July 2026 Regulatory & Legislative Update

This regulatory and legislative update covers issues involving the gender identity saga, FLSA, Trump Accounts, and more.

The Gender Identity Saga

Section 1557 of the Affordable Care Act prohibits certain types of discrimination in the delivery of health services. An individual cannot be discriminated against or prohibited from participating in a health-related program, or denied health coverage, on the basis of race, color, national origin, sex, age, or disability. The meaning of “sex” has been challenged repeatedly.

Challenges go back to when regulations were first issued in 2016 enforcing the civil rights law of the ACA and banning healthcare discrimination based on race, color, national origin, sex, age, or disability in any health program receiving federal funding. Rules have been issued, challenged, reissued, and challenged again. The most recent rules were issued in 2024. “Sex” was defined broadly to include sexual orientation and gender identity. This definition was challenged, and a ruling was issued on Oct. 22, 2025, vacating the provisions of the regulations expanding the definition of sex discrimination to include gender-identity discrimination.

On June 2, 2026, The Department of Health and Human Services (HHS) issued its Notice of Vacatur Regarding Certain Provisions of the 2024 Nondiscrimination in Health Programs and Activities Final Rule indicating that, in accordance with the court’s order, the vacated provisions are legally void and that all other provisions of the Section 1557 Rule remain in force. Additional information about Section 1557 is available from the HHS’ Office of Civil Rights.

This vacatur notwithstanding most employers employing 15 or more employees are subject to Title VII of the Civil Rights Act of 1964 and related laws, as enforced by the Equal Employment Opportunity Commission. These laws prohibit discrimination on the basis of age, race/color, national origin, religion, sex (including pregnancy), disability or genetic information with regard to any terms, conditions or privileges of employment, including compensation and employee benefits.

An employer subject to Title VII must ensure that any act it takes, including the design of its employee benefit plans, is not discriminatory. This is emphasized, in part, due to a Supreme Court ruling in Bostock, et. al, issued on June 15, 2020, wherein the Court ruled that Title VII protections on the basis of sex must be defined broadly and without regard to gender identity or sexual orientation.

FLSA Stay the Course

On May 15, 2026, the Department of Labor (DOL) Wage and Hour Division (WHD) issued a technical amendment restoring the standards in place in 2024. This is the result of a court decision vacating the rules that would have increased the salary standards used for determining exempt status and highly compensated status. The standard salary level required to qualify for the executive, administrative, and professional (EAP) overtime exemption continues to be $684 per week, or $35,568 annually. The salary level to qualify as a highly compensated employee (HCE) is $107.432.

As background, on April 23, 2025, the DOL issued a final rule regarding the salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA), raising the salary level for the overtime exemption and HCE status. Four lawsuits challenged the 2024 rule, and the courts issued orders vacating the 2024 rule. These orders remain final judgments following the dismissal of the appeal in each case. Due to these judgments, the DOL has returned to the version of these regulations in place on June 30, 2024, prior to the effective date of the 2024 rule, and which the Department has been enforcing.

This regulation dictates who is exempt from Fair Labor Standards Act (FLSA) minimum wage and overtime rules, based on the following criteria:

• Salary Basis Test: The employee must be paid a predetermined and fixed salary that is not subject to reduction based on the quality or quantity of work performed.
• Salary Level Test: The employee must earn at least $684 per week.
• Duties Test: The employee’s actual job duties must primarily involve executive, administrative, or professional duties as defined by the law. The threshold for an HCE is $107,432 for the overtime exemption.

Additional information regarding exemptions under the FLSA can be found at Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act (FLSA)

The Trump Account ERISA Question

EBSA released Technical Release 2026-02 confirming that Trump Accounts and Code Section 128 Trump Account contributions will generally not be considered employee pension benefit plans under ERISA. The rationale is, since a Trump account is for the benefit of a child and not an employee, and because plans subject to ERISA are for the benefit of employees, ERISA does not apply.

As a reminder, Trump Accounts are a type of traditional IRA specifically for children under the age of 18 and would allow the taxpayer and others to contribute (after-tax) up to $5,000 per year, tied to cost-of-living adjustments annually. Additional information on these contributions can be found in Code § 530A. In addition, Section 6434 provides for a one-time $1,000 pilot program contribution from the government for each child born between Jan. 1, 2025, and Dec. 31, 2028. An employer may, but is not required, to participate in funding Trump Accounts. Employers may contribute up to $2,500. Funding for Trump Accounts begins on July 4, 2026. For additional information, see past Benefit Beat August 2025 Regulatory & Legislative Update.

Section 3(2) of ERISA states that a plan, fund, or program is a “pension plan” under ERISA only if it provides retirement income to employees, and Trump Accounts provide benefits for dependents of employees. Under the Guidance, employer contributions during the growth period do not constitute an ERISA-covered plan if participation is voluntary for employees and does not:

• Impose conditions of using Trump account funds beyond those under the Code
• Influence or make decisions related to funds contributed to Trump Accounts
• Hold that the accounts or contribution program are an employee pension or welfare benefit plan maintained by the employer
• Receive payment or compensation related to a Trump account

Beyond the growth period, employer involvement and contributions to Trump Accounts should be limited in accordance with IRA payroll safe harbor conditions found in 29 CFR 2510.3-2(d).

