RETIREMENT PLAN UPDATES
IRS Proposes Rules for Electronic Rollovers
In Notice 2026‑49, the Internal Revenue Service (IRS) proposed standardized procedures intended to make retirement plan rollovers faster and more efficient. These procedures would allow for direct communication between plans and facilitate electronic fund transfers as opposed to paper checks. The proposed guidance, provided as a series of sample forms for optional use with corresponding procedural steps, would apply to transfers between two retirement plans or between a retirement plan and an individual retirement account (IRA). Additionally, the proposal seeks to protect personal information via encryption and a unique “rollover identification number” for each specific transaction.
IRS Proposes Minimum Funding Rules for Single-Employer Plans
On August 20, 2026, the IRS published proposed regulations modifying minimum funding rules for single employer defined benefit plans. The proposed regulations would implement section 430 of the Internal Revenue Code (the Code) as amended by the Worker, Retiree and Employer Recovery Act of 2008 (WRERA) and the SECURE 2.0 Act of 2022 (SECURE 2.0). As proposed, the regulations clarify which expenses can be included in a plan’s target normal cost, address when plan amendments must be taken into account in actuarial results, extend deadlines for certain actuarial assumption changes and make other clarifying updates. Notably, the proposed regulations would allow plan sponsors to adopt a retroactive amendment increasing accrued benefits after the close of a plan year. Such an amendment may then be taken into account for determining the plan’s target funding and normal target cost. The proposed regulations also would clarify that “plan‑related expenses” for purposes of determining target normal cost include amounts expected to be paid from plan assets (other than benefit payments) but exclude investment‑related fees and expenses.
Seventh Circuit Affirms Denial of Survivor Benefits
On July 20, 2026, in Havlik v. University of Chicago, the U.S. Court of Appeals for the Seventh Circuit affirmed the invalidity of an attempted change to a surviving spouse’s rights based on an ineffective power of attorney designation. The Seventh Circuit affirmed that governing Wisconsin law requires a specific, express grant for a power of attorney to change the rights of a surviving spouse, which the power of attorney at issue did not have. According to the Seventh Circuit, because the plan administrator acted in accordance with law and the plan’s terms in denying the change, there was no breach of fiduciary duty and no negligence. The case underscores the importance of confirming the validity of powers of attorney and beneficiary designations and addressing any deficiency.
DOL and PBGC Weigh in on Pension Risk Transfer Litigation
After revitalizing its opinion letter program earlier in 2026, the Pension Benefits Guaranty Corporation (PBGC) issued an opinion confirming its longstanding view that it bears no responsibility for benefits after pension liabilities have been transferred to an insurer. This opinion is of particular importance amid increased pension risk transfer (PRT) and related litigation. The U.S. Department of Labor (DOL) filed an amicus brief also addressing PRTs with respect to Doherty v. Bristol‑Myers Squibb, a case currently pending in the U.S. Court of Appeals for the Second Circuit. The case, like many others brought (and largely dismissed) in recent years, argues that it is a breach of fiduciary duty to shift pension obligations via a PRT to something other than the safest possible annuity provider, alleging that the fiduciaries selected a “cheaper alternative” over “safer alternatives.” The case survived a motion to dismiss in 2025, after the U.S. District Court for the Southern District of New York determined that the plaintiffs had shown sufficient injury to proceed, due to the “substantial risk” to their benefits. The prior ruling also affirmed a PRT as a fiduciary (rather than a settlor) act, involving implementation decisions which trigger fiduciary duties. In favor of the plan fiduciaries, the DOL’s brief argues that the PRT process is permitted by the Employee Retirement Income Security Act (ERISA) and that courts and participants should not “punish employers” for engaging in permissible PRTs. While yet undecided, the eventual outcome of this case could shift the litigation landscape for similar claims in the future.
PBGC Proposed Rule Addresses Failures to Provide Information
PBGC recently proposed a rule updating monetary penalties for when defined benefit plans fail to timely provide required notices or other information to PBGC and plan participants. While the rule proposes categories of information subject to differing monetary penalties based on severity and number of participants, the rule also would incentivize self‑reporting and prompt self‑correction through lowered penalties for violations that are caught and addressed early.
