September 2026 Regulatory & Legislative Update

This regulatory and legislative update covers issues involving Medicare Part D, proposed Dependent Care Assistance Program regulations, and more.

Reminder Time for Medicare Part D

It’s that time again! Medicare Part D open enrollment for the 2027 plan year begins on Oct. 15, 2026, and ends on Dec. 7, 2026. 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 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.

“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.

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

Proposed Dependent Care Assistance Program Regulations Released

For the first time in many decades, the Internal Revenue Service (IRS) and Treasury are proposing regulations addressing the dependent care assistance plan “DCAP” discrimination rules.

Importantly, while these regulations are only proposed and will not officially take effect until finalized, the IRS states that the proposed regulations can be relied on immediately. The regulations offer some welcome relief for the perennially difficult discrimination test applicable to a DCAP. Further, the regulations offer a helpful way to resolve discrimination without eliminating the benefit entirely for highly compensated employees (HCEs).

For purposes of a DCAP, a highly compensated employee is generally:

• An officer;
• A shareholder who owns more than 5% of the voting power of value of all classes of the employer’s stock, determined without attribution.
• An employee who is highly compensated based on the facts and circumstances. The HCE threshold indexed for 2026 is $160,000.
• A spouse or dependent of a person described above.

There are four discrimination tests:

The regulations propose a simplified method for correcting discrimination failures. These rules provide that, if a DCAP fails a non-discrimination test under Internal Revenue Code Section 129, the discriminatory portion of the benefit provided to HCEs is reclassified as taxable income. Employers report this imputed or taxable amount as part of the employee’s taxable wages on Form W-2 (Boxes 1, 3, and 5). Box 10 is used to report the total dependent care benefits elected or received.

Proposed Trump Account Regulations Released

The Treasury Department and IRS are proposing regulations to guide employer participation in funding Trump accounts. Importantly, while this guidance is only proposed, the rules can be relied on immediately.

As background, a Trump Account is a tax-favored savings vehicle established for minors. The account must be established as a traditional IRA and specifically designated as a “Trump Account.” An account may be established for an individual who has a Social Security number and has not reached age 18 by the end of the calendar year in which the account is opened. Only one Trump Account may exist for a beneficiary at any given time. A legal guardian, parent, grandparent, or adult sibling may generally establish the account. For 2026 and 2027, the combined annual contribution limit generally is $5,000, tied to cost-of-living adjustments beginning after 2027, excluding certain contributions such as the federal pilot contribution and qualifying governmental or charitable contributions.

The proposed regulations address the following:

1. Employer contribution is only available for common-law employees, self-employed workers —such as sole proprietors, partners in a partnership, directors acting solely as directors, and more-than-2% shareholders in an S corporation cannot receive tax-free Section 128 contributions for themselves or their dependents.
2. An employer may contribute up to $2,500 annually per employee, importantly not per dependent. This contribution is excluded from income tax but is subject to employment tax withholding. Employees can make pre-tax salary reduction contributions for their dependents through a §125 cafeteria plan. The $2,500 cap, tied to a COLA beginning after 2026, applies to the employer contribution and salary reduction combined and applies across all plans. Importantly, it is the employee, not the employer, who is responsible for monitoring this. The employee can decide how to split the contribution among dependents.
3. To qualify, employers must maintain a separate written Section 128 plan document that spells out eligibility and contribution details. Specifying who is eligible, how much the employer will contribute, how employees designate accounts, and the procedures for required certifications. Employers must follow the terms of their written plans for contributions to qualify for the tax exclusion. Employer-sponsored contribution arrangements must be through a written program.
4. Employers would also need to provide employees with notice that the program is available and explain the terms of the program.
5. If a salary reduction is offered to employees, it must be described in the Cafeteria Plan. Employees must be allowed to change contributions at least every 30 days, unlike most cafeteria plan elections that lock in at the start of a new year.
6. Employers would need to give employees an annual statement showing contributions made on their behalf. That requirement could be met by reporting Trump Account contributions in Box 12 of Form W-2 using code “TA.”
7. Employers must report pre-tax or tax-free contributions directly to the Trump Account trustee and notify them of the Section 128 contribution type.
8. Trump Account contribution programs must satisfy nondiscrimination requirements to ensure benefits are not provided disproportionately to highly compensated employees. The proposed regulations include rules addressing eligibility, benefit availability, testing methodologies, and correction procedures for certain failures. The discrimination tests for Trump Accounts are:
   1. Eligibility test
   2. Contribution and benefits test
   3. 55% Average Benefits Test

   If found to be discriminatory, the discriminatory amount must be reported on form W-2 along with reporting the failure to trustee that the amount is not a Trump Account contribution.

Unlike an HSA, employers cannot require contributions to a specific Trump Account. Under the proposed rules, employers are prevented from requiring workers to use a particular Trump Account trustee. This requirement is necessary because only one Trump Account may exist per beneficiary.

