Benefits Counselor - November 2025

RETIREMENT PLAN UPDATES

Third Circuit Rejects Claim for Equitable Relief under ERISA as Duplicative

In a nonprecedential opinion issued on October 10, 2025, the U.S. Court of Appeals for the Third Circuit affirmed summary judgement in favor of the defendant fiduciaries in Carr v. Jefferson Defined Benefit Plan, et al. In its ruling, the Third Circuit held that the plaintiff's claim for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA) was duplicative of her prior benefits claim; in other words, it was "a claim for her pension benefits dressed up in the cloak of equity." This reinforces that, in the Third Circuit, a participant's ERISA civil enforcement right to obtain equitable relief cannot be used to recover the same amounts due under ERISA's right to benefits owed.

Seventh Circuit Addresses ERISA's Statutory Withdrawal Liability Formula

In SuperValu, Inc. v. United Food and Commercial Workers Unions and Employers Midwest Pension Fund, decided on October 9, 2025, the U.S. Court of Appeals for the Seventh Circuit addressed how to calculate a withdrawn employer's installment payments for complete withdrawal liability when the same employer previously did not incur partial withdrawal liability after it sold some (but not all) of its stores in compliance with ERISA Section 4204. Under ERISA, the amount of a withdrawn employer's annual payments is based on its contribution history to the pension fund during the 10-year period before the date of withdrawal. The Seventh Circuit confirmed that ERISA's statutory payment schedule rules did not require the fund to disregard the employer's entire contribution history relating to the stores sold in a prior Section 4204 transaction when it calculated the employer's annual payments to the fund for its subsequent complete withdrawal from the fund.

Senate Passes Two Bipartisan Bills Promoting ESOPs

In October 2025, the Senate unanimously passed the Retire through Ownership Act and the Employee Ownership Representation Act of 2025. The first bill allows fiduciaries of employee stock ownership plans (ESOPs) to rely on qualifying valuations by independent valuation experts or business appraisers. The sponsors of the Retire through Ownership Act hope that this change will help ESOP fiduciaries avoid frivolous legal challenges and reduce ambiguity over valuations of shares. The second bill adds two ESOP representatives to the ERISA Advisory Council and establishes a new Advocate for Employee Ownership within the U.S. Department of Labor (DOL), to help identify opportunities to promote employee ownership.

HEALTH AND WELFARE PLAN UPDATES

Departments Issue New Guidance on Fertility Benefits

The U.S. Departments of Health and Human Services (HHS), Labor and the Treasury (collectively, the Departments) issued new Frequently Asked Questions (FAQs) guidance regarding the provision of fertility benefits. In the FAQs, the Departments confirm that certain fertility benefits may be offered under certain "excepted benefit" rules. If qualified as excepted benefits, the fertility benefits would be exempt from some requirements of the Affordable Care Act (ACA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The Departments further suggested that new regulations on fertility care access may be forthcoming.

Dependent Care FSA Limit Set to Increase in 2026 for the First Time in Decades

Beginning with plan years starting after December 31, 2025, the Dependent Care Flexible Spending Account (DCFSA) limit will increase from $5,000 to $7,500 (or, for married couples filing separately, $2,500 to $3,750). Plan sponsors will need to decide whether to adopt the increased limit and amend plan documents and enrollment materials accordingly. Notably, this change may require an amendment even if a plan elects not to adopt the increase, if the limit is incorporated by reference into plan documents.

Plan sponsors should also be aware of the potential impact of this increase on Internal Revenue Code nondiscrimination testing for DCFSA benefits. Plan sponsors should begin to review DCFSA participation data to ensure the higher cap will not trigger nondiscrimination failures if DCFSA participation is concentrated among highly compensated employees. If the DCFSA is likely to fail testing, plan sponsors could proactively redesign their DCFSA benefits to avoid highly compensated employees being taxed on their DCFSA contributions.

IRS Announces 2026 Limits for Health and Welfare Benefits

On October 9, 2025, the Internal Revenue Service (IRS) announced the inflation adjusted health and welfare benefit limits for 2026 in Revenue Procedure 2025 32. Among other inflation adjustments, the announcement includes the following health and welfare benefit related increases:

• Maximum health flexible spending account (FSA) salary reductions will increase from $3,300 in 2025 to $3,400 in 2026.
• The health FSA carryover will increase from $660 in 2025 to $680 in 2026.
• In 2026, the term "high deductible health plan" will mean a health plan with an annual deductible that is between $2,900 and $4,000 (between $5,850 and $8,750 for family coverage).

California Introduces Expansive New PBM Regulations

California has joined numerous states increasing regulation of pharmacy benefit managers (PBMs). On October 11, 2025, California's governor signed SB 41, imposing certain fiduciary obligations on PBMs operating in the state, establishing limitations on fee structuring and pricing, implementing new requirements on rebates, and creating new licensing and financial reporting requirements for PBMs. While PBM laws in other states have been challenged as preempted by ERISA for self-funded group health plans, courts have largely tended to favor the states; for example, in September 2025, an Arkansas PBM regulation was upheld in district court as not preempted by ERISA. However, this is not always the case, as illustrated by recent litigation in Iowa, discussed below.

