April 2026 Regulatory & Legislative Update

This regulatory and legislative update covers issues involving the prohibited transaction challenge, beneficiary designation, investment advice fiduciary, and more.

Prohibited Transaction Challenge Proceeds

On March 9, 2026, a federal court in New York decided that the ERISA class action case, Stern v. JPMorgan Chase & Co., could continue. The lawsuit claims that JPMorgan Chase did not properly manage its employee prescription drug benefit, engaging in a prohibited transaction in violation of ERISA. The court threw out the part of the lawsuit about breaking trust with employees, but said the employees had a reasonable argument that the company’s contract with its PBM, CVS Caremark, broke federal benefits law by arguably allowing excessive prices to be charged for prescriptions, as well as using plan assets to pay the vendor excessive fees.

Specifically, the court found that claims alleging JPMorgan, as the plan fiduciary, potentially engaged improperly with a party in interest, the PBM, could proceed. The plaintiffs established standing by showing they may have experienced personal financial loss as a result of higher out-of-pocket costs for prescription drugs.

This case is one of the first to survive a motion to dismiss in a wave of ERISA class action suits. Whether the plaintiffs prevail remains to be seen. In the meantime, it is an important wake-up call to sponsors of self-funded health plans to be cognizant of their fiduciary duties. The Consolidated Appropriations Act of 2026 and recently proposed PBM regulations will provide plan sponsors with a treasure trove of information that must be used prudently.

Beneficiary Designation, Process Reigns Supreme

In Packaging Corporation of America Thrift Plan for Hourly Employees v. Langdon, the court overturned the district court’s use of the “substantial compliance” doctrine related to a participant’s informal request to change a beneficiary, resulting in a significant retirement account being awarded to an ex-spouse, even though the participant’s intentions were clear.

In this case, Carl Kleinfeldt, the plan participant, had designated his wife, Dena Langdon, as the primary beneficiary of his retirement account. The two later divorced, and Kleinfeldt sent a fax to the plan’s benefits center requesting the removal of his ex-wife as beneficiary. These steps failed to satisfy the plan’s designated procedures for changing a beneficiary.

The court found that Kleinfeldt failed to follow the federal common law “substantial compliance” doctrine, which requires a participant to both express intent to change beneficiaries and act to change beneficiaries as required by the plan documents.

This case is an important reminder to plans requiring beneficiary designation to establish clear procedures for such designations, including changes to beneficiaries. Plans should ensure plan documents clearly outline methods for plan participants to designate or change beneficiaries, implement a system that notifies participants that beneficiary changes have been processed, and consider conducting a beneficiary designation review and audit.

Investment Advice Fiduciary: Yes, No, Maybe

The Department of Labor (DOL) recently issued a final rule, effective April 20, 2026, that formally removes the 2024 Retirement Security Rule from the Code of Federal Regulations. This follows two Texas federal court decisions in March 2026 that vacated the rule, which the current administration declined to defend.  

Key changes include restoration of the “Five-Part Test.” This is the 1975 standard for determining who is an investment advice fiduciary. To be considered a fiduciary under this test, advice must be: 

• Rendered as to the value of securities or other property;
• Provided on a regular basis;
• Provided pursuant to a mutual agreement;
• The primary basis for investment decisions; and
• Individualized based on the plan’s specific needs. Though an effective date is noted above, the government’s position is that the five-part test has been continuously in place since the 2024 rules never took effect.

One-time recommendations, such as for an IRA rollover, generally are not fiduciary advice under this reinstated five-part test. The DOL has restored the original 2020 version of the prohibited transaction exemption, excluding the preamble to the PTE. The DOL has indicated it has no current plans for new notice-and-comment rulemaking regarding the fiduciary definition.

GLP-1 Dilemma for Health Plans

Health plans and employers are facing a GLP-1 dilemma as they weigh the benefits of these medications against high costs and impact on premiums. One of the main dilemmas is the high costs, with monthly prices often exceeding $1,000 to $1,500 per patient. In addition, about 40% of the population meets the clinical eligibility requirements for these drugs based on obesity or other related conditions. 

These medications were originally used to treat Type 2 Diabetes. To be offered tax-favored, the Code section 213(d) criteria for medical expense must be met. The expense must be for the diagnosis, cure, mitigation, treatment, or prevention of disease. An expense for general good health or cosmetic reasons without a medical basis does not qualify. To qualify as a medical expense for Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Arrangements (HRAs), the above criteria must be met. To qualify, a doctor must prescribe the medication to treat a specific disease, such as obesity, diabetes, or hypertension.

Some employers use HRAs or FSAs to help employees pay for the drugs rather than including them in the comprehensive health plan. Importantly, a carved-out HRA must be integrated with a comprehensive health plan in order to satisfy the Affordable Care Act’s market provisions. Another concept is to remove the weight loss drug from the PBM contract and allow employers to manage coverage separately. This approach could help control costs, improve access, and allow for more targeted, cost-effective utilization. It would likely require renegotiating the PBM contract. Yet another option is to engage with compounding pharmacies for comparable drugs.   

Though these lower-cost alternatives are available, the FDA has issued serious warnings regarding compounded GLP-1 drugs highlighting risks of dosing errors, severe side effects, and hospitalization due to improper concentration calculations and misuse. Plans are urged to use only licensed pharmacies, as some products may be counterfeit or contain different ingredients than approved brands.

There is no one-size-fits-all solution to this cost-and-care challenge. Employers will want to work closely with a trusted adviser to develop a solution that works best for their situation.

Washington PFML Premium Split Adjusted

On March 11, 2026, Governor Ferguson signed legislation adjusting how the Washington Paid Family and Medical Leave (PFML) premium requirements are allocated between employers and employees to address IRS guidance. 

Employer contributions for paid family leave are not subject to federal employment taxes. Shifting employer contributions away from medical leave helps minimize additional federal tax liabilities. This law will impact the 2027 premium rate split but does not affect the 2026 premium rate or contribution split.

Beginning Jan. 1, 2027, employees will pay the entire medical leave premium. For family leave, the premium will be the difference between the total family leave premium plus 45% of the medical leave premium, minus the full medical leave premium. 

As a reminder, the premium rate for 2026 is 1.13% of each employee’s gross wages, up to the Social Security cap ($184,500). The premium rate is split between employer and employee, with the employer contributing 28.57% and the employee contributing 71.43%.  Employers with fewer than 50 employees are exempt from paying the employer share. 

Washington’s Employment Security Department will provide additional information to employers on how to implement the new premium split later this year.

Paid Sick and Paid Family Leave Coming to Virginia

Virginia legislators have passed both a paid sick leave bill and a paid family and medical leave bill, which the governor is expected to sign. 

The paid sick leave bill would mandate one hour of paid sick leave for every 30 hours worked, up to 40 hours in a year beginning July 1, 2027. The paid family and medical leave bill would provide up to 12 weeks of paid leave, funded by contributions split between the employer and employee. Contributions would begin April 1, 2028, with benefits beginning Dec. 1, 2028.

A more detailed summary will be forthcoming once these bills have been signed.

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.