HEALTH AND WELFARE PLAN UPDATES
Departments Announce Non‑Enforcement for Mental Health Parity Rules
On May 15, 2025, the U.S. Departments of Health and Human Services, Labor and the Treasury (collectively, the Departments) announced a non‑enforcement policy for Biden‑era mental health parity rules issued in 2024.
This announcement follows a motion by the Departments to suspend litigation in The ERISA Industry Committee v. United States Department of Health and Human Services et al. The lawsuit, filed in January 2025, asks the U.S. District Court for the District of Columbia to invalidate the 2024 mental health parity rules as arbitrary, capricious and beyond the Departments' statutory authority. In the motion to suspend, filed May 9, 2025, the Departments indicated that they were considering revising or rescinding these rules. Finalized on September 9, 2024, the rules amended earlier 2013 rules implementing the Mental Health Parity and Addiction Equity Act (MHPAEA) to address disparities in access to care for mental health/substance use disorder (MH/SUD) conditions compared to medical/surgical (M/S) conditions. Among other things, the 2024 rules mandate all plans offer a meaningful benefit covering the core treatment for any MH/SUD condition in a classification for which M/S conditions are covered by the plan. Plans are additionally required to collect and evaluate data on material differences in access to MH/SUD and M/S benefits based on nonqualified treatment limitations (NQTLs). In designing NQTLS, plans are prohibited from using discriminatory or biased information or sources. Plan fiduciaries are required to certify that a prudence process was followed when preparing this comparative analysis.
According to the Departments' statement of non‑enforcement, they will not be enforcing the 2024 rules or pursuing enforcement actions based on failure to comply before the final decision in the now‑suspended litigation is issued and for 18 months thereafter. While awaiting additional guidance, plans should refer to the prior 2013 rules for compliance with the MHPAEA.
Virginia District Court Allows Tobacco Surcharge Litigation to Proceed
The U.S. District Court for the Eastern District of Virginia has denied an employer's motion to dismiss a claim challenging tobacco surcharges imposed under an employee wellness program. The case, Bokma v. Performance Food Grp., Inc., cites a similar ruling issued last month in Mehlberg v. Compass Group, USA, Inc., which determined that plaintiffs had made sufficient allegations that the challenged surcharges violated ERISA's fiduciary rules, allowing the case to proceed. The wellness program challenged in Bokma imposed a $600 surcharge on employees ($300 on spouses) who failed to self‑certify that they had not used tobacco products during the previous 12 months. Plaintiffs alleged that this was discrimination based on health status because there was no compliant wellness program that permitted all participants to earn the full reward and additionally constituted a fiduciary breach under ERISA. The Court declined to dismiss these claims, finding the allegations plausible and sufficient to proceed.
Amid the increase in tobacco surcharge litigation, where many cases remain pending, Bokma and Mehlberg, together, represent preliminary victories for participants challenging such surcharges as discriminatory and violative of ERISA. Plan sponsors should take care to ensure any employee wellness program is nondiscriminatory, consistent with the requirements of the Affordable Care Act (ACA) and the Health Insurance Portability and Accountability Act (HIPAA) and is ERISA‑compliant.
Sixth Circuit Decision Sheds Light on ERISA Fiduciary Status of Service Providers with "Shared Savings" Programs
A recent U.S. Court of Appeals for the Sixth Circuit decision in Tiara Yachts, Inc. v. Blue Cross Blue Shield of Michigan addressed whether a Michigan‑based health insurance company (BCBSM) acted as an ERISA fiduciary in its administration of a health plan. Pursuant to an administrative services agreement with the plan, BCBSM handled claims processing and made provider payments using plan assets. The agreement stipulated a 30 percent fee payable to BCBSM for any prevented or recovered overpayments. When BCBSM's claims processing platform and internal practices resulted in routine overpayments to out‑of‑network providers, allowing BCBSM to retain a portion of the recovered overpayments under this "shared savings" program, the plan argued that BCBSM breached its fiduciary duty under ERISA by engaging in self‑dealing.
The district court dismissed this claim, citing insufficient evidence that BCBSM acted as an ERISA fiduciary. However, the Sixth Circuit reversed the decision. The Sixth Circuit found that BCBSM's exercise of authority and control over plan assets (including by deciding how much to pay providers and distributing payment from plan assets) conferred ERISA fiduciary status. BCBSM's claims processing practices allowed it to profit off frequent overpayments. The Sixth Circuit's decision emphasizes how contractual obligations can coexist with fiduciary obligations, and that discretion and control over plan assets can transform service providers into ERISA fiduciaries. Where a shared savings program gives a service provider discretion over an element of its own compensation, this could give rise to self‑dealing for purposes of ERISA.
