September 2025 Regulatory & Legislative Update

This regulatory and legislative update covers issues involving the state of preventive care, Medicare Part D enrollment, determining creditable status, and more.

The Precarious State of Preventive Care

The Affordable Care Act (ACA) requirement to cover certain preventive services at no cost to the insured continues to be an area fraught with challenges. You may recall that in June, the Supreme Court decided the case of Kennedy, et al. v. Braidwood Management, Inc., et al. The primary question addressed by the Court related to the proper appointment of the committees recommending preventive services.

The Supreme Court determined that the committees were, in fact, properly appointed and under the jurisdiction of the Secretary of Health and Human Services (HHS). Certain aspects of this case have been returned to the lower court for further proceedings. In addition, the Secretary of HHS, Robert F. Kennedy, Jr., is replacing members of certain of these committees. Specifically, he has overhauled the Advisory Committee on Immunization Practices (ACIP) and is considering changes to other committees responsible for making preventive care recommendations.

Importantly, for now, the preventive mandate remains in full force and effect.  As it relates to immunizations in particular, the COVID vaccine – which is deemed a required preventive coverage – is being tightly constricted. Most recently, the Food and Drug Administration (FDA) has approved the vaccine only for individuals aged 65 and older and for others who have underlying health conditions. How the ACIP and the Centers for Disease Control (CDC) will respond will be determined in the weeks to come.

In the meantime, employer-sponsored plans may be impacted, and insurers are reviewing how the COVID vaccine will be covered under their plans. Many insurers may continue to cover the vaccine, and self-funded plans have discretion and will need to make decisions in the weeks and months to come as the ACIP and CDC release further guidance.

Another consideration relates to pharmacy access to vaccines. More than a dozen states only allow pharmacists to administer the vaccine if it is approved by the CDC. In those states, there could be changes to where an individual can obtain a COVID vaccine. For now, the best advice is to work closely with your insurer or TPA, as applicable, to make the most appropriate decision for your population.

Reminder Time for Medicare Part D

It’s that time again! Medicare Part D open enrollment for the 2026 plan year begins on Oct. 15, 2025, and ends on Dec. 7, 2025. Employers offering prescription drug coverage must provide the annual Creditable (or Non-creditable) Coverage Disclosure Notice  to all Medicare-eligible individuals at least once every 12 months.  

As a reminder, an employer is not obligated to provide creditable prescription drug coverage. If an employer sponsored health plan provides prescription drug coverage, the employer is obligated to notify Medicare-eligible individuals about the status of that prescription drug coverage at least once per year and at certain other times, as follows:

• Prior to an individual’s initial enrollment in Part D;
• Prior to the effective date of coverage for any Medicare-eligible individual who joins the plan;
• Whenever prescription drug coverage ends, or changes from creditable to non-creditable coverage or vice versa; and
• Upon an individual’s request.

“Medicare-eligible individuals” include any current and former employees, and dependents of current and former employees, who are covered by the plan or who become eligible to enroll in the plan.

Determining Creditable Status

Historically, a simplified safe-harbor method of determining creditable coverage status has been available. Alternatively, an actuarial determination could be used. Due to recent changes to Medicare Part D and for various other reasons, the existing simplified method has become outdated. 

The old, simplified method provides:

• Availability for both brand and generic drugs;
• Reasonable access to retail pharmacies; and
• Designed to pay at least 60% of the participant’s prescription drug expenses. In addition, various cost restrictions apply, which are now largely outdated.

For 2026, a new simplified method is available, and it provides as follows:

• Availability of brand-name, generic, and biological prescription drug products;
• Reasonable access to retail pharmacy; and
• Designed to pay at least 72% of the participant’s prescription drug expenses.

The new simplified method differs from the existing method in several ways. Notably, it adds biological prescriptions to the types of prescriptions that must be covered, removes the annual, lifetime, and cost-share standards, and increases the plan payments for prescription drugs from 60% to 72%.

For 2026, plans may choose to use either the old or new simplified method. Beginning in 2027, only the new simplified method will be allowed. Alternatively, the actuarial method is always an option.  To assist high-deductible health plans in meeting creditable status, the guidance offers a couple of design suggestions. Examples include:

• Ensuring that preventive and permissive maintenance drugs are covered at first dollar or at a low cost; and
• Lowering cost sharing once the minimum statutory deductible has been satisfied.

