May 2026 Regulatory & Legislative Update

This regulatory and legislative update covers issues involving Medicare Part D, benefit exclusions, the 2025 MHPAEA Report, and more.

Medicare Part D Updates

The Centers for Medicare and Medicaid Services (CMS) have issued Final Rules related to Medicare Advantage and Part D, including codifying Inflation Reduction Act Part D redesign. See our prior Benefit Beat article on the redesign here. As a reminder, the 2026 Medicare Part D deductible is $615.00, and the out-of-pocket maximum is $2,100, expected to be $700 and $2,400 respectively in 2027. This guidance also addresses Part D creditability determination.  

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 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 that 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.

In 2027 and after, only the actuarial method or the revised simplified method may be used to determine whether an employer’s prescription plan is creditable. To be creditable means to be at least as generous as Medicare Part D prescription coverage. The new simplified method first introduced for the 2026 determination period, requires as follows:

• Availability of brand name, generic, and biological prescription drug products;
• Provides reasonable access to retail pharmacy; and
• Designed to pay at least 73%, up from 72% of the participant’s prescription drug expenses.

Sponsors of account-based plans such as HRAs including ICHRAs, will be relieved to know that the final rule removes the requirement to provide a creditable coverage notice for these types of arrangements.

Benefit Exclusion, a Potential Risk

A recent class action settlement offers an important reminder about carefully considering benefit exclusions. E.S. v. Regence BlueShield is a class action lawsuit alleging Regence improperly denied coverage for hearing aids and associated services. Plaintiffs claimed that defendants violated the Affordable Care Act and Washington Law Against Discrimination by excluding coverage for necessary hearing devices. The argument is that this exclusion primarily impacts individuals with disabilities. 

A $3 million settlement was reached. Eligible individuals are those that had Regence insurance and who paid out-of-pocket for hearing aids or related services between Oct. 30, 2014, and Dec. 31, 2025.

Detailed case information and documents can be found on the E.S. v Regence BlueShield Official Settlement Website. 

By contrast, the 1st Circuit Court of Appeals dismissed a claim of discrimination in Holland, et al. v. Elevance Health, Inc., finding that the exclusion of weight loss drugs impacted individuals with disabilities as well as individuals without disabilities. The broad exclusion of weight loss drugs was found by this court to be facially neutral and not sufficiently proximate to individuals with disabilities. This continues to be an evolving area of the law.

The lesson for health plan sponsors is to carefully consider a benefit exclusion before adopting it. If the exclusion would predominantly impact only individuals with disabilities, the exclusion could be found to violate discrimination rules such as Section 1557 of the Affordable Care Act, the Americans with Disabilities Act, or state discrimination rules.

2025 MHPAEA Report to Congress

The Departments of Labor, Health and Human Services, and the Treasury (the “Departments”) recently released their 2025 Report to Congress on enforcement activity under the Mental Health Parity and Addiction Equity Act (“MHPAEA”). 

As a reminder, the MHPAEA is a federal law that generally requires group health plans and health insurance issuers that provide mental health or substance use disorder benefits to provide those benefits on terms no more restrictive than the terms applicable to medical and surgical benefits. This parity requirement extends to both financial requirements, such as copayments and coinsurance, and treatment limitations.

The 2025 Report details enforcement activities during the two-year period from Aug. 1, 2023, through July 31, 2025. The report showed that both the DOL and the Centers for Medicare & Medicaid Services (CMS) requested more comparative analyses. Less correspondence was issued regarding NQTLs, but more initial determination letters were issued. 

This is an indication that more violations were cited with fewer questions asked. CMS issued more insufficiency letters than the DOL, noting there were numerous times that a comparative analysis was not available and that even in the instances of a comparative analysis, additional information was needed. Both departments issued more final determination letters in 2025 than in prior years, indicating they are more willing to cite plans or issuers in the report to Congress for providing deficient comparative analyses.

