidance on how these accounts will operate. Beginning July 4, 2026, employers may contribute up to $2,500 per year (indexed annually) per employee on a tax-favored basis via Trump Account Contribution Plans (TACPs). The notice also confirms that TACPs may be offered through cafeteria plan salary reductions, and that further rules coordinating TACPs with cafeteria plans will be addressed in upcoming proposed regulations. The notice can be found here.

3. CMS Final Rule - Hospital Pricing Transparency

CMS’s recent final rule aims to strengthen hospital price transparency requirements beginning in 2026. Hospitals must publicly disclose actual (rather than estimated) allowed amounts along with counts and National Provider Identifiers (NPIs) in machine readable files (MRFs), backed by a formal accuracy attestation. While this could certainly increase price transparency, the required MRFs remain highly technical and difficult for the average consumer to interpret. As a result, employers and third-party tools will play a critical role in translating these data into usable insights for plan members. That being said, more accurate, transparent pricing data may give employer-sponsored group health plans stronger leverage in evaluating hospital contracting and benchmarking provider prices. Employers might also use the information to enhance benefit design strategies such as tiered networks, reference pricing, and steering toward lower-cost care settings. The fact sheet for the final rule can be found here.

4. Guidance for Electronic Submission of ACA Employer Reporting

The IRS has released Publication 5164 and 5165 for the 2025 filing season, providing updated guidance for electronic submission of Forms 1094 and 1095 through the AIR system. While the publications outline technical standards and testing procedures, most employers will continue to rely on third-party vendors for electronic reporting due to the complexity of obtaining a Transmitter Control Code (TCC), meeting formatting specifications, and completing required testing. Employers should confirm they are prepared to electronically file or have a vendor solution in place ahead of the 2025 reporting deadlines. The publications can be found here:

5. Kaiser Family Foundation (KFF) Survey

The 2025 KFF Employer Health Benefits Survey underscores the continued rise in employer-sponsored health costs, with family premiums climbing 6% to nearly $27,000 this year. Employees are contributing roughly $6,850 on average toward that total, reflecting the sustained pressure both workers and employers face in managing healthcare expenses. Beyond premiums, cost-sharing burdens continue to climb. The average deductible for single coverage rose to $1,886, with employees at smaller firms facing substantially higher out-of-pocket costs.

Employers cite escalating prescription drug prices—especially for new therapies and weight-loss medications—as a major factor behind rising costs. Chronic disease and hospital costs are also significant drivers. In response, employers are increasingly exploring new care models to improve value and manage costs: nearly a third of firms with 50 or more workers now contract for virtual primary-care services, and some are forming direct arrangements with provider groups.

You can find extensive detail from KFF’s survey here.

6. CMS Marketplace Fact Sheet

While we wait to see whether enhanced advanced premium tax credits, which are set to expire at the end of 2025, will make it into the budget bill currently being negotiated by Congress to end the government shutdown, CMS released a fact sheet outlining its expectations for the 2026 Marketplace plan year. The fact sheet highlights efforts to preserve consumer choice, stabilize premiums, and expand access to HSA–eligible plans. You can find the fact sheet here.

7. FAQs – Fertility Coverage Options

Recent agency FAQs clarify that employers may offer fertility-related benefits (e.g., in-vitro fertilization) as an excepted benefit, provided the coverage is offered under a separate, fully-insured policy and is not coordinated with another group health plan maintained by the same plan sponsor. The benefit would be treated similarly to a specified disease or fixed indemnity policy. Because excepted benefits are exempt from many ACA coverage mandates, they do not need to be integrated with the employer’s major medical plan and do not affect HSA eligibility.

The FAQs further explain that fertility benefits meeting the requirements of §213(d) may also be reimbursed through an Excepted Benefit Health Reimbursement Arrangement (EBHRA). An EBHRA may be offered to employees who are eligible for—though not necessarily enrolled in—the employer’s major medical plan, with annual reimbursement limited to $2,200 for 2026.

Outside of an EBHRA, employers currently cannot offer a stand-alone, self-funded reimbursement arrangement for fertility benefits that would qualify as an excepted benefit. However, the agencies have indicated an intent to pursue rulemaking that could expand how fertility benefits may qualify as “limited excepted benefits,” potentially allowing self-funded options in the future.

The FAQs can be found here.

8. Employer Plan Sponsor Responsibilities

A federal court in Minnesota (Orrison v. Mayo Clinic) allowed claims to proceed that the plan and its administrator failed to disclose out-of-network reimbursement methodology (a breach of its ERISA fiduciary duties) and failed to maintain an accurate provider directory (a violation of the No Surprises Act/Transparency requirements). This provides a reminder for employers (as plan sponsors) to work with carriers, TPAs, and other vendors to maintain accurate provider directories for participants and ensure plan documents and participant materials clearly explain cost-sharing calculations—especially how allowed amounts for out-of-network services are determined. The court decision can be found here.

