Proposed Rules – Electronic Distribution

Current Rule: Under the Department of Labor's 2002 electronic disclosure safe harbor, ERISA-covered group health plans generally may furnish required disclosures electronically only if the participant either (1) has regular access to the employer's electronic information system as an integral part of their job duties ("wired at work"); or (2) affirmatively consents to electronic delivery. As a result, many employers continue to rely on paper distribution for employees who do not meet one of these two requirements.

Proposed Rule: The DOL has proposed a new electronic disclosure safe harbor that would extend the electronic delivery framework adopted for retirement plans in 2020 to ERISA-covered group health plans. Rather than requiring employees to be "wired at work" or affirmatively consent to electronic delivery, employers could default participants into electronic delivery by obtaining an email address or smartphone number, providing an initial paper notice explaining the electronic delivery process and participants' rights, and allowing participants to opt out and receive paper copies free of charge. The proposal was published on July 23, 2026, with comments due by September 21, 2026. If finalized, the new safe harbor would become effective 60 days after publication of the final rule.

Wellness Tax Schemes

We continue to encounter vendors aggressively marketing programs that promise substantial tax savings for both employers and employees by offering a variety of tax-favored benefits and reimbursement arrangements. While many of these programs include legitimate benefits (e.g., preventive care, telehealth services, counseling, etc.) that may be excluded from employees' taxable income in appropriate circumstances, the tax savings often appear to be driven by the volume of payroll dollars being redirected into these arrangements rather than by the value of the qualifying benefits themselves. As a result, the amount withheld from employees' pay and later reimbursed on a purportedly tax-free basis may significantly exceed what can reasonably be treated as tax-favored under existing tax rules, creating a risk that employees are underpaying income taxes and employers are underpaying payroll taxes.

Employers proceeding with such programs should understand the potential tax risks to employees and themselves if the IRS decides to get more aggressive with enforcement around these types of programs.

Updated CHIP Notice

The U.S. Department of Labor has updated its Model CHIP Notice, with the latest version dated July 31, 2026. Employers that are subject to the CHIP notice requirement should use the updated model notice when providing information to employees about potential premium assistance opportunities available through Medicaid or the Children’s Health Insurance Program (CHIP). The notice is required to be provided upon initial eligibility and during open enrollment for group health plan coverage.

HRA Council’s 2026 ICHRA Report

The HRA Council’s 2026 “Growth Trends for ICHRA & QSEHRA” report finds continued strong growth in employer use of Individual Coverage HRAs (ICHRAs) and Qualified Small Employer HRAs (QSEHRAs), with applicable large employers representing the fastest-growing ICHRA segment. The report also finds that ICHRA enrollees tend to be younger than the existing ACA individual-market population, with more than half of enrollments involving employees under age 45, potentially strengthening the ACA marketplace risk pool. Despite 2026 individual market changes, including the expiration of enhanced premium tax credits, the HRA Council describes ICHRA adoption as growing and playing an important role in benefit strategy for employers.

DOL Guidance on MHPAEA Enforcement

The Department of Labor's Employee Benefits Security Administration (EBSA) recently issued Field Assistance Bulletin 2026-03 (FAB 2026-03), providing new guidance on how it intends to enforce the Mental Health Parity and Addiction Equity Act's (MHPAEA) non-quantitative treatment limitation (NQTL) requirements. While the Departments previously announced non-enforcement relief for certain provisions of the 2024 Final Rule during ongoing litigation, the underlying statutory requirement to perform and document NQTL comparative analyses remains in effect. Plan sponsors should not interpret the enforcement relief as a suspension of MHPAEA compliance obligations.

Under the new guidance, EBSA will focus its enforcement efforts on three NQTL categories that it believes present the greatest potential for participant harm: (1) separate treatment limitations and exclusions affecting mental health and substance use disorder (MH/SUD) benefits, (2) medical necessity standards and utilization management practices, and (3) network adequacy, provider admission standards, and reimbursement methodologies. EBSA also emphasized that it will review not only plan language, but also how plan provisions operate in practice, including the use of operational data and participant complaints.

For employers, the guidance provides a useful opportunity to reassess existing comparative analyses against a clearer enforcement framework. Plan sponsors should review current NQTL documentation, evaluate vendor-provided analyses, consider relevant operational data, and ensure that plan administration aligns with written plan terms. Although FAB 2026-03 refines DOL's enforcement priorities, it does not eliminate MHPAEA obligations or relieve plan fiduciaries of responsibility for compliance. More information about Lumelight’s solutions can be found here.

ICHRAs Rebranded as CHOICE Arrangements

CMS now refers to Individual Coverage Health Reimbursement Arrangements (ICHRAs) as CHOICE Arrangements (Custom Health Option and Individual Care Expense). While the underlying arrangement remains the same, the new branding is intended to make these options easier to understand. See CMS’ page on how these arrangements work here.

MLR Rebate Season

Employers sponsoring a fully-insured group health plan may soon be getting a check from their insurer. This check is a medical loss ratio (MLR) rebate that insurers are required to distribute to their plans when too much of the premiums charged in the previous year go toward the insurer’s administration, marketing, and profit, rather than going toward paying claims and quality improvement initiatives. Insurers are required to distribute this check annually by September 30. How an employer may use the rebate amount will depend on plan documentation and how coverage premiums are paid.

Updated HIPAA Security Risk Assessment Tool Available

A new Version 3.7 of the Security Risk Assessment (SRA) Tool is available to help organizations evaluate compliance with the HIPAA Security Rule. The update includes new questions addressing assessment scope, remote access and telework risks, asset inventory management, system activity logging, and other cybersecurity considerations reflecting today's evolving threat landscape.

The updated tool is intended to help identify potential risks to electronic protected health information (ePHI) and documenting security risk assessment efforts. While use of the tool does not guarantee HIPAA compliance, and the tool was developed primarily for healthcare providers, it may also serve as a useful resource for employers sponsoring HIPAA-covered group health plans that create, receive, maintain, or transmit ePHI when evaluating their administrative, physical, and technical safeguards.

Wearables – Sometimes Qualifying Medical Expenses

The IRS recently added new FAQ guidance (Q&A #15) addressing when the cost of wearable devices, such as smart watches, rings, patches, sensors, and similar technology, may qualify as a reimbursable medical expense under an HSA, FSA, HRA, or Archer MSA. The IRS explained that wearable devices are not eligible simply because they track health-related information; rather, the device must be purchased and used primarily to diagnose, treat, mitigate, or prevent a specific medical condition, based on the individual's facts and circumstances. Factors such as a medical practitioner's recommendation, a diagnosed condition, abnormal test results, or how the collected data is used may support eligibility, while a general desire to improve health or monitor wellness is insufficient. The same standard applies to related accessories, add-ons, and software subscriptions.