Form and Manner of Notice

The notice must be in writing. It can be delivered on paper or, under certain conditions, electronically.

If delivered on paper, the notice can be included along with other plan materials if the disclosure notice is prominently displayed, in bold typeface in font size 14 or greater, and in a separate text box on the first page of the plan participant information. 

Disclosure Notice to CMS

The Medicare Part D Disclosure Notice discussed in this article is distinct from the annual Medicare Part D disclosure that plan sponsors make to the Centers for Medicare and Medicaid Services (CMS). The disclosure to CMS must:

• Be made using the online Disclosure to CMS form
• Be made within 60 days of the beginning of the plan year
  • Generally, March 1 for calendar year plans
• Be made within 30 days:
  • Upon cancellation of prescription drug benefit; or
  • Material change in prescription drug benefit causing coverage to change from creditable to non-creditable, or vice versa

The Disclosure to CMS Guidance and Instructions  is available on the CMS website.  

IRS Issues Draft W-2

Above-the-line tax deductions were established for qualified tips and qualified overtime compensation as part of the One Big Beautiful Bill Act (The Act of 2025). To assist with these deductions, employers will be required to include the following on Form W-2:

• Total amount of cash tips reported by employees and the employee’s tipped occupation; and
• Total amount of qualified overtime.

Additional guidance is expected from the IRS, including a list of qualifying occupations that can claim the deduction for no tax on tips, along with guidance on the method employers can use to estimate the amount of designated qualified tips and qualified overtime compensation for 2025.

The IRS has released a draft 2026 W-2.

Key changes to the form include:

• Box 12: Use to report qualified tips using code “TP” and qualified overtime compensation using code “TT”.
• New Box 14b: Report an employee’s qualified occupation.
• Box 14 renumbered: The current Box 14 becomes Box 14a.

Employers should begin working with their payroll providers to ensure compliance with this requirement.

Delaware Paid Family Leave Update

The Healthy Delaware Families Act has been amended to clarify several provisions of the law.  These amendments took effect July 30, 2025.  

As a reminder, the Healthy Delaware Families Act provides up to 12 weeks for parental leave and up to 6 weeks for medical leave or family caregiver leave. Contributions to the paid leave fund began Jan. 1, 2025. Benefits become available Jan. 1, 2026.

Use of Leave

The law now restricts an employer from requiring employees to use employer-provided paid time off, such as vacation or sick leave, before using paid family leave benefits. However, an employer and employee may mutually agree to the use of employer-provided paid time off to supplement any paid family leave benefits. 

Paid Family Leave Primary

The amendments clarify that paid family leave is the primary source of income replacement. Other sources of income replacement, such as disability insurance, are to be coordinated in accordance with the terms of the applicable policy.

Private Plan

An employer may satisfy its obligation to comply with the Healthy Delaware Families Act through a private plan. An employer may apply for a private plan on a rolling basis with effective dates of January 1, April 1, July 1, or October 1. Previously, application could only be made between September 1 and December 1 of each year. 

The amendments clarify that an employer sponsoring a private plan need only provide claim documentation to the Department, if there is an appeal, complaint, audit, or specific inquiry. 

Voluntary Participation

Employers employing 10-24 employees are only obligated to comply with the parental leave portion of the law. The amendment clarifies that, if an employer in this size classification offering a private plan chooses to provide medical or family caregiver leave, all provisions of the law apply. 

Additional information, including FAQs and a benefits contribution calculator, can be found on Delaware’s Department of Labor website. 

Illinois Paid Leave for Military Funeral Honors

Illinois’ Military Leave Act was amended to require employers to provide up to 40 hours of paid leave for eligible employees when serving on a funeral honors detail. This law took effect Aug. 1, 2025, and is in addition to other paid leave an employer already provides.

Employers with 51 or more employees must provide funeral honors detail leave. This leave is available to an employee who has been employed for at least 12 months and performed at least 1,250 hours of service during the 12-month period immediately preceding the start of leave. 

To be eligible for funeral honors detail leave, the employee must be trained to participate in a funeral honors detail at the funeral of a veteran, and either a retired or active member of the U.S. Armed Forces, including reservists and national guard, or an authorized provider.

