This regulatory and legislative update covers issues involving the government shutdown, updated PCORI fees, retirement plan COLAs, and more.
What’s Up With the Government?
The government shutdown, the longest in history, began on Oct. 1, 2025, and ended on Nov. 12, 2025. It resulted in a continuing resolution to keep the government funded until Jan. 30, 2026. So, what now? Well, there is a lot of catch-up to do. Of particular note, a large part of what kept the government shuttered is consternation over the cost of healthcare. Particularly, the expiring extended premium tax credits available to certain individuals who purchase coverage through the ACA’s exchanges, often referred to as the marketplace. Congress is considering a variety of proposals to address this conundrum, including:
- A temporary extension of the premium tax credit available to certain individuals who purchase coverage through the marketplace.
- Returning the premium tax credit to the pre-extension levels and limiting them to individuals who fall below 400% of poverty and meet certain other criteria.
- An option being floated by the Trump Administration, which would curtail or eliminate premium tax credits in favor of contributions to consumer-driven arrangements such as HSAs.
Only time will tell whether any of these concepts gain traction. In addition to noodling premium tax credits, the issue of prescription costs and cost transparency is on the agenda. The government is also on the verge of withdrawing fiduciary regulations promulgated during the Biden administration. Challenges were mounted, and the debate rages on. Stay tuned for further developments.
Updated PCORI Fee Announced
The IRS released the adjusted applicable dollar amount for the Patient Centered Outcome Research Institute (PCORI) fee. For policy and plan years ending between Oct. 1, 2024, and Oct. 1, 2025, the fee is $3.47 per covered life. The fee increases to $3.84 per covered life for policy and plan years ending between Oct. 1, 2025, and before Oct. 1, 2026 (applicable for a 2025 calendar year plan) according to IRS Notice 2025-61.
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.
As in prior years, the fee is required to be reported annually to the IRS using the second quarter Form 720 and must be paid by the due date of July 31st. Additional information about the PCORI fee is available on the IRS’ dedicated PCORI webpage and Questions and Answers webpage.
Retirement Plan COLAs
The IRS released the 2026 cost of living adjustments (IRS Notice 2025-67) applicable to defined benefit and defined contribution plans (highlights below).
| 2026 Retirement Plan COLAs | 2026 | 2025 |
|---|---|---|
| Defined benefit plan annual limit | $290,000 | $280,000 |
| Defined contribution plan annual limit | $72,000 | $70,000 |
| Elective deferral limit for purposes of cash or deferred arrangements (401(k) plans) and tax-sheltered annuities (403(b) plans) | $24,500 | $23,500 |
| Maximum deferral limit for 457 plans | $24,500 | $23,500 |
| >Age 50 catch-up contribution limit to 401(k), 403(b) or 457(b) plans | $8,000 | $7,500 |
| Super-Catch-up: Age 60, 61, 62, or 63 catch-up contribution limit to 401(k), 403(b), or 457(b) plans | $11,250 | $11,250 |
| Maximum deferral limit for SIMPLE plans | $17,000 | $16,500 |
| >Age 50 catch-up contribution limit to SIMPLE plans | $3,850 | $3,500 |
| Super Catch-up: Age 60, 61, 62, or 63 catch-up contribution limits to SIMPLE plans | $5,250 | $5,250 |
| Beginning in 2026, individuals who earn over $150,000 (indexed) in the prior year will only be able to make catch-up contributions to Roth 401(k) accounts | ||
| Minimum compensation considered in determining eligibility for a SEP (simplified employee pension) | $750 | $750 |
| Threshold for highly compensated employee (HCE) | $160,000 | $160,000 |
| Key employee compensation limit for top-heavy plan purposes | $235,000 | $230,000 |
| Annual compensation limit | $360,000 | $350,000 |
CMS Announces 2026 Premiums and Cost-Sharing Amounts
The Centers for Medicare and Medicaid Services (CMS) has issued the 2026 cost of living adjustments to certain parts of Medicare. As a reminder, Medicare is comprised of Part A – Hospitalization, Part B – Medical Services, Part C – Managed Care, and Part D – Prescription Drug. Following are certain COLAs for 2026:
Medicare Part B
Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment and other medical and health services not covered by Medicare Part A.
| Medicare Part B Premium and Deductible | 2026 | 2025 |
|---|---|---|
| Standard Monthly Premium for Medicare Part B | $202.90 | $185.00 |
| Annual Deductible for All Medicare Part B Beneficiaries | $283.00 | $257.00 |
Medicare Part B Income-Related Monthly Adjustment Amounts
| Beneficiaries who are married and lived with their spouse at any time during the year, but who file separate tax returns from their spouses with modified adjusted gross income: | Income-Related Monthly Adjustment Amount: | Total Monthly Premium Amount: |
|---|---|---|
| Less than or equal to $109,000 | $0.00 | $202.90 |
| Greater than $109,000 and less than or equal to $391,000 | $446.30 | $649.20 |
| Greater than or equal to $391,000 | $487.00 | $689.90 |
The 2025 premiums for high-income beneficiaries with Part B coverage who are married and file a separate return, and total premiums for high-income beneficiaries with immunosuppressive drug-only Part B coverage can be found here.
