Benefits Catch-Up – Q1 2026

Qualified Retirement Plans

DOL Proposes Rule on 401(k) Plans Investing in Alternative Investments

On March 31, 2026, the Department of Labor (DOL) published a proposed regulation entitled “Fiduciary Duties In Selecting Designated Investment Alternatives” (Proposed Rule). The DOL issued the Proposed Rule in response to White House Executive Order 14330, “Democratizing Access to Alternative Assets for 401(k) Investors” (Executive Order). Responding to concerns about litigation risk related to “alternative assets” raised in the Executive Order, the Proposed Rule provides a safe harbor that plan fiduciaries can follow when evaluating designated investment alternatives, including alternative assets. Notably, the DOL intends for the Proposed Rule to be “investment neutral” and applicable to the selection of all designated investment alternatives, not just those that include alternative assets. Review our legal alert on the Proposed Rule here. 

DOL Issues Proposed Regulations on Electronic Disclosure 

On February 25, 2026, the DOL issued a proposed rule that would amend the 2002 and 2020 electronic disclosure safe harbors under ERISA. These proposed regulations reflect the new requirement that defined contribution plans provide at least one paper benefit statement annually and that defined benefit plans provide one every three years. Plan sponsors that want to deliver all benefit statements electronically under the 2002 (wired at work) safe harbor must deliver a one-time advance paper notice to participants who become eligible after December 31, 2025 informing them of their right to opt out of electronic delivery. Under the 2020 (notice and access) safe harbor, the plan sponsor would have to provide one paper benefit statement per year (once every three years for a defined benefit plan) until the participant affirmatively opts into electronic delivery. Unless the participant opts in to electronic delivery, paper statements must be provided free of charge and include a statement explaining how to request electronic delivery. 

IRS Updates Safe Harbor Rollover Notices to Reflect SECURE 2.0 Act Changes

On January 15, 2026, the Internal Revenue Service (IRS) issued Notice 2026-13, which updates the model Internal Revenue Code (Code) Section 402(f) notice for eligible rollover distributions from retirement plans. The revised notice incorporates changes under the SECURE Act and SECURE 2.0 Act, including expanded exceptions to the 10% early distribution tax, updated required minimum distribution rules, the increased $7,000 cash-out threshold, and pension-linked emergency savings accounts. The IRS reiterated that notices generally must be provided to participants up to 180 days before distribution and using the model notice remains optional. 

House Introduces ERISA Litigation Reform Act to Curb Prohibited Transaction Claims 

The United States House of Representatives recently introduced the ERISA Litigation Reform Act (H.R 6084), which would amend ERISA to require a heightened pleading standard for certain prohibited transactions claims following the Supreme Court’s decision in Cunnigham v. Cornell University. The bill would automatically stay discovery while motions to dismiss are pending and require plaintiffs to plausibly allege that the prohibited transactions are not exempt under ERISA Section 408(b)(2), shifting the burden of proof to plaintiffs on exemption issues. 

DOL Reinstates Five-Part Test for ERISA Fiduciary 

On March 17, 2026, the DOL issued a notice recognizing two federal court vacaturs of the Biden era Retirement Security Rule and related amendments to applicable prohibited transaction exemptions, thereby reinstating the DOL’s longstanding five-part test for determining when a person providing investment advice is treated as an ERISA fiduciary. Additionally, the DOL withdrew its preamble to Prohibited Transaction Exemption 2020-02, but maintained the exemption. As a result, fewer recommendations by financial institutions and their representatives to participants in ERISA-covered plans and to IRA owners will be considered “investment advice” for purposes of ERISA and section 4975 of the Code. 

SCOTUS Grants Certiorari in Intel Case 

The United States Supreme Court recently granted certiorari in Anderson v. Intel Corp. to decide whether ERISA plaintiffs alleging an imprudent investment decision based on fund underperformance must identify a “meaningful benchmark” to survive a motion to dismiss. The case arises from the Ninth Circuit decision, which held that when plaintiffs claim that a prudent fiduciary would have selected a different investment option, the plaintiffs must point to a fund with similar objectives, risks, and strategies for comparison. The Supreme Court’s decision is expected to clarify the pleading standards in cases involving fund underperformance, potentially reducing early successes in ERISA litigation cases. 

Climate-Related Financial Risk Subject of Cushman & Wakefield 401(k) Claim 

On March 3, 2026, a class of Cushman & Wakefield 401(k) plan participants filed a complaint in the US District Court Western District of Washington alleging that the plan violated ERISA by ignoring climate change-related financial risks in its investment fund selection. The complaint challenges the inclusion of the Westwood Quality SmallCap Fund in the plan, alleging that the fund has high fees, lackluster performance, and is invested heavily in companies with high climate risk exposure. The case involves a novel theory about the role environmental, social, and governance (ESG) factors should play in selecting an investment lineup.