9. 2025 Final Form 1094-C & Form 1095-C

The IRS has released the final 2025 Forms 1094-C and 1095-C with no changes from how they looked in 2024. We’re still waiting on the 2025 accompanying instructions, but we don’t anticipate changes there either, so employers can begin preparing now for the upcoming ACA employer reporting season. The forms can be found here.

10. IRS 2025-2026 Priority Guidance Plan

The IRS released its 2025–2026 Priority Guidance Plan, which outlines the agency’s intended areas of focus for the coming year. For employer-sponsored health and welfare benefits, there are no real surprises in the plan—most of the items listed are routine updates such as the annual release of cost-of-living adjustments, Health Savings Account (HSA) limits, and the Patient-Centered Outcomes Research Institute (PCORI) fee notice. While no major new initiatives affecting health and welfare plan design are included, the plan does provide a helpful indication of when employers can expect the IRS to issue these regular updates. You can find the plan here.

11. HIPAA Security Risk Assessment Tool Updated

Employers sponsoring group health plans that are covered entities under HIPAA are required to conduct a security risk analysis for electronic protected health information (ePHI). Employers can use the Security Risk Assessment (SRA) Tool created by the Department of Health & Human Services Office for Civil Rights (OCR) to assist with this analysis. The tool guides organizations in identifying where ePHI is stored or transmitted, evaluating vulnerabilities, and documenting risks with corresponding mitigation steps. The latest version (v3.6) enhances usability with clearer guidance, updated questions and responses that reflect current cybersecurity practices, and improved educational content addressing areas such as encryption and incident response. The latest version of the SRA Tool can be found here.

If you have questions, please contact your North Risk Partners Risk Advisor. Don’t have an advisor? No problem. We’ll help you find one.

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Benefits During an Unprotected Leave of Absence

Jarrica Walston — Sat, 10 Jan 2026 02:25:36 +0000

When it comes to administering health plan coverage during an employee’s leave of absence, the first step is to determine whether the employee is entitled to protected leave under federal or state law (e.g., FMLA). For purposes of this summary, an assumption is made that the employee is either not eligible for protected leave or protected leave has already been exhausted.

1. Will an employee who takes unprotected leave remain eligible for health insurance and other benefits?

If an employee enrolled in benefits takes an unprotected leave of absence or exhausts their protected leave, their continued eligibility for benefits during leave will depend on two things: the eligibility rules in the plan documents and the employer’s own leave policies.

Plan Documents

Some plan documents include specific provisions outlining how long an employee on leave may remain covered under the benefit plan before coverage terminates (e.g., plan document may allow eligibility to continue during approved leave for 60 days). When such language exists, the plan document governs. Employers should review all plan documents, including any wrap documents and underlying summary plan descriptions (SPDs) or certificates of coverage, as provisions may differ across benefits.

Employer Leave Policy

In the absence of specific language in the plan documents, it falls on the employer to determine how long an employee on an unprotected leave can remain on the benefit plans as an active participant. Some employers will address eligibility for benefits in the employer’s leave policy or employee handbook. Absent insurance carrier/stop-loss vendor restrictions, employers are free to determine eligibility while on unprotected leave. The employer’s leave policy should establish a definite period of eligibility while on leave (not open-ended), the eligibility should align with any applicable rules within the plan documents, and the employer should apply its policies consistently to all employees. In cases where plan documents and employer policies are vague, silent, or defer to the employer, it is the employer’s responsibility to interpret and apply the information available.

2. When should an employer make an offer of COBRA/continuation coverage to an employee on unprotected leave?

When to offer COBRA/continuation coverage depends on how the plan is administered according to the information in Q-1 above. If, according to the plan terms and/or employer leave policy, the employee’s leave of absence (i.e., reduction in hours) triggers a loss of eligibility for coverage; that triggers a qualifying event requiring the employer to make an offer of COBRA or state continuation coverage.

3. If an employee remains eligible for health coverage during unprotected leave, how should the employer handle premiums?

If the leave of absence is paid, employee contributions may continue to be deducted from payroll. If the leave is unpaid, the employer should have a process for obtaining employee contributions and that process should be communicated to employees. There are no rules that specifically address how employers may collect premiums during unprotected leave, so most employers follow the rules applicable to FMLA by offering at least one of the following options:

Pre-pay on a pre-tax basis (this cannot be the sole option)
Pay during the leave on an after-tax basis
Make catch-up contributions on a pre-tax basis upon return from leave

If an employee fails to make their share of premium contributions during the leave in accordance with the employer’s communicated policy, their coverage can be terminated (potentially retroactively). Coverage terminated due to failure to pay premiums is not a COBRA qualifying event.

4. How should the employer handle health plan coverage upon the employee’s return from leave?

13-Week Rule (only applicable large employers (50 or more FTEs))

If an employee returns from unpaid leave within 13 weeks without being credited an hour of service, the employer must treat the employee as a continuing employee. If the employee was previously covered and returned as full-time, the medical coverage must be reinstated as soon as administratively possible (i.e., no later than the 1st of the month following rehire) to avoid potential ACA penalties. If the unpaid leave was longer than 13 weeks, the employee can be treated as a “new hire” upon return and subjected to a new waiting period or initial measurement period, as applicable.

