February 2026 Regulatory & Legislative Update

This regulatory and legislative update covers issues involving fiduciary duties, voluntary benefits, the 2026 Federal Poverty Level, and more.

Fiduciaries Be Aware — Silence is a No-Go

In Atkins v. The Prudential Insurance Company of America, et al., the surviving spouse of a former employee sued after his wife lost life insurance coverage while terminally ill. The employee, who was totally disabled due to ovarian cancer, was eligible for a life insurance benefit that included a waiver of premium provision in the event of total disability. However, she was never told that she needed to submit written proof of her continued disability to keep the coverage active. Even after she stopped working, the employer continued to send benefit statements and invoices, making it appear that coverage was still in place. The beneficiary learned that the policy lapsed after the employee’s death.

The court concluded the plaintiff (the spouse) had a valid claim under ERISA because the employer failed to actively inform the employee about the need to submit paperwork to maintain coverage. The court decided that in “special circumstances” — when an employer knows an employee is terminally ill or totally disabled and risks losing coverage — there is a fiduciary duty to proactively disclose key plan information, even if the employee does not specifically ask.

Important insights for plan fiduciaries:

• Silence is unacceptable, especially when it is misleading.
• Employers and plan administrators should proactively reach out and clearly communicate important steps required to maintain benefit eligibility.
• It is important to monitor third-party administrators and ensure critical deadlines and requirements are being communicated correctly.

Proactive, clear communication is key to meeting fiduciary duty.

Voluntary Benefits, Fiduciary Duty, Maybe

Several lawsuits have been brought accusing voluntary plan sponsors and plan consultants of neglect and self-dealing. Allegations include breach of fiduciary duty under ERISA, failure to monitor plan costs specifically as it relates to commissions charged compared to benefits available, and engaging in prohibited transactions. A number of employers are being sued, including CHS/Community Health Services, Inc., Universal Health Systems, Inc., Universal Services of America LP, Laboratory Corp. of America Holdings, and United Airlines, Inc.

Voluntary programs typically include accident, critical illness, cancer, and hospital indemnity type arrangements.

Importantly, in this litigation, the voluntary plans are subject to ERISA. This means ERISA’s requirements, including fiduciary duty, apply. It is possible that these types of products can be sold to employees without employer involvement, making them exempt from ERISA. To meet the ERISA exemption, the following four standards must be met:

• No direct or indirect contribution by employer or employee organization;
• Participation is strictly voluntary;
• Employer’s involvement is ministerial only, and the employer doesn’t endorse the program; and
• Employer receives no consideration.

While the outcome of this litigation is far from known at this time, it is nevertheless a good idea for employers to ensure they know exactly which plans and programs available to their employees are subject to ERISA. For each plan subject to ERISA, make sure all ERISA requirements are being met. These include, but are not limited to, reporting and disclosure requirements as well as fiduciary standards.

Excessive fee litigation is a hot topic in the retirement plan space and, more recently, in the welfare plan space. It is a good idea to periodically review plans which could include reviewing the marketplace through a request for proposal process to ensure offerings are appropriate.

2026 Federal Poverty Level

The Department of Health and Human Services has released the federal poverty level (FPL) guidelines for 2026.  These poverty guidelines are important for a number of reasons, not the least of which is the Affordable Care Act. 

The FPL guidelines are used to determine eligibility for premium assistance and cost-sharing.  Further, for employer shared responsibility purposes, use of the FPL guidelines is one of three safe harbor methods that can be utilized to determine an individual’s household earnings for purposes of satisfying the ACA’s affordability standard. 

Coverage under an employer-sponsored plan is deemed affordable to an employee if the employee’s required contribution to the plan does not exceed 9.96% (indexed for 2026) of the employee’s household income for the taxable year, based on the cost of single coverage in the employer’s least expensive plan.  If the FPL guidelines’ safe harbor is used, the maximum individual contribution is $129.89 for a calendar-year plan and $132.46 for a 2026 non-calendar year plan.

Note: If a non-calendar year plan uses the FPL guideline in effect six months prior to the plan year start date, the maximum individual contribution is $129.89, assuming the 2025 FPL guideline is used.   

As background, employers subject to the ACA’s employer shared responsibility provisions who fail to offer minimum essential coverage to their full-time employees or fail to offer adequate and affordable coverage may be subject to an excise tax if at least one of its employees qualifies for premium assistance through a marketplace.  If an employer is using the FPL as its affordability standard, it is allowed to use the FPL guidelines in effect six months prior to the beginning of the plan year. 

Note: A calendar-year plan must use the 2025 FPL guidelines since the 2026 FPL guidelines were not issued when the offer of coverage was made (9.96% x $15,650/12 = $129.89).

The 2026 FPL guidelines became applicable on Jan. 13, 2026 (unless an office administering a program using the guidelines specifies a different effective date for that particular program). The above calculations use the FPL applicable in the 48 contiguous states. For calculations in Alaska and Hawaii, separate amounts apply.