On June 29, 2026, the Dept. of the Treasury and IRS issued additional guidance indicating that contributions to Trump Accounts will not be subject to gift tax reporting under the safe harbor rules. Therefore, parents, guardians, grandparents, and others can contribute up to $5,000 a year in after-tax dollars and will not be required to file a gift tax return.

Blue Cross Blue Shield Antitrust Settlement

Almost three years ago, the parties in Blue Cross Blue Shield Antitrust Litigation MDL 2406, N.D. Ala., No. 2:13-cv-20000-RD, reached a preliminary settlement, and the court conditionally approved that settlement.  Defendants agreed to pay $2.67 billion to the settlement fund.  For additional information see our past Benefit Beat Blue Cross Blue Shield Antitrust Settlement.

Individuals that may be entitled to settlement include those that were covered by certain Blue Cross Blue Shield plans. Specifically, self-funded plans that were purchased or enrolled between Sept. 1, 2015, through Oct. 16, 2020, and insured plans that were purchased or enrolled between Feb. 7, 2008, through Oct. 16, 2020.   

Now that settlement distributions have begun, sponsors of health plans subject to ERISA must consider whether any portion of the distribution is attributable to plan assets. The class action allowed individuals to file their own claims. Settlements were allocated as follows:

Individual and insured groups default option:

• 15% to employee for single coverage and 34% to employee for family coverage
• Remaining 85% and 66%, respectively to group plan

If either the group or its employee believed that their contribution percentage was greater than the default option, then they could elect the alternative option on the claim form.

Self-funded accounts default option:

• 18% to the self-funded employee for single coverage and 25% to the self-funded employee for family coverage
• Remaining 82% and 75%, respectively to self-funded group

Self-funded groups and self-funded employees had the same opportunity to choose an alternative option on the claim form.

If the payment is equal to or less than $5.00, then no distribution shall be made to that claimant, and the claimant will be notified that there will be no distribution given the de minimis value.

Claimants that elected the alternative option were required to submit sufficient data, records, or other materials supporting a greater contribution percentage. 

Since there is no guarantee that an impacted individual actually filed a claim, a conservative approach would be to follow the MLR guidance, which provides the portion attributable to plan assets must be used for the exclusive benefit of plan participants. If the plan allows, it can be used to defray reasonable administrative expenses, to provide a premium holiday, or to enhance benefits. A less conservative approach, but the one taken by the settlement, suggests that since individuals had the opportunity to file their own claims, the employer is entitled to retain the proceeds sent to it. For additional information on employer obligations, see FAQs | Blue Cross Blue Shield Antitrust Settlement, specifically questions 34-39.

PCORI Revised Form 720 Released

As a reminder, the annual PCORI report and fee are due July 31, 2026. The PCORI fee is submitted annually to the IRS using the second quarter Form 720. The IRS has just released the updated 2026 second quarter form 720 that reflects the PCORI fees due for plans ending in 2025. The Portal for filing opens in early July.  Instructions for Form 720. For additional information on the PCORI fee, filing and payment, see past Benefit Beat June 2026 Regulatory & Legislative Update.

The fee is $3.47 for plan years ending before Oct. 1, 2025, and $3.84 for plan years ending between October 1 and Dec. 31, 2025.

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

2027 Massachusetts MCC Standards Issued

Massachusetts has issued the minimum creditable coverage (MCC) standards for the 2027 tax year. As a reminder, Massachusetts requires most state residents to maintain minimum creditable coverage or be subject to a state tax. The law does not impose an obligation on employers to offer minimum creditable coverage. It does require health plans to provide a 1099-HC reflecting whether the coverage offered meets minimum creditable coverage standards.

The 1099-HC must be provided no later than January 31 of the following year. The 1099-HC only needs to be provided to the primary subscriber. The 1099-HC can be sent by mail or if the subscriber consents, the 1099-HC can be sent electronically.

Cost-of-Living Adjustments

An MCC-compliant health plan may impose varied levels of co-payments, deductibles, and coinsurance (see table below for limits), as long as the plan discloses, to the insured, the relevant deductible, co-pay, and co-insurance amounts applicable to both in and out-of-network services.

*Note: Calculation of out-of-pocket maximums must include deductibles, co-insurance, co-payments, or similar charges on behalf of an enrollee with respect to essential health benefits.

An HSA-compatible high-deductible health plan can qualify as MCC if the plan covers core services, a broad range of medical benefits, and facilitates access to a health savings account (HSA), i.e., the plan sponsor and/or insurer must provide information to individuals explaining how to establish and fund an HSA. MCC status may also be achieved with an HRA in conjunction with a federally qualified high-deductible health plan.

Mid-Year PFL Updates

Somes states with paid family and medical leave (PFML) programs will have increases to the maximum weekly benefit amount mid-year due to increases in the state average weekly wage (SAWW). Outlined in the table below are the states that will increase the maximum weekly benefit amount for PFML claims beginning on or after July 1, 2026.

*Note: Oregon’s SAWW and weekly benefit increase took effect June 28, 2026.

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.