June 2026 Regulatory & Legislative Update

This regulatory and legislative update covers issues involving ERISA and PBM laws, ACA penalty assessments, IDR rules, and more.

The ERISA PBM Preemption Saga

A recent Sixth Circuit Court of Appeals decision may be of interest to sponsors of self-funded health plans subject to ERISA. In McKee Foods Corp. v. BFP Inc., the U.S. Sixth Circuit Court of Appeals ruled that certain provisions of Tennessee’s pharmacy benefit manager (PBM) laws are preempted by the Employee Retirement Income Security Act (ERISA).

McKee Foods Corporation sponsors a self-insured ERISA group health and prescription drug plan for its employees. BFP, Inc. (doing business as Thrifty Med Plus Pharmacy) was removed from McKee’s pharmacy network following an audit by McKee’s PBM that revealed misconduct. Thrifty Med responded by filing administrative complaints seeking reinstatement in the network, citing two Tennessee laws, Public Chapter 569 and Public Chapter 1070. McKee filed suit seeking a ruling that both laws are preempted by ERISA. The Eastern District of Tennessee granted summary judgment to McKee in March 2025. Tennessee appealed.

The appeals court permanently enjoined Tennessee from forcing McKee Foods’ self-funded health plan to comply with two specific state regulations:

This ruling is a victory for employers sponsoring self-funded health plans. The court ruled that both of these provisions impede an employer’s ability to design its plan as well as impede uniform administration of the plan impacting central matters of plan administration. This is surely not the last word on the topic.

Several pieces of litigation continue. Of note, Iowa’s PBM law challenge continues as do challenges to the California PBM law, among others. Employers sponsoring self-funded plans should stay tuned to developments on this front, working closely with vendor partners and legal counsel.

A Nod to ACA Penalty Assessment

In Supreme Linen Services, Inc. v. United States, No. 1:25-cv-20723 (S.D. Fla. Feb. 17, 2025), Supreme Linen argued that the ACA requires a certification from the Department of Health and Human Services (HHS) before employer shared responsibility penalties could be assessed, and that the IRS alone could not validly impose the Employer Shared Responsibility Payment. The federal district court in Florida rejected that argument and ruled in favor of the government.

As a reminder, under the ACA, large employers (generally 50+ full-time employees) can face penalties if they fail to offer qualifying health insurance coverage, or offer coverage that is unaffordable or inadequate, and at least one employee receives a premium tax credit through the ACA Marketplace. The penalties arise under Internal Revenue Code §4980H.

The Southern District of Florida held that the IRS itself had sufficient authority to make the required certification, Letter 226-J satisfied the statutory requirement, and the employer mandate penalties were therefore valid. Letter 226-J is the IRS notice typically sent to employers proposing ACA employer mandate penalties. The court essentially said administration of the Internal Revenue Code rests with the IRS unless Congress explicitly gives the power elsewhere.

This is a significant ACA enforcement case because it supports the IRS’ current process for assessing ACA employer mandate penalties, and it appears to create a split with at least one other lower court decision.  

In Faulk Company, Inc. v. Xavier Becerra et al., the U.S. District Court in Texas found that the IRS did not have authority to impose penalties on Faulk for failure to offer health coverage to its full-time employees. See our June 2025 Benefit Beat article. 

Supreme Linen Services, Inc. has appealed the Court’s ruling. For now, employers subject to the ACA’s shared responsibility rules should continue their diligent efforts to comply. This includes timely filing forms 1095 and making them available to employees as well as responding to 226-J letters in a timely manner.

IDR Rules Coming

The Departments of Health and Human Services, Labor, and Treasury have finalized updated rules for the Federal Independent Dispute Resolution (IDR) process under the No Surprises Act. In addition, CMS has released a Fact Sheet regarding the Final Rules. These rules impact how group health plans and insurers resolve certain payment disputes with providers.

The No Surprises Act is intended to take patients out of the middle of payment disputes in three instances

• Emergency services provided at an out-of-network facility or by an out-of-network provider;
• Non-emergency services provided by an out-of-network provider at an in-network facility; and
• Air ambulance services.

In these situations, the patient is charged the in-network rate, and any balance is resolved between the payer and provider. The IDR process is used when the parties cannot come to a resolution among themselves. These rules have been challenged repeatedly in the few years since the law’s enactment. In brief, the just issued rules provide

The insurer of an insured health plan handles this process. Sponsors of self-funded health plans will want to work closely with their third-party vendors as these IDR awards can significantly impact the plan’s experience.

It’s PCORI Time

The PCORI fee, filing and payment for plan or policy years ending in 2025 is due by July 31, 2026. The employer accomplishes the filing using the second quarter current version of Form 720.

The PCORI fee is assessed on the average number of lives covered under the policy or plan. For policy and plan years ending between Oct. 1, 2024, and Sept. 30, 2025, the fee is $3.47 per covered life. For policy and plan years ending between Oct. 1, 2025, and Sept. 30, 2026, the fee is $3.84 per covered life. What this means is plans ending before Oct. 1, 2025, use the $3.47 figure. Plan years ending between Oct. 1, 2025, and Dec. 31, 2025, use $3.84.