RETIREMENT PLAN UPDATES
Fifth Circuit Decision Underscores Participants' Duty to Inform Themselves
The U.S. Court of Appeals for the Fifth Circuit has affirmed a district court's dismissal of LeBoeuf v. Entergy Corporation, et al., a case brought by the children of a deceased plan participant alleging breach of fiduciary duty. Prior to his death, the participant had remarried but did not update his beneficiary designation, despite a plan provision specifying that remarriage revokes any prior designation. The plan required that a new designation be made with spousal consent. In LeBoeuf, the Fifth Circuit ruled that the plaintiffs failed to demonstrate any breach by the plan's benefits committee, a fiduciary under ERISA; the committee made no material representations and had adequately informed the participant of this rule. In fact, the participant had received multiple plan documents explaining the impact of remarriage on a beneficiary designation. Because of the clear language of the documents, the court determined that it was not reasonable for the participant to rely on other quarterly statements that continued to list his pre‑remarriage beneficiaries. In emphasizing the participant's duty to inform himself of plan terms and stating that plan sponsors are not obligated to address potential participant misunderstandings absent an inquiry, LeBoeuf underscores the importance of maintaining clear, accurate plan documents and engaging in consistent communication with participants through required reporting.
LeBoeuf is distinguishable from another recent case, Watson v. EMC Corp., wherein the U.S. District Court for the District of Colorado found that a plan administrator did breach its fiduciary duty under ERISA by failing to provide complete and accurate information; in Watson, the deceased participant had made specific written inquiries to the plan regarding his benefits and the plan administrator's response to those inquiries was inadequate and lacked pertinent details. The case had been remanded back from the U.S. Court of Appeals for the Tenth Circuit in 2024. Therefore, while clear plan documents can fulfill a plan fiduciary's duty to inform, when a participant makes a specific inquiry, a plan fiduciary's response must be timely and include adequate information.
District Court Rules Form 5500 Does Not Create Binding Obligation on Use of Forfeitures
An Arizona district court decision is the latest in the recent surge of litigation challenging the use of forfeitures to offset employer contributions rather than to pay plan expenses. Sievert et al. v. Knight‑Swift Transportation Holdings Inc. is now one of the few cases alleging misuse of forfeited assets in a 401(k) plan to end in dismissal with prejudice, foreclosing any opportunity for the plaintiffs to amend their complaint and refile. The district court determined that a statement in the plan's Form 5500 filing—that forfeited assets "shall be used" to pay plan expenses—did not create a binding legal obligation for the plan. Fiduciary obligations are governed by plan documents, not external filings, and the written plan document established discretion over how to allocate forfeitures. The Sievert decision builds off other recent precedents suggesting that "a plan sponsor's decision to allocate forfeitures toward reducing its own employer contributions, without more, is not sufficient to state a claim for a breach of fiduciary duty of loyalty or prudence under ERISA."
Ninth Circuit Affirms Dismissal of Claim Alleging Private Equity Investments Violate ERISA's Fiduciary Duties of Loyalty and Prudence
The U.S. Court of Appeals for the Ninth Circuit's dismissal of Anderson v. Intel Corp. Inv. Pol'y Comm. confirms that private equity and hedge fund investments do not inherently violate ERISA's duty of loyalty or duty of prudence. The plaintiff, a retirement plan participant, alleged that these private equity and hedge fund investments were imprudent and self‑serving. Both the district court and the Ninth Circuit disagreed. Prudence is evaluated prospectively, based on decision‑making and conduct rather than outcomes. It is not sufficient to claim that different investment decisions could have yielded more favorable results. In granting the dismissal, the Ninth Circuit found that the plaintiff did not bring sufficient evidence that plan fiduciaries were inadequate in making investment decisions or acted disloyally to the plan. This case underscores the importance of thoughtful and deliberate investment decision‑making by plan fiduciaries, and that including private equity and hedge fund investments can be part of a prudent diversification strategy.
Department of Labor Rescinds Cryptocurrency Guidance for 401(k) Plans
The U.S. Department of Labor (DOL) has issued Compliance Assistance Release 2025‑01, rescinding guidance issued in 2022 which discouraged retirement plan fiduciaries from including cryptocurrency options in 401(k) plans. The 2022 guidance directed fiduciaries to "exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan's investment menu for plan participants." This guidance was intended to warn plans of the risk associated with cryptocurrency investments and chill the inclusion of cryptocurrency options in retirement plans. However, according to the DOL, this "extreme care" language is not consistent with ERISA's requirements and marks an overreach by the prior Administration. The DOL thereby resumes a neutral stance on cryptocurrency investments, neither endorsing nor condemning plan fiduciaries who choose to include them in a plan's investment options.