HEALTH AND WELFARE PLAN UPDATE
DOL Proposes Expansions to E-Delivery for Group Health Plans
On July 23, 2026, the DOL proposed a new rule which would allow group health plans to share certain mandatory disclosures with participants and beneficiaries electronically. If adopted, the rule would create an additional electronic disclosure safe harbor, following a notice and access model of disclosure. More information is available here.
IRS Proposes Nondiscrimination Rules for DCAPs
Decades after the publication of the dependent care assistance program (DCAP) rules in Section 129 of the Code, the IRS has published nondiscrimination testing guidance. The proposed regulations implement the statutory requirement that benefits not discriminate in favor of highly compensated employees (HCEs) and provide details on testing methodology that may help DCAPs pass nondiscrimination testing, potentially including DCAPs that have failed in the past. The proposed regulations also provide guidance regarding how to correct DCAPs that fail testing.
EBSA Field Assistance Bulletin Addresses MHPAEA Enforcement
On September 8, 2026, the DOL’s Employee Benefits Security Administration (EBSA) issued a Field Assistance Bulletin (FAB) clarifying the DOL’s narrowed enforcement approach with respect to the Mental Health Parity and Addiction Equity Act (MHPAEA) and MHPAEA’s nonquantitative treatment limitation (NQTL) comparative analysis requirement. Specifically, the FAB lays out three areas of enforcement priority:
- Separate treatment limitations, including exclusions: EBSA will focus its enforcement attention on blanket treatment limitations, including exclusions applicable to otherwise covered mental health and substance use disorder conditions and not to medical/surgical conditions.
- Medical necessity standards and review process: In reviewing prior authorization and concurrent/retrospective review procedures, EBSA will review the proprietary clinical guidelines utilized by health plans.
- Standards for determining network adequacy: If plans have inadequate networks, EBSA will ensure that plans are considering all available options to assist participants and beneficiaries who are seeking mental health and substance use disorder treatment to avoid out‑of‑network costs.
The FAB follows a non‑enforcement policy issued in May 2025, under which the 2013 rules remain largely enforced with respect to MHPAEA.
Seventh Circuit Rules Against ERISA Preemption in Arkansas Pharmacy Benefits Manager Dispute
On August 26, 2026, the U.S. Court of Appeals for the Seventh Circuit affirmed that ERISA does not preempt Arkansas Insurance Department Rule 128, in Central States, Southeast and Southwest Areas Health and Welfare Fund v. McClain. On appeal, the plaintiffs’ remaining preemption claim alleged that Rule 128 has an “impermissible connection” by “dictating plan choices” and encroaching on ERISA’s “uniform reporting regime.” The Seventh Circuit disagreed, finding that the Rule merely applies to certain pharmacy benefit costs, not to plan structure, and that states, like Arkansas, can enforce such regulations.
Agencies Issue Tobacco Surcharge Guidance
In response to a surge of tobacco surcharge litigation over health-contingent wellness programs, the U.S. Departments of Labor, Health and Human Services, and the Treasury (the Departments) issued FAQ guidance on August 26, 2026. Health-contingent wellness programs, which allow eligible individuals to qualify for rewards (or avoid surcharges) based on satisfying a standard related to a health factor, must ensure that the “full reward” is available to all similarly situated individuals. Increasing litigation over tobacco surcharges has amplified the need for clarifying guidance. The new FAQs are intended to help health plan sponsors comply with the full reward requirement, particularly with respect to:
- Disclosure of any “reasonable alternative standard” to participants—plans must disclose any such alternative in all plan materials describing the wellness program.
- Retroactive applicability from the beginning of the year (as opposed to the time the alternative was satisfied) where an individual satisfies such a reasonable alternative standard during the plan year—the Departments will not take enforcement action with respect to rewards that apply only during the period after the alternative was satisfied (and not retroactively to the beginning of the plan year).