Medicare Part A
Medicare Part A covers inpatient hospital, skilled nursing facilities, hospice, inpatient rehab, and some home health care services. Roughly 99% of Medicare beneficiaries do not have a Part A premium because they have at least 40 quarters of Medicare-covered employment.
| Medicare Part A Deductibles and Coinsurance Amounts by Type of Cost Sharing | 2026 | 2025 |
|---|---|---|
| Inpatient Hospital Deductible (covers the first 60 days of Medicare-covered inpatient care in a benefit period) | $1,736 | $1,676 |
| Daily Coinsurance for 61st – 90th day | $434 | $419 |
| Daily Coinsurance for Lifetime Reserve Days | $868 | $838 |
| Skilled Nursing Facility Coinsurance | $217 | $209.50 |
Enrollees who are 65 and over, who have fewer than 40 quarters of coverage, and certain individuals with disabilities pay a monthly premium to voluntarily enroll in Medicare Part A. Those with at least 30 quarters of coverage or who were married to someone with at least 30 quarters of coverage may buy into Part A at a reduced premium. That rate will be $311, a $26 increase from 2025. Certain uninsured individuals with at least 30 quarters of coverage and certain individuals with disabilities who have exhausted other entitlements will pay the full premium; that amount will be $565 a month in 2026, a $47 increase from 2025.
Medicare Part D Income-Related Monthly Adjustment Amounts
Higher-income beneficiaries Part D monthly premiums are based on income. The 2026 Part D income-related monthly adjustment amounts are as follows:
| Beneficiaries who file individual tax returns with modified adjusted gross income: | Beneficiaries who file joint tax returns with modified gross income: | Income-related Monthly Adjustment Amount |
|---|---|---|
| Less than or equal to $109,000 | Less than or equal to $218,000 | $0.00 |
| Greater than $109,000 and less than or equal to $137,000 | Greater than $218,000 and less than or equal to $274,000 | $14.50 |
| Greater than $137,000 and less than or equal to $171,000 | Greater than $274,000 and less than or equal to $342,000 | $37.50 |
| Greater than $171,000 and less than or equal to $205,000 | Greater than $342,000 and less than or equal to $410,000 | $60.40 |
| Greater than $205,000 and less than or equal to $500,000 | Greater than $410,000 and less than or equal to $750,000 | $83.30 |
| Greater than or equal to $500,000 | Greater than or equal to $750,000 | $91.00 |
Income-related adjustments for high-income beneficiaries who are married and lived with their spouses at any time during the taxable year can be found here.
OT and Tip Reporting – A Bit of Relief
Employers are off the hook for 2025 mandatory reporting of deductible tips and overtime authorized by the July 4th tax act, commonly referred to as the One Big Beautiful Bill Act (OBBBA). See our August Benefit Beat here for additional information. The IRS released Notice 2025-69, which offers some guidance on how individual taxpayers can determine qualified tips or qualified overtime for the 2025 tax year. Even though employers are not required to do separate reporting for the 2025 tax year, the IRS encourages employers to provide the information to their employees.
The IRS suggests the following employer assistance:
- Posting information on an online portal;
- Providing additional written statements; or
- Using Box 14 of Form W-2
The IRS advises employers to expect an influx of inquiries from employees during the 2025 tax filing season and suggests having a proactive plan in place to assist employees.
Illinois Consumer Disclosure Notice
Under the Consumer Coverage Disclosure Act, an employer employing individuals in Illinois must annually provide its employees with a document comparing the Illinois essential health benefits with the benefits offered by the employer plan. Importantly, this is a disclosure-only requirement. It does not require the employer to include the listed benefits in its health plan.
The list of essential health benefits is the same as last year’s. The disclosure notice, updated for 2026, can be found on the Illinois Department of Labor’s website. As a reminder, employers must provide this notice to all employees upon hire, annually, and upon request.
Massachusetts Paid Family Leave Posters Updated
The Department of Paid Family and Medical Leave released the contribution rate and weekly benefit amount for the paid family and medical leave law beginning Jan. 1, 2026. See November Benefit Beat.
The law requires employers to provide written notice of the new contribution rate 30 days in advance of the rate change. Since there is no change in the contribution rate for 2026, the employer is not required to notify current employees. However, the employer may choose to do so.
The Department has issued 2026 workplace posters, notices, and rate sheets, which can be found on the Department of Paid Family and Medical Leave website.
New York City Expands Sick and Safe Leave
New York’s City Council amended the Earned Safe and Sick Time Act (ESSTA) to align with the requirements of the Temporary Schedule Change Act (TSCA). The amendments will go into effect on Feb. 22, 2026.
The amendments provide employees with an additional 32 hours of unpaid sick and safe time, add four additional uses for sick and safe time, and incorporate the state’s paid prenatal leave obligation into ESSTA.
Front-Loaded Unpaid Hours
Employers will be required to provide a separate bank of 32 hours of unpaid safe and sick time that must be front-loaded at hire and at the beginning of each calendar year. This unpaid leave bank must be provided by all employers regardless of their size or net income. The front-loaded unpaid leave must be available for use immediately for any permissible reason under the ESSTA. Unused leave from this unpaid leave bank does not carry over to the next year.
The intent of this frontloading is to replace the two days of temporary schedule changes per calendar year already provided for by the TSCA.
Additional Uses of ESSTA
An employee may use ESSTA for an employee’s own needs, to attend to the needs of a family member, for the closure of an employee’s work site or child’s school, or to obtain physical or legal services due to domestic violence. The amendments add four potential uses for safe and sick time to include the personal circumstances to which the TSCA applies, which include:
- To provide care for a minor child or care recipient.
- To attend a legal proceeding for subsistence benefits or housing.
- In the case of a public disaster.
- When an employee or employee’s family member has been the victim of workplace violence.
Prenatal Leave
The amendment also requires employers to provide eligible employees with 20 hours of paid prenatal leave during any 52-week calendar period. This leave is concurrent with 20 hours of paid prenatal leave currently required under New York State law.
Additional information about ESSTA and prenatal leave can be found on the NYC Department of Consumer and Worker Protection website.
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