§125 Rules

If the employee returns from unprotected leave within 30 days of coverage being terminated, the employer is required to reinstate the employee’s previous elections (assuming they are eligible upon return). If the leave was longer than 30 days, the cafeteria plan can be designed to reinstate the employee’s prior cafeteria plan election or allow the employee to make a new election to the same extent allowed for new hires.

5. What if the employee takes leave during their waiting period or before medical coverage becomes effective?

HIPAA’s nondiscrimination rules generally prohibit health plans from denying or delaying coverage based on an employee’s ability to work when the absence is health-related. Therefore, for healthrelated leave, coverage should typically become effective once the waiting period is met, even if the employee is not actively at work. If the employee does not return and no longer meets eligibility requirements, coverage may be terminated in accordance with the employer’s standard unprotected leave policies. HIPAA’s nondiscrimination protections apply only to group health plans, not to excepted benefits (e.g., dental/vision coverage, health FSAs) or non-health benefits such as life and disability insurance, which may require the employee to be actively at work before coverage begins.

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ACA Employer Reporting Summary

Jarrica Walston — Sat, 10 Jan 2026 02:16:12 +0000

Certain employers, plan sponsors, and insurers are required to report health plan information and participant coverage data to the IRS each year. The IRS uses this information to administer and regulate various aspects of the Affordable Care Act (ACA), including an individual’s eligibility for a premium tax credit when purchasing health insurance through a public Marketplace and the §4980H employer shared responsibility rules. Failure to report complete, accurate, timely information can result in significant reporting penalties up to $340/form.

Employer Reporting Responsibilities

Applicable Large Employers (ALEs)

All ALEs (those with at least 50 full-time equivalents (FTEs)) are required to report on offers of coverage to full-time employees. ALE status is determined by averaging FTEs for the previous calendar year. For example, if an employer averaged 50 or more FTEs during 2024 (alone or as part of a larger controlled group or affiliated service group), the employer is an ALE for 2025 and required to report offer of coverage information early in 2026 (for the 2025 calendar year). ALEs report offer of coverage information using Forms 1094-C and 1095-C. Offer of coverage reporting on the “C” forms will never be handled by the carrier but instead must be done by the employer or a vendor on behalf of the employer.

Employers Offering Self-Funded Group Health Plan Coverage

Any size employer who provided self-funded (including level-funded) coverage during 2025 must report coverage information for all individuals enrolled in the plan, including employees, non-employees (e.g., owners, retirees, COBRA participants), and their spouses and dependents. Small employers (<50 FTEs, non-ALEs) report this coverage information using Forms 1094-B and Form 1095-B. ALEs generally report this coverage information in Part III of the Form 1095-C.

Timing of Reporting

Employer reporting is required annually and is done early in the year for the previous calendar year. Reporting is based on calendar year data (even for employers with a non-calendar year medical plan).

2025 Reporting Deadlines

Due March 2, 2026: Form 1095s to employees and covered individuals

Due March 31, 2026: Submission of Form 1094 and all Form 1095s to the IRS

Reporting Method of Delivery

Distribution to Individuals

The options for distribution of Form 1095s are:

Hand delivery
Mail
Electronically if individuals consent to electronic delivery
NEW as of 2024 - post a notice of availability

Posting Notice of Availability

Distribution to individuals can be satisfied by providing a “clear, conspicuous and accessible notice” that the forms are available upon request. The notice must include an email address, physical address, and telephone number that can be used to request a copy of Form 1095. Notice must be posted on the employer’s public-facing website so that it is accessible to all possible Form 1095 recipients. The notice must be posted by March 2 and remain posted through October 15. If a Form 1095 is requested, it must be provided within 30 days and would have to be hand delivered or mailed unless the employer obtains consent to provide Form 1095 electronically.

IRS Submission

For almost all employers, Form 1094 and all Form 1095s must be submitted to the IRS electronically.

Electronic Filing Requirements

Employers who file 10 or more tax forms must file electronically (previously only those filing 250 or more forms were required to file electronically). The count includes not only Form 1094 and Form 1095s, but also any other information tax returns the employer may file during the year (e.g., W-2s or 1099s), and therefore, almost all employers will be required to file electronically. This is also true for any corrections that may need to be filed. Most employers use the services of a vendor or reporting software to handle the electronic transmittal to the IRS.

State Coverage Reporting

A handful of states (CA, MA, NJ and RI) and D.C. have individual coverage mandates requiring residents to have minimum essential coverage or pay a state tax penalty. To enforce these mandates, these states require group health plans, both fully-insured and self-funded, to report coverage information to the states. Employers offering group health plans with covered individuals residing in these states may be required to send reporting to the state tax department in addition to the coverage information submitted to the IRS. In most cases, the same Form 1094 and Form 1095s can be sent to the applicable state tax department to satisfy the reporting requirement. NOTE: Posting notice of availability for Form 1095s as permitted by the IRS may not satisfy state distribution requirements.

Resources

IRS forms and instructions for 2025 reporting (due in early 2026) can be found on the IRS website at:

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