IRS Sample Plan Language - Educational Assistance Program
The 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. Publication 5993 (Rev. 4-2026)
CMS Final Rule - Creditable Coverage Status & Disclosures
The 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 HRAs (such as ICHRAs), HSAs, and 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. 2026-06600.pdf
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’s 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 such as preferred networks and tiered cost-sharing, even in states that seek 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.
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. 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.
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.
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 EBSA’s 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.
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.
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 that TrumpRx should be viewed as a supplemental option primarily for those who are uninsured, not as 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.
Handling Employee Contributions During Unpaid Leaves of Absence
If the leave of absence is unpaid or not paid through payroll (e.g., STD or workers’ compensation), it is advisable to establish a process for collecting the employee's contribution and 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 premiums unless two conditions are met:
- The employee must be allowed a 30-day grace period from the date the premium is due; and
- 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, it must be available for reinstatement upon the employee's return 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 premiums.
For non-FMLA leave, employers have greater flexibility in their 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 the payment procedures in place for FMLA-protected leave for consistency and ease of administration.
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.
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). Form 720 (Rev. June 2026)