2026 and 2025 Poverty Guidelines for the 48 Contiguous States and District of Columbia

The NPP Update, the Time Is Now

In 2024, the Department of Health and Human Services (HHS) updated the HIPAA Notice of Privacy Practices regulations to align with new rules concerning the Confidentiality of Substance Use Disorder (SUD) Patient Records. These changes place additional restrictions on the use and disclosure of SUD-related records and primarily affect federally assisted SUD programs (“Part 2 Programs”), as well as any covered entities that receive or maintain records from these programs. As a result, all health plans and other covered entities subject to HIPAA must update their Notice of Privacy Practices (NPP) by Feb. 16, 2026.

By the Feb.16, 2026, deadline, the NPP must address the following

• Any revised descriptions of permitted uses or disclosures must reflect stricter legal requirements for handling substance use disorder protected information.
• The NPP must state that impacted records will not be used or disclosed in civil, criminal, administrative, or legislative proceedings against the individual without written consent or a court order (with notice and opportunity to be heard).
• If the plan intends to use or disclose records for fundraising, the NPP must provide a clear option to opt out of fundraising communications. Typically, health plans do not use records for this purpose.
• Individuals must be informed that health information disclosed by the covered entity — upon the individual’s authorization — may be “redisclosed” by the recipient and may no longer be protected.

Plan Responsibilities

• For fully insured plans in which the employer only receives summary or deidentified information, confirm that the insurer manages the NPP and ensure the document has been updated.
• Self-funded plans and sponsors of insured plans in which the employer receives protected health information, confer with third-party vendors to determine whether there is an updated NPP that can be used by the plan.
• If you choose to post the NPP online, make sure to include instructions for accessing the updated document in your next annual mailing.

As a reminder, if the NPP is changed, the revised NPP must be distributed as follows

• If the NPP is posted on the plan’s website, the updated NPP must be posted by Feb. 16, 2026. The plan’s next annual mailing must include the NPP or instructions for how to access it.
• If the updated NPP is not posted online, it must be distributed to plan participants within 60 days of the revision.

While the Department of Health and Human Services (HHS) has not yet released an updated NPP, the website offers model notices that can be amended to include the required language. There are two sets of notices available, one for health plans and one for providers, and three formatted options. 

Plans should consider adding language to the uses and disclosures section of its NPP that states

• Substance Use Disorder (SUD) information protected by 42 CFR Part 2.
• Records received will not be “used or disclosed in civil, criminal, administrative or legislative proceedings against the individual unless based on written consent, or a court order after notice and an opportunity to be heard is provided to the individual or the holder of the record.”
• A disclosure that if a covered entity intends to use or disclose such records for fundraising for the covered entity’s benefit, the individual must first be provided with a clear and conspicuous opportunity to elect not to receive any fundraising communications.

In all instances, the notice must be tailored to the needs of the plan and should be reviewed by legal counsel.

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 currently $145 per day per employee.

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.

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

• Alabama
• Alaska
• Arkansas
• California
• Colorado
• Florida
• Georgia
• 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

No new states have been added to this list from the last update.

2027 Out-of-Pocket Limits Announced

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. The 2027 HSA and HDHP amounts will be issued in May or June.

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

New Jersey’s Family Leave Act Expanded

In his final week as New Jersey’s governor, Phil Murphy signed into law a major expansion of the New Jersey Family Leave Act. Effective July 17, 2026, New Jersey family leave eligibility is broadened in three ways:

• Lowers employer-size threshold from 30 employees to 15 employees employed anywhere, though it is only available to individuals working in New Jersey.
• Reduces the minimum length of employment from 12 months to three months for purposes of eligibility.
• Reduces the work-hour requirement from 1,000 hours during the prior 12 months to 250 hours during the prior 12 months.

As a reminder, the NJ family leave act provides eligible employees up to 12 weeks of unpaid job-protected leave in a 24-month period to care for a family member with a serious health condition, bond with a child within one year of the child’s birth or placement for adoption or foster care, or provide required care or treatment for a child during a state of emergency if their school or place of care is closed due to an epidemic of a communicable disease or other public health emergency.

In addition, the law addresses the coordination of earned sick leave and temporary disability insurance (TDI) or family leave insurance (FLI). An employee entitled to earned sick leave and TDI or FLI has the right to choose how to coordinate the leave entitlements. The employee can choose which leave is to be used first, but cannot use them at the same time.

Further, the law appears to provide reemployment rights to those on TDI or FLI. Hopefully, regulations will be issued clarifying this and other aspects of the law before its effective date.

New York 2026 Health Assessment

The New York Health Care Reform Act (HCRA) has been in effect since the mid-1990s and is renewed periodically. This law includes two assessments, one for medical professional education and the other for indigent care. 

The assessment applies to group health plan payors, including insured and self-funded plans, as well as dental services delivered through a health care reform-designated facility. Typically, dental services delivered by a stand-alone dental office would not be covered. Also, account-based plans such as HRAs, FSAs, and HSAs are not subject to the assessment. The payor can choose to be an electing payor or pay at the point of service.

The medical professional education surcharge is assessed based on the residency of the covered life. 2026 regional covered-lives assessment levels. 

The indigent care surcharge for electing payors is 9.63% through 2026. This assessment applies to care delivered in New York without regard to the residency of the patient. 

A self-funded health plan sponsor should affirm with its TPA how these assessments are being handled. 

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.