GENERAL UPDATES
Proposed Tax Bill Includes Changes for Benefit Plans
After substantial negotiation culminating in an overnight session, the U.S. House of Representatives narrowly passed the Trump Administration's proposed tax and government spending bill early on May 22, 2025. The varied provisions include significant changes to health accounts and other benefit plan issues. The bill would expand health savings account (HSA) eligibility and participation by allowing certain seniors on Medicare to contribute to HSAs, permitting HSAs alongside bronze or catastrophic plans, improving compatibility between HSAs and on‑site employer clinics, allowing both spouses to make catch‑up contributions to the same HSA, and permitting HSAs to accept distributions from a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) for employees newly enrolled in high deductible health plans (HDHPs). The bill also proposes an expansion to the use of HSAs, adding the ability to pay direct primary care arrangement fees and pay a limited amount for a fitness facility or similar exercise program, as well as permitting an HSA to be used for certain expenses incurred before the HSA is established, if the participant opened the HSA (and incurred the expenses) within 60 days of enrollment in an HDHP. The bill would increase the HSA contribution limit by $4,300 for individual coverage (or $8,550 for family coverage), limited based on income above $75,000 (or $150,000 for those filing a joint return).
In the bill, individual coverage HRAs are rebranded and codified as custom health option and individual care expense (CHOICE) arrangements, to be included on employees' Form W‑2, with a tax credit for small employers that maintain a CHOICE arrangement. Employees would also be allowed to fund a CHOICE arrangement through a cafeteria plan and then use those funds to purchase coverage on the individual market.
The proposals also include changes to paid family and medical leave benefits and would reduce the retirement benefits of federal employees. Finally, the bill would repeal the section of the SECURE 2.0 Act providing for government matching contributions to certain individual retirement accounts or retirement plans, though the bill will likely be finalized before this section's effective date.
These and other proposed changes would take effect for tax years and plan years beginning after December 31, 2025. The bill, however, remains subject to change (and is likely to change significantly) as it passes through the U.S. Senate.
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.
General Deadlines
✓ Form 5500 for Calendar Year Plans. Plan administrators generally must file Form 5500 within seven months after the end of the plan year, including applicable schedules and attachments. Thus, unless a deadline extension is granted before the due date, for plan years ended on December 31, 2024, the Form 5500 filing deadline is July 31, 2025. A plan administrator can apply for a deadline extension by filing Form 5558 (Application for Extension of Time) on or before July 31, 2025.
✓ Summary of Material Modifications for Calendar Year Plans. Summary of Material Modifications (SMMs) must be distributed within 210 days after the end of the plan year in which the substantial modification was adopted. Thus, for calendar year plans, all SMMs describing amendments made during the 2024 plan year must be distributed by July 30, 2025.
Health and Welfare Plan Deadlines
✓ PCORI Fee Due July 31, 2025. Plan sponsors or administrators of self‑insured group health plans must report and pay the annual PCORI fee to the IRS by filing the second quarter Form 720 by July 31, 2025. For plan years that end on or after October 1, 2023, but before October 1, 2024, the PCORI fee due is $3.22 per covered life. For plan years that end on or after October 1, 2024, but before October 1, 2025, the PCORI fee due is $3.47 per covered life.
Retirement Plan Deadlines
✓ Annual Funding Notice for Certain Defined Benefit Plans. Plan administrators of defined benefit plans with 100 or fewer participants generally must provide the annual funding notice to required recipients by the Form 5500 filing deadline, including extensions.
✓ Form 8955‑SSA. As with Form 5500, plan administrators must file Form 8955‑SSA within seven months after the end of a plan year (i.e., July 31, 2025, for calendar year plans). A plan administrator can receive the same extension for Form 8955‑SSA as is available for Form 5500 by filing Form 5558 on or before July 31, 2025. Plan administrators must also provide individual statements to those separated participants identified on Form 8955‑SSA prior to the Form 8955‑SSA filing deadline.
✓ Periodic Pension Benefit Statements for Calendar Year Defined Contribution Plans. For calendar year defined contribution plans with participant‑directed investments, pension benefit statements must be provided within 45 days of June 30, by August 14, 2025. Calendar year plans without participant-directed investments must provide pension benefit statements on or before the date the Form 5500 is filed by the plan, but in no event later than July 31, 2025 (unless a Form 5500 deadline extension is granted).
✓ Multiemployer Plan Summary Report. Plan administrators of multiemployer defined contribution plans must provide certain financial information, including contribution schedules, benefit formulas, and numbers of employers and participants, to participating unions and contributing employers within 30 days after the Form 5500 filing deadline (i.e., by Saturday, August 30, 2025, for calendar year plans).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
