The Fall 2025 Employee Benefits Briefing covered a wide range of timely and emerging issues in employee benefits law. The discussion offers plan sponsors and fiduciaries a practical roadmap for navigating regulatory change, litigation risk, and evolving workforce needs.
Watch the Employee Benefits Briefing (Fall 2025)
Alternative assets in retirement plans
A recent executive order signaled potential access to alternative investments, like private equity, venture capital, and crypto, for 401(k) and 403(b) plans. While the financial industry is eager to develop products, fiduciaries should proceed cautiously. The order is not yet law, and rulemaking from the DOL and SEC is still pending.
Key questions remain around fiduciary prudence, product readiness, and investor protections. The order also calls for a safe-harbor framework and the reconsideration of accredited investor rules, which could expand access but fiduciaries remain in wait-and-see mode for now.
Mental health parity enforcement
Despite a temporary pause on enforcing 2024 regulations, mental health parity remains a live issue. The DOL continues to investigate plans. Employers, especially those with self-funded arrangements, should ensure they have up-to-date comparative analyses and documentation. Enforcement is expected to ramp up once the government shutdown ends.
Wellness programs and tobacco surcharges
Litigation around tobacco surcharges is gaining traction. Employers should review their wellness program documentation for consistency and clarity, especially around how participants can earn rewards or avoid penalties. Whether framed as a surcharge or a reward, the compliance requirements are the same.
AI in benefits administration
Artificial intelligence is reshaping benefits operations, from claims adjudication to participant engagement, offering new efficiencies and personalization. At the same time, AI introduces complex oversight considerations. While automation can streamline routine tasks, those responsible for plan governance should understand how AI tools function, including the algorithms behind them, how data is used, and how exceptions are handled.
It's important to evaluate vendor practices around model training, accuracy, and bias mitigation, and to ensure that appropriate safeguards are in place for data privacy and security. Contracts may benefit from clear terms around audit rights and accountability for errors. Ultimately, the standard of care expected in plan oversight applies regardless of whether humans or machines make decisions.
Roth catch-up contributions
Final IRS regulations under the SECURE 2.0 Act of 2022 provide guidance on upcoming 401(k) and 403(b) catch-up rules.
Starting January 1, 2026, employees earning more than $145,000 in FICA wages in the prior year must make catch-up contributions on a Roth basis. While the deadline to amend plan documents for this change is not until December 31, 2026, employers should begin coordinating now with payroll and recordkeeping vendors to finalize mandatory Roth implementation in advance of the January 1, 2026, operational deadline. A one-year good-faith compliance period offers some flexibility, but accurate income tracking and clear communication with participants will be essential.
Regulatory updates: The “One Big Beautiful Bill”
The “One Big Beautiful Bill” introduced key updates to employee benefits plans. While it did not modify retirement plan limits, the legislation made several temporary COVID-era provisions permanent and added new benefit options for employers to evaluate. Notable changes include:
- Telehealth coverage: High-deductible health plans (HDHPs) can now permanently cover telehealth visits for non-preventive services before the deductible is met, restoring a popular pandemic-era benefit that enhances access and convenience for employees.
- Dependent care FSAs: The annual contribution limit for dependent care flexible spending accounts has increased from $5,000 to $7,500.
- Student loan repayment: Employers can now permanently use educational assistance benefits (up to $5,250 annually) to help employees pay down student loans.
- Trump accounts: A new type of IRA for children, these accounts allow employers to contribute on behalf of employees with kids starting in July 2026. While adoption may be slow, these new accounts could become popular if future guidance allows employees to make pre-tax contributions through cafeteria plans.
Fertility, menopause, and multi-generational benefits
Employers have clearer guidance on expanding access to fertility treatment coverage while complying with the Affordable Care Act (ACA), ERISA, and Internal Revenue Code requirements. In a published Frequently Asked Question (FAQ), the Departments of Labor, Health and Human Services, and Treasury outline existing compliance frameworks that allow plan sponsors to offer fertility-related benefits as “excepted benefits.” These include:
- Specified-disease policies must be fully insured and separate from group health plans;
- Excepted benefit HRAs can reimburse out-of-pocket fertility expenses, subject to annual caps and structural rules; and
- Certain EAPs may offer fertility-related support services, provided they are voluntary, free of cost-sharing, and uncoordinated with other plans.
Importantly, enrollment in these benefits does not disqualify HSA eligibility, offering additional flexibility for employers and employees.
The guidance also previews potential rulemaking that could further broaden options, such as allowing self-funded fertility benefits under the “limited excepted benefits” category and adjusting coverage limits.
More broadly, these developments reflect a growing trend: employers are increasingly tailoring benefit offerings to meet the needs of a multi-generational workforce.
PBM reform and fiduciary oversight
Litigation targeting pharmacy benefit managers (PBMs) is gaining momentum, with several cases already filed alleging breaches of fiduciary duty in the health and welfare context. This trend mirrors the scrutiny retirement plans have faced in recent years and signals a need for employers to apply the same level of fiduciary diligence to their health and welfare plans.
To mitigate risk, employers should consider proactive steps, including:
- Forming dedicated health and welfare fiduciary committees to oversee plan decisions and vendor relationships.
- Conducting thorough RFP processes for PBM services, with a focus on transparency, performance guarantees, and fee disclosures.
- Monitoring vendor performance throughout the contract lifecycle—not just at implementation—to ensure compliance with negotiated terms.
- Engaging experienced ERISA counsel, particularly those with deep expertise in pharmacy contracting and dispute resolution.
Employers should also be prepared to evaluate PBM arrangements, ensuring vendors are meeting contractual guarantees and held accountable for discrepancies. As the legal landscape evolves, maintaining robust documentation and oversight processes will be critical to defending fiduciary decisions and minimizing exposure.
PEPs and fiduciary responsibilities
Pooled employer plans (PEPs) are gaining popularity, offering potential administrative efficiencies for employers. However, joining a PEP does not eliminate fiduciary obligations. Employers must still exercise careful oversight when selecting and monitoring pooled plan providers. The Department of Labor (DOL) has issued a request for information that may lead to future safe harbor guidance, but for now, fiduciary prudence remains essential.
ERISA litigation trends
Litigation involving pension risk transfers and forfeiture allocations continues to grow. Courts remain divided on whether participants have standing in pension transfer cases, especially when benefits are still being paid. Forfeiture claims—challenging how forfeited employer contributions are applied—are increasingly added to broader fiduciary lawsuits.
Employers should also be cautious about relying on AI