Takeaways for employers include:

• Compliance with MHPAEA is the responsibility of the plan sponsor, regardless of outsourcing of benefit administration to service providers.
  • Plan sponsors
• Remember that MHPAEA’s statutory obligations, including the production of a comparative analysis, remain in full force and effect.
• Continue to pay attention to NQTLs, including:
  • Provider network admission standards
  • Prior authorization requirements
  • Concurrent care review requirements, and
  • Excluding key mental health and substance use disorder treatments.
• Ensuring thorough, detailed comparative analyses are completed.

DOL Priorities Revisited

FAB 2026-01 lays out the Employee Benefit Security Administration’s (EBSA’s) posture on enforcement that provides a look into EBSA’s current priorities. Key components of FAB 2026-01 include:

• It outlines four principles that guide investigative priorities and practices, internal review, and case development.
• Some show a shift in the types of cases EBSA is willing to pursue.
• EBSA’s enforcement priorities addressed in the FAB are:
  • Shift Toward Duty of Loyalty
  • Limitation of Regulation Through Enforcement
  • Centralization and Leadership Oversight of Significant Enforcement Activity
  • Enforcement Must Be Responsive and Timely

This can be viewed as a positive for plan sponsors as the FAB indicates a more targeted and restrained approach to enforcement actions, with fewer investigations overall, especially those based on unsettled legal arguments. There will be a greater focus on violations that are clear-cut, targeting conflicts of interest or significant harm to participants. There will be an increased focus on the fiduciary duty of loyalty. 

Plans should review their conflict-of-interest risk and ensure there are appropriate processes, procedures, and fiduciary oversight in place to prevent prohibited transactions. According to this FAB, process is essential.  

Educational Assistance Plan Guidance Updated

The IRS has issued Fact Sheet 2026-10, providing FAQs about educational assistance programs and an updated sample educational assistance plan document. This fact sheet supersedes the 2024 FAQs in Fact Sheet 2024-22. See our prior Benefit Beat August 2025 Regulatory & Legislative Update.

As background, under a Code Section 127 educational assistance program, an employer can provide up to $5,250 per year in tax-free qualified education benefits to employees.  These benefits include tuition, fees, and similar expenses, books, supplies, and equipment. 

Effective Mar. 27, 2020, and made permanent by the One Big Beautiful Bill Act (OBBBA), these plans may also include principal and interest payments on qualified education loans (“Student Loans”).  Beginning in 2027, the $5,250 annual limit becomes subject to a cost-of-living adjustment.

The 2026 FAQs restate, with minor revisions, the 2024 FAQs and include the following noteworthy changes:

• For educational expenses other than Student Loans, the 2026 fact sheet states expenses “must not have been incurred prior to employment.”
• They clarify that an employee may incur Student Loan expenses prior to employment. 
• Revise language from the 2024 FAQs to make it clear that the employer “must” (instead of “can”) inform the employees about the program and its terms. 
• Reflect the OBBBA indexing provision, beginning in 2027.
• Clarify Code Section 132 working condition fringe benefit exclusion for certain educational expenses

These FAQs are intended as informal guidance and are not precedent. The IRS stated that the FAQs were issued to “provide general information…as expeditiously as possible.” 

Maryland FAMLI Regulations Finally

The Maryland Department of Labor released regulations on the Paid Family and Medical Leave Insurance (FAMLI) program. As a reminder, the law provides eligible employees with up to 12 weeks of paid leave for baby bonding, to care for a family member, for one’s own serious health condition, or a qualifying military exigency. Contributions are set to begin Jan. 1, 2027, and benefits will be available Jan. 3, 2028. 

In addition, the DOL has revamped the FAMLI website with updated FAQs to incorporate the final regulations. The website has sections for both employer and employee. The employer page contains information on private plans as well as steps an employer should take now to prepare for FAMLI.

Virginia Joins the PFML Bandwagon

Virginia joins the list of states offering paid family leave. This law allows individuals to take up to 12 weeks of job-protected leave for baby bonding, one’s own serious health condition, care for a family member, qualifying military exigency, and safe leave. Funding begins April 1, 2028, and benefits begin Dec. 1, 2028.

This law will apply to virtually all employers, excluding the Commonwealth, and all employees subject to the unemployment law. Self-employed individuals may opt in to the program.

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.