As background, the PCORI fee is assessed on the average number of lives covered under the policy or plan. Virtually, all health plans, whether insured or self-funded, are subject to the PCORI fees. With regard to reimbursement type plans, health reimbursement arrangements (HRA) and medical flexible spending account (FSA) plans are subject to these fees. However, FSA plans that qualify as HIPAA-excepted plans are not subject to these fees. The PCORI fee does not apply to stand alone dental or vision plans.

The PCORI fees are assessed on the insurer of an insured plan. For a self-funded plan, the plan sponsor is required to pay the fee on behalf of its plan. Because the law provides that the PCORI fees are to be paid by the plan sponsor, at least for plans subject to ERISA, the fees cannot be paid from plan assets.

Additional information about the PCORI fee is available on the IRS’ dedicated PCORI webpage and Questions and Answers webpage.

2027 ACA Penalty Amounts Announced

The Internal Revenue Service (IRS) has issued Revenue Procedure 2026-22 providing the employer shared responsibility indexed penalty amounts for calendar year 2027.

As a reminder, the 4980H(a) penalty applies if an employer subject to employer shared responsibility (50 or more employees) does not offer minimum essential coverage to at least 95% of its full-time employees. The 4980H(b) penalty applies if an employer subject to employer shared responsibility does not offer adequate affordable coverage.

2027 Cost of Living Adjustments

HSAs, DPCSAs & EB-HRAs

The IRS has released Rev. Proc. 2026-24 with the cost of living (inflation) adjusted amounts for health savings accounts (HSAs), Direct Primary Care Service Arrangements (DPCSAs) and Excepted Benefit Health Reimbursement Arrangements (EB-HRAs) for plan years beginning in 2027.

Health Savings Accounts (HSAs)

• Catch-up contributions for people aged 55 or over remain unchanged at $1,000.
• The contribution limit applies to the 2027 calendar year.
• The HDHP deductible and out-of-pocket limits apply to plan years beginning in 2027.

Direct Primary Care Service Arrangements

To maintain HSA eligibility, monthly fees for Direct Primary Care Service Arrangements (DPCSAs) cannot exceed $150 per individual or $300 per family in 2027, unchanged from 2026. These limits are adjusted for inflation after 2026. As a reminder, the arrangement must provide only primary care services from primary care practitioners. The care must not include prohibited services or items.

The annual cap applies to plan years beginning in 2027.

2027 Out-of-Pocket Limits

The ACA imposes certain cost-sharing restrictions, such as out-of-pocket (OOP) limits on health plans. These limits are adjusted annually and apply to (1) insured plans offered through the marketplace; and (2) insured and self-funded plans offered outside the marketplace.

Maximum Annual Limitation on Cost Sharing

Note: The OOP limits applicable to high-deductible health plans (HDHP) used in conjunction with health savings accounts (HSAs) differ from these cost sharing limits.

Affordability Standard – Employer Shared Responsibility for 2026 is 9.96%. The 2027 affordability standard will be issued later this year.

2025 Civil Penalties Remain in Effect

The Department of Labor (DOL) has announced that there will be no annual adjustments to civil monetary penalties for certain benefit-related violations in 2026. Federal law enacted in 2015 requires these penalties to be adjusted each year for inflation, based on the Consumer Price Index for All Urban Consumers (CPI-U) issued by the Bureau of Labor Statistics (BLS) for the previous October. However, due to the federal government shutdown in fall 2025, the BLS was unable to release the necessary October 2025 data.

Since the law does not provide an alternative calculation method, the Office of Management and Budget has cancelled the 2026 penalty adjustments and instructed agencies to continue using the 2025 penalty amounts.

Bloomington, MN Paid Sick Leave Repealed

Bloomington’s City Council has voted to repeal its Earned Sick and Safe Time Ordinance effective April 27, 2026. This relieves Bloomington employers from needing to coordinate compliance with the city leave ordinance and the state leave law. Employers will want to ensure existing paid leave policies are compliant with the state’s earned sick and safe time (ESST) law. 

As a reminder, Minnesota’s ESST law has been in effect since January 2024, and applies to employers employing one or more employees. Employees earn one hour of sick and safe time for every 30 hours worked, up to 48 hours in a year, to be used for one’s own illness, to care for a sick family member, absences due to domestic violence, closure of workplace due to weather, or bereavement. 

Additional information about the state’s ESST law can be found on the Minnesota Department of Labor and Industry’s website. 

Virginia’s Paid Sick Leave at Last

Virginia adds to its leave options with the signing of a paid sick leave law on May 20, 2026.  Viriginia passed a paid family leave law in April 2026. See the May Benefit Beat for a summary.

The law provides that employees accrue one hour of paid sick leave for every 30 hours worked, up to 40 hours per year. Leave can be used for an employee’s illness, to care for a sick family member, or for absences due to domestic violence.

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.