Iowa Court Enjoins Enforcement of PBM Law

An Iowa District Court granted an injunction suspending enforcement of several provisions of Iowa SF 383 on October 29, 2025, stating that the challenged provisions violated ERISA and other federal law. SF 383 was signed by the Iowa governor in June 2025, with the intention of regulating drug prices by setting reimbursement standards and other restrictions on PBMs. The injunction will remain in place pending the outcome of related litigation.

Mississippi District Court Vacates Prohibition on Transgender Bias in Health Care

On October 22, 2025, a Mississippi district court blocked enforcement of a final rule from the HHS, which interpreted the prohibition of sex-based discrimination in section 1557 of the ACA to include discrimination based on sexual orientation and gender identity. The rule expanded Title IX antidiscrimination protections to transgender individuals seeking health care. In a decision consistent with a preliminary injunction granted in 2024 and favoring the states suing to block enforcement this rule, the judge determined that the rule exceeded HHS's statutory authority, because HHS had defined "sex" in a way inconsistent with the understanding at the time of Title IX's enactment, when the term was defined according to biological differences. While the case, State of Tennessee v. Kennedy, was decided in district court, the ruling purports to vacate the HHS final rule as it expands the Title IX definition of sex discrimination nationwide.

GENERAL UPDATES

Eleventh Circuit Addresses ERISA's Strict Exhaustion Rule

In Bolton v. Inland Fresh Seafood Corp. of America, Inc., issued on October 15, 2025, the U.S. Court of Appeals for the Eleventh Circuit dismissed a class action lawsuit alleging violations of ERISA by the defendant company's ESOP for failure to exhaust administrative remedies prior to filing in federal court. While a majority of circuit courts do not require exhaustion for claims alleging a statutory violation of ERISA, the Eleventh Circuit declined to take this approach or stray from binding Eleventh Circuit precedent requiring exhaustion, even in the ERISA fiduciary claim context. The Eleventh Circuit is currently the only circuit court with a mandatory exhaustion requirement, even for plaintiffs asserting fiduciary breach in violation of ERISA's statutory mandate.

COMPLIANCE DEADLINES AND REMINDERS

Plan sponsors should be preparing to take action on the following upcoming deadlines. If you have any questions or need any assistance on these items, please reach out to your Reinhart attorney.

Health and Welfare Plan Deadlines

• Summary of Benefits and Coverage. A Summary of Benefits and Coverage (SBC) must be provided for each available health plan option annually with open enrollment materials. For group health plans with no open enrollment, the SBC must be provided to all participants and beneficiaries 30 days prior to the start of the plan year (by December 2, 2025, for calendar year plans).
• Gag Clause Attestation. Group health plans must attest to their compliance with the gag clause prohibitions of the Consolidated Appropriations Act (CAA) by December 31, 2025. The CAA prohibits group health plans and health insurers from entering into any agreement with a service provider that would directly or indirectly restrict the plan from providing provider specific cost or quality information to providers and participants. The attestation must be filed electronically on the Centers for Medicare & Medicaid Services portal. For more information on gag clause attestations, check out spotlight article, "Gag Clause Attestations: Getting Compliant Ahead of the Upcoming Deadline."
• CHIPRA Notice to Employees (Calendar Year Plans). The Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) imposes notice obligations on employers and plan sponsors to coordinate plan coverage with state Medicaid and the Children's Health Insurance Program (CHIP). Employers that maintain a group health plan in a state with Medicaid or CHIP premium assistance subsidies must provide written notice to employees by the first day of the plan year (January 1, 2026, for calendar year plans), informing them of the assistance available in each state where plan participants reside.

Retirement Plan Deadlines

• Qualified Plan Amendments for SECURE 2.0 Compliance. Retirement plan sponsors should review all plan documents for compliance with ERISA and the Code as amended by SECURE 2.0, with several key changes coming into effect on January 1, 2026. These changes include the requirement that catch up contributions by certain higher earning participants be made on a Roth basis and the increased "super catch up" contribution limit for participants who attain ages 60, 61, 62 or 63 during a calendar year. More information on these requirements, including specific implementation deadlines, is available here.
• 401(k) Notice of Intent to Use Safe Harbor Formula (Calendar Year Plans). Defined contribution 401(k) plans using the safe harbor matching contribution formula must provide notice to all participants and eligible employees, describing the formula and participants' rights and obligations, by at least 30 days (but no more than 90 days) before the start of the plan year (before December 2, 2025, for calendar year plans). However, under the SECURE Act, the notice requirement does not apply to certain plans that rely on nonelective contributions to satisfy the safe harbor requirements.
• Automatic Enrollment Notice. Defined contribution 401(k) plans with an automatic enrollment arrangement must provide notice of the right to elect a different deferral percentage, and how contributions will be invested absent an affirmative election, to all participants and eligible employees by at least 30 days (but no more than 90 days) before the start of the plan year (before December 2, 2025, for calendar year plans).
• QDIA Notice (Calendar Year Plans). Defined contribution 401(k) plans with participant directed investments must provide notice of the Qualified Default Investment Alternative (QDIA) at least 30 days before the start of the plan year (before December 2, 2025, for calendar year plans).