GENERAL UPDATES
Ninth Circuit Severs Arbitration Clause in ERISA Plan Document
On July 30, 2026, the U.S. Court of Appeals for the Ninth Circuit held an arbitration clause (and corresponding class action waiver) in an ERISA plan document unenforceable. The Ninth Circuit ruled, in Pover v. Capital Grp. Cos., Inc., that the disputed clause impermissibly barred the plaintiff, and other plan participants, from asserting her ERISA right to sue as a representative for plan‑wide relief. While still split on the validity of arbitration clauses in plan documents, circuit courts are more frequently invalidating arbitration clauses in ERISA plan documents that preclude plan‑wide relief and class actions.
Circuit Courts Uphold “Abuse of Discretion” Standard in ERISA Claims
Federal courts have traditionally applied the deferential “abuse of discretion” standard to review denial of benefit claims under ERISA section 502(a)(1)(B), meaning that such courts generally uphold plan fiduciaries’ decisions to deny benefits unless such decision is arbitrary or capricious. In two recent retirement plan cases, In re Quest Diagnostics ERISA Litig., decided by the U.S. Court of Appeals for the Third Circuit in June, and Rush v. GreatBanc Tr. Co., decided by the U.S. Court of Appeals for the Seventh Circuit in July, the Third and Seventh Circuits applied the same standard to class action claims brought under ERISA section 502(a)(2) with regard to fiduciaries’ discretionary decisions, including with respect to plan investments.
District Court Applies ERISA to Foreign Employees
On July 27, 2026, the U.S. District Court for the Eastern District of Pennsylvania ruled in Ajeti v. Life Ins. Co. of North America that ERISA governs (and preempts) state law claims brought by foreign employees seeking benefits under their American employer sponsored benefit plan. The plaintiffs, in bringing their claim in state court, argued that their dispute is “extraterrestrial,” because it involves non‑citizens and injuries incurred while working outside of the United States and, accordingly, does not fall under ERISA’s purview. The District Court disagreed and determined that ERISA explicitly covers plans maintained outside of the United States when such plans are established in the United States by a domestic employer and are maintained primarily for the benefit of employees within the country, even where some foreign employees are covered as well.
COMPLIANCE DEADLINES AND REMINDERS
Plan sponsors should be preparing for these upcoming deadlines. If you have any questions or need any assistance on these items, please reach out to your Reinhart attorney.
General Compliance Deadlines
- Form 5500 Deadline for Calendar Year Plans with Extensions: Plan administrators generally have seven months after the end of a plan year to file a Form 5500, including applicable schedules and attachments. For plan years ending December 31, 2025, the Form 5500 filing deadline was July 31, 2026. However, for plans that obtained an extension, Form 5500 must be filed by October 15, 2026.
- Summary Annual Report Deadline for Calendar Year Plans: Plan administrators whose plans must provide Summary Annual Reports generally must distribute them within nine months after the plan’s year end (e.g., for plan years that ended December 31, 2025, the deadline is September 30, 2026). However, if a plan has received an extension for filing its Form 5500, the deadline is extended to two months after the extended Form 5500 filing deadline.
Retirement Plan Deadlines
- Annual Funding Notice for Calendar Year Defined Benefit Plans: Calendar year defined benefit plans with 100 or fewer participants generally must provide an Annual Funding Notice to required recipients by the Form 5500 filing deadline, including filing extensions.
- PBGC Comprehensive Premium Filing for Calendar Year Defined Benefit Plans: Defined benefit plans must electronically file the Comprehensive Premium Filing with the PBGC by the 15th day of the 10th calendar month after the first day of the plan year (e.g., for plan years beginning January 1, 2026, the deadline is October 15, 2026).
Health and Welfare Deadlines
- Medicare Notice of Creditable Coverage: Plans that provide prescription drug coverage to Medicare Part D eligible individuals must notify these individuals whether the drug coverage they have is creditable or non‑creditable prior to the Part D open enrollment period, by October 15, 2026.
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.
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