Health & Welfare Plans

PBM Updates: DOL Issues Proposed Rules and Congress Creates New Rebate Passthrough Rules and Transparency Requirements 

On January 30, 2026, the DOL issued proposed rules requiring pharmacy benefit managers (PBMs) to disclose information about their compensation to self-funded health plans to satisfy the “reasonable compensation” service provider exemption under the prohibited transaction rules. The proposed rules would require PBMs to provide information every six months on spread compensation, manufacturer payments, clawbacks and formulary placement incentives. 

Two weeks later, on February 3, 2026, President Trump signed the Consolidated Appropriations Act, 2026 (CAA) into law. The CAA amends ERISA’s service provider fee disclosure rules to include PBMs, effective now. In addition, the CAA imposes extensive reporting requirements on PBMs, including an obligation to disclose detailed drug coverage and costs semi-annually (quarterly if a plan fiduciary requests). The CAA also requires that PBMs pass through one hundred percent of all rebates it receives with respect to the group health plan. The CAA disclosure and rebate requirements take effect for plan years beginning after August 2028. 

There is significant overlap between the two rules, and they highlight the importance of understanding, evaluating, and negotiating PBM compensation.

Employees of JPM May Proceed with Their Lawsuit Over High Drug Costs in Health Plan

The Southern District of New York has allowed a class action against JP Morgan Chase’s (JPM) self-funded healthcare plan to proceed on the grounds that the company engaged in prohibited transactions with its PBM. Plaintiffs alleged that JPM breached its fiduciary duties by paying excessive fees for certain medications, improperly classifying certain medications as “specialty drugs,” and failing to benchmark its PBM pricing against the market. The plaintiffs also alleged that JPM engaged in prohibited transactions with its PBM. The court viewed some of these actions as settlor functions and dismissed the breach of fiduciary duty claims. However, the Court allowed the prohibited transaction component of plaintiffs’ claim to proceed.

IRS Releases Guidance Related to Recent HSA Changes

At the end of 2025, the IRS released Notice 2026-5, which provides guidance on the One Big Beautiful Bill Act’s (OBBBA) expansion of health savings account (HSA) qualification requirements under Code Section 223. The OBBBA permanently codified CARES Act relief that allowed high-deductible health plans to provide certain telehealth and remote care services on a no-cost or reduced-cost basis before a participant reaches their deductible without impacting the participant’s HSA eligibility. The OBBBA also provides that, starting in 2026, enrolling in a direct primary care service arrangement (DPCSA) will not impact HSA eligibility. Notice 2026-5 provided FAQs clarifying which benefits are treated as permissible telehealth and remote care services. Specifically, the Notice explained that in-person services, medical equipment and prescription drugs are not considered telehealth and remote care services, and are not covered by the OBBBA relief. The Notice also provides guidance on arrangements that constitute DPCSAs. 

New Class Action Suits Attempt to Bring Voluntary Benefit Plans Under ERISA Scrutiny

At the end of December, a wave of class action lawsuits were filed against employers and benefits consultants alleging that their voluntary benefits plans are subject to ERISA and that both the employers and consultants had breached their fiduciary duties in administering these plans. The plaintiffs allege that the relevant voluntary benefits plans fall outside of the DOL safe harbor exempting voluntary plans from ERISA. As a result, plaintiffs allege that the employers who offered them breached their fiduciary duties in selecting and monitoring the insurance providers, causing excessive premiums. The cases are a reminder for employers to review the ERISA status of any voluntary benefits they offer. 

Other Plans and Benefits

Guidance On Trump Accounts 

On March 9, 2026, the Department of the Treasury and the IRS released two notices of proposed rulemaking regarding Trump accounts. The first set of proposed regulations provide Pilot Program guidance (only children born in calendar years 2025 through 2028 who are US citizens and have a social security number are eligible for the $1,000 Pilot Program contribution) and the second outlines rules for opening initial and rollover Trump accounts. The proposed regulations follow the IRS’s December 2, 2025 Notice 2025-68, which was the first published Trump account guidance. See our legal alert discussing the recent Trump account guidance here.

Extension of SECURE 2.0 Act Amendment Deadline for IRAs 

In Notice 2026-9, the IRS extended the deadline for adopting certain amendments required under the SECURE 2.0 Act for individual retirement arrangements (IRAs), Simplified Employee Pension arrangements, and Savings Incentive Match Plan for Employees (SIMPLE) IRA plans. The amendment deadline has been extended to December 31, 2027 to provide additional time for certain stakeholders (particularly IRA custodians and plan providers) to amend their plans pending the release of model amendment language. 

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.