Employees must provide reasonable advance notice prior to taking leave. The employer may request documentation verifying the employee’s participation. 

This new leave law is in addition to an employee’s rights under USERRA. USERRA does not have the tenure and hour requirements, so an employee may be entitled to leave under USERRA; however, the leave would be unpaid.

Minnesota Paid Family Leave Workplace Poster

Minnesota’s Paid Family Leave law provides up to 12 weeks of family leave and 12 weeks of medical leave (20-week cap) beginning Jan. 1, 2026. Employer/employee contributions to the fund also begin Jan. 1, 2026. Additional information about the law can be found on Minnesota’s paid leave website, or you can request additional information from your CBIZ contact.

The paid leave law has posting and notice obligations. Employers must provide employees with a written notice about paid leave by Dec. 1, 2025. Employers must also post a workplace poster in English and in any language spoken by five or more employees. The Department of Employment and Economic Development has prepared a workplace poster in English for an employer’s use. 

The Department has available, on its website, a paid leave calculator tool to help an employee estimate his/her benefit amount beginning in January 2026.

Nebraska Paid Sick Leave Notice

Nebraska’s voter-approved paid sick leave law takes effect Oct. 1, 2025. See prior Benefit Beat article. Employers need to provide written notice to current employees by Sept. 15, 2025, and to any new employees on the date of hire. Nebraska’s Department of Labor has prepared the Notice of Employee Rights, which is available on the Department’s website.

Employers must also conspicuously display a model poster in the worksite on or before Oct. 1, 2025. If an employee has no physical workplace, the poster may be delivered via e-mail, posting on the intranet, or other electronic means.

San Francisco HCSO Expenditure Rates for 2026

Several years ago, the City and County of San Francisco passed the Health Care Security Ordinance (“HCSO”) requiring covered employers to contribute to the health care costs of its covered employees – either through private means or through “Healthy San Francisco”. 

An employer is subject to the HCSO if it employs one or more workers within the geographic boundaries of the City and County of San Francisco, is required to obtain a valid San Francisco business registration certificate, and is a for-profit business employing 20 or more workers worldwide, or a nonprofit organization with 50 or more workers worldwide. A covered employee is one who has been employed for more than 90 days and who regularly works at least eight hours per week in San Francisco.

Each year, these health care expenditure amounts are adjusted. These expenditure rates do not apply to businesses with 19 or fewer employees, or to nonprofits with 49 or fewer employees. In determining employer size, all individuals performing work for compensation, both in and outside of San Francisco, should be counted, regardless of whether the individual is full-time, part-time, temporary, or seasonal.

The required minimum health care expenditure is calculated by multiplying the total number of “hours paid” to that employee by the applicable expenditure rates, which for 2025 and 2026 are as follows:

An employee who is a manager, supervisor, or confidential employee who earns at or above an annual salary of $125,045 (or $60.29 per hour) in 2025 is exempt from coverage under the HCSO.  For 2026, the new threshold will be $128,861 per year (or $61.95 per hour).

Employers who have self-funded health plans (medical, dental, or vision) must calculate the actual value of their plans (using either premium amounts or claims paid) to determine if the expenditures meet or exceed the required health care expenditure rate. If the employer’s annual spending fell short of the HCSO expenditure rate, the employer must make top-off payments for employees enrolled in these plans by the end of February of the following year.

Employers are required to report their health care expenditures annually to the Office of Labor Standards Enforcement (OLSE) by April 30 each year. Employers who fail to submit the annual report in a timely manner could be subject to penalties for each quarter the violation occurs.

Washington Expands Pregnancy Accommodation

Washington’s Healthy Starts Act provides pregnancy-related accommodations for pregnant workers, including frequent restroom breaks, scheduling flexibility for medical appointments, and reasonable lactation breaks.

Beginning Jan. 1, 2027, the law is expanded to apply to employers employing one or more employees (currently 15 or more employees) and any religious or sectarian organization not organized for private profit. 

The law is also expanded to provide paid lactation breaks at the employee’s regular compensation rate, and to provide scheduling flexibility for postpartum visits. 

Additional information about the Healthy Starts Act can be found on Washington’s attorney general’s webpage. 

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. This information is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.