Employers contemplating offering a Trump account contribution as an employee benefit will want to begin considering the following:

• Will an employer contribution, a salary reduction option, or both be offered?
• Prepare plan documentation accordingly.
• Prepare employee notification.
• Determine issues that could arise from multiple Trump trustees.
• Consider potential discrimination issues.
• Work with payroll provider to ensure proper taxation.

Paid Family Leave Tax Credit Guidance

The 2025 July 4^th Act, commonly known as The One Big Beautiful Bill Act (OBBBA), made permanent a federal tax credit for employers who offer paid family leave. IRS Notice 2026-28 explains certain aspects of the permanent tax credit available through Section 45S – Employer Credit For Paid Family and Medical Leave (PFML). The Notice indicates that regulations will be proposed in the near future.

As background, a temporary federal tax credit was made available by the Tax Cuts and Jobs Act (TCJA) to employers who offer paid family leave. This credit was available between 2017 and 2025. It was made permanent by the OBBBA. The credit is available to employers that provide qualifying paid family and medical leave to eligible employees.

The credit is generally:

• 5% of qualifying wages paid during leave if the employee receives 50% of normal wages; and
• Increases incrementally up to 25% of qualifying wages if the employee receives wage replacement above 50%.

The credit may be claimed for up to 12 weeks of leave per qualifying employee per year. 

Qualifying reasons for leave include:

• Baby bonding;
• Caregiver leave, including for a military exigency; and
• One’s own serious health condition.

Qualifying leave does not include vacation, medical or sick leave, or personal leave (such as PTO), meaning leave not provided exclusively for one of the reasons described above.

An employer is eligible for a general business tax credit under Code Section 45S if it has a separate written policy in place that allows all qualifying employees a minimum of two weeks of annual paid leave as described above, and the employer must pay at least 50% of the employee’s normal wages during leave.

It is important to note that this credit is available to any employer, regardless of size, without regard to whether it is subject to the federal Family and Medical Leave Act (FMLA), as long as the employer maintains the written policy that meets the wage payment criteria.

 The permanent tax credit is available for qualified employees, which include employees that:

• Have been employed for at least one year, or six months if the employer elects the shorter service requirement.
• Work at least 20 hours per week.
• The law limits the credit to wages that do not exceed 60% of the HCE threshold. For 2026, this means individuals earning less than $96,000 in 2025.

The OBBBA revised the eligibility requirements and made the credit permanent. These changes to the paid leave credit became effective for tax years beginning in 2026. 

Recently released guidance implements changes from the OBBBA. The guidance details the following:

• Written policy that outlines: Any full-time qualifying employee is eligible for at least two weeks of annual paid leave and medical leave. Qualifying part-time employees must be eligible for a prorated amount. The written policy must include protective language.
• Two Calculation Methods: Employers can use the traditional wage method (based on leave wages paid) or the new premium method (based on qualifying PFML insurance policy premiums). If an insurance policy covers extra leave reasons, only the part for permitted leave qualifies for the tax credit. Credits can also be split if an employer pays both wages and insurance for different leave types. Notably, the credit for wage replacement can only be taken if wages are actually paid to individuals taking leave whereas credit can be taken for insurance premium paid even if leave is not taken.
• State Mandates: Leave provided under state or local mandates for paid family leave count toward program eligibility, but not toward the direct credit calculation.
• Public Comments: Written comments on the implementation rules are open until Oct. 16, 2026.

Wellness, Some Welcome Relief Maybe

On Aug. 26, 2026, the Departments of Labor, Treasury, and Health and Human Services (the Departments) issued FAQs Part 74 addressing questions regarding the HIPAA wellness program nondiscrimination rules. The guidance comes in response to ongoing litigation and concerns regarding the operation of health-contingent wellness programs, particularly with respect to the full reward requirement and disclosure obligations related to reasonable alternative standards.

Until further guidance or regulations are issued, the Departments will not take enforcement action against a group health plan or issuer that does not apply a wellness program reward retroactively to the beginning of the plan year as long as all other requirements of a contingent wellness program are met.

To qualify for this enforcement relief, the plan or issuer must:

• Provide the reward for the period after the participant satisfies the reasonable alternative standard;
• Continue to satisfy the remaining requirements applicable to health-contingent wellness programs under the HIPAA wellness regulations;
• Ensure the wellness program remains reasonably designed to promote health or prevent disease;
• Ensure the program is not a subterfuge for discrimination or underwriting based on a health factor;
• Provide a reasonable alternative standard that satisfies all applicable requirements; and
• Allow participants sufficient time to complete the reasonable alternative standard and receive a reward under the program.

The preamble to the 2013 final regulations indicated that if an individual satisfies a reasonable alternative standard after the beginning of a plan year, the participant should receive the same full reward available to individuals who satisfied the initial standard at the start of the year. The Departments have clarified that they will not take enforcement action against plans or issuers that provide the reward only prospectively from the date the reasonable alternative standard is satisfied, rather than retroactively to the beginning of the plan year, so long as all other wellness program requirements continue to be met.

The FAQs also address the scope of the notice requirement related to reasonable alternative standards.  Under the 2013 regulations, plans and issuers must disclose the availability of a reasonable alternative standard, or waiver if applicable, in all plan materials describing the terms of a health-contingent wellness program. For outcome-based wellness programs, the notice must also be included in communications informing an individual that he or she failed to satisfy the initial outcome-based standard.

The notice must include:

• Information regarding the availability of a reasonable alternative standard;
• Contact information for obtaining the alternative standard; and
• A statement that recommendations of an individual’s personal physician will be accommodated.

It is clarified that the notice is not required in materials that simply mention the existence of a wellness program without describing its terms.

These FAQs bring welcome relief and clarification in the two areas that bring questions for plan sponsors: whether wellness rewards must be applied retroactively when a participant completes a reasonable alternative standard mid-year and when reasonable alternative standard notices must be provided.

Even though the Departments have exercised enforcement discretion regarding retroactive rewards, employers sponsoring health-contingent wellness programs should continue to ensure that their programs remain reasonably designed, nondiscriminatory, and fully compliant with the reasonable alternative standard requirements.

Rollover Guidance

The IRS has issued Notice 2026-49 relating to retirement plans, roll-overs, IRA transfers, and sample forms. The sample forms are included in the appendix to Notice 2026-49 and are intended to simplify, standardize, and expedite the direct roll-over process. Sample forms include:

• Participant’s Rollover Request
• Receiving Plan’s Request to Distributing Plan
• Distributing Plan’s Rollover Certification
• Receiving Plan’s Rollover Acceptance

In addition to sample forms, the appendix includes rollover procedures. While use of the sample forms is optional, plans are encouraged to follow the rollover procedures as outlined in the appendix. This guidance is intended to encourage use of electronic means for rollovers. Importantly, this guidance only relates to rollovers between retirement plans and/or between a retirement plan and an IRA.

Know Your Rights Under USERRA Poster Updated

The Department of Labor has released an updated USERRA poster that all employers must display to inform employees of their rights under the Uniformed Services Employment and Reemployment Rights Act. Employers should replace outdated notices now to stay compliant and ensure workers understand their protections related to military service. The new poster includes the United States Space Force logo and reflects broad legislative changes that expand anti-retaliation protections, clarified coverage for both career and non-career service members, and adjusted remedies for violations.

Employers must replace the old posters in break rooms and other common areas and ensure remote workers receive updated electronic copies either through email, intranet, or a digital employee portal

Premium Assistance Under Medicaid and The Children’s Health Insurance Program (CHIP)

Individuals who are eligible for employer-sponsored group health coverage but are unable to afford the premium may be eligible to receive premium assistance from a state’s Medicaid agency or Children’s Health Insurance Program (CHIP).

The Children’s Health Insurance Program Reauthorization Act (CHIPRA) requires employers that maintain group health plans in states that provide premium assistance subsidies to provide health plan participants with notice of the availability of these programs.

Employers can provide the notice:

• With the summary plan description
• With the open enrollment materials
• With materials notifying the employee of their health plan eligibility
• As a separate document

The notice explaining the right to premium assistance must be provided to employees residing in the listed states at least once annually, without regard to where the employer is located, or where the health plan is situated. Failure to provide notice of this premium assistance opportunity can result in a penalty assessment of $145 per day, per employee (indexed for 2026).

Employers can use (1) the model notice as is, (2) a modification of the model notice, or (3) their own notice, so long as the notice provides at least minimal information about how to contact the relevant state Medicaid or CHIP office. The notice can be provided in written form or electronically, in compliance with the DOL’s electronic disclosure rules.

Note: Illinois has been added to the list of states offering premium assistance.

States with Premium Assistance under Medicaid and the Children’s Health Insurance Program (CHIP):

• Alabama
• Alaska
• Arkansas
• California
• Colorado
• Florida
• Georgia
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Massachusetts
• Minnesota
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

MN Paid Leave 2027 Rate

The Minnesota Department of Employment and Economic Development (DEED) announced that the premium rate for Minnesota Paid Leave will remain the same as 2026. It is 0.88% of covered wages.

As a reminder, the MN Paid Leave program took effect Jan. 1, 2026. It provides up to 12 weeks of medical leave or up to 12 weeks of family leave, not to exceed 20 weeks in a benefit year. This benefit is funded by employer and employee contributions which began Jan. 1, 2026.

Employers must pay at least half of the premium (0.44%) and can collect the remaining (0.44%) from employee.   

The premium rate for small employers remains the same as 2026 at 0.66% of employee wages. A small employer is one who employs 30 or fewer workers in each quarter and pays an average of no more than $27,745.88 per quarter. Small employers pay 0.22% of the premium and collect the remaining 0.44% from the employee.

Additional information can be found at Minnesota’s Paid Leave.

Waiting Period for San Francisco’s Paid Parental Leave Shortened

On Aug. 7, 2026, Mayor Daniel Lurie signed an Ordinance reducing the eligibility requirement under the City’s Paid Parental Leave ordinance from 180 days to 90 days. This change applies in stages as follows: Jan. 1, 2027, for employers with 100 or more employees and Jan. 1, 2028, for employers with 20-99 employees.

As a reminder, the City’s Paid Parental Leave ordinance (PPLO) is a wage replacement program that operates alongside the state’s Paid Family Leave law (PFL). A covered employee receiving state PFL benefits for child bonding, is eligible for up to 8 weeks of supplemental compensation from the City.

To be considered a covered employee, the individual must satisfy four criteria:

• Must be employed for 180 days (lowered to 90 days),
• Must work in SF for at least 8 hours per week,
• At least 40% of the total weekly hours must be in SF, and
• Employee must be eligible to receive state PFL benefits for child bonding.

The City’s PPLO limits the total combined amount an employee may receive from state PFL benefits and employer-paid supplemental compensation. For claims filed in 2026, that maximum combined weekly benefit amount is $2,522.

Additional information can be found at www.sf.gov.

New Jersey Medicaid Employer Fee

On June 30, 2026, Governor Sherrill signed A 5324 into law as part of the state budget plan. This law applies to employers employing 50 or more employees who received coverage through New Jersey’s Medicaid program in the prior calendar year. The fee is assessed for each employee and each dependent of an employee who receives health coverage through Medicaid. 

Employees and dependents with developmental, intellectual, or permanent physical disabilities are not counted in calculating the fee. In addition, beginning July 1, 2027, an employee who works less than 90 days for an employer, is part-time, temporary, or seasonal is exempt.

The law imposes a tiered per-person fee structure based on the number of Medicaid-covered employees and Medicaid covered dependents in the calendar year preceding the date employer is notified of its liability. 

For employers with 50-249 Medicaid beneficiaries, the fee is $325. For employers with 250-499 Medicaid beneficiaries, the fee is $525. For employers with 500+ Medicaid beneficiaries, the fee is $725. An employer who fails to pay the fee for each impacted employee or dependent is subject to a penalty not to exceed $500 per day for each day the fee remains unpaid.

On or before March 1 of each year, the Division of Revenue and Enterprise Services in the Department of the Treasury will notify an employer of the number of employees, and employee dependents, who receive health coverage through Medicaid for which an employer is required to pay the fee. All payments are due on or before April 15. The State Treasury, along with the Commissioner of Labor and Workforce Development, will develop implementation rules for the new law. 

The law prohibits an employer from using the information that an applicant is on Medicaid in its hiring decisions. 

This law presents many challenges for employers. On Aug. 20, 2026, a coalition of NJ business groups filed a lawsuit challenging the law on ERISA preemption grounds. Further, the employer does not have knowledge about which employees or dependents might be covered by Medicaid. This issue will need to be addressed so that employers have an opportunity to validate any assessment.

Workplace Protections for Illinois Workers

On Aug. 7, 2026, Illinois Governor JB Pritzker signed the Illinois Menopause Equity and Care Act, which amends the Illinois Humans Rights Act establishing workplace protections for employees experiencing menopause-related conditions. The amendments apply to Illinois employers with one or more employees.

Beginning Jan. 1, 2027, Illinois employers are prohibited from discriminating against employees based on menopause-related conditions. These conditions include perimenopause, menopause, and associated medical or symptomatic conditions, such as vasomotor symptoms, sleep disruption, cognitive or mood changes, and osteoporosis-related changes.

The law also requires employers to provide reasonable accommodations to employees with menopause-related conditions, such as flexible scheduling, modified work hours, and temperature or climate-adjusted workplaces, unless the employer can demonstrate that the accommodation would impose an undue hardship on the ordinary operation of the business of the employer.

Employers are required to post a notice in a conspicuous location in the workplace and to include the notice in employee handbooks concerning the employee’s rights to reasonable accommodations for menopause-related conditions. The Department of Human Rights will prepare an updated notice for an employer’s use. The notice will be available on the Department’s website.

In addition, this law requires, beginning Jan. 1, 2028, individual and group health insurance plans to cover medically necessary hormonal and non-hormonal therapy to treat perimenopausal symptoms or conditions. Further, health insurance plans that insure more than 25 employees must provide for individuals 45 years of age and older, coverage for an annual perimenopause health visit without cost sharing unless doing so would jeopardize HSA eligibility under a high-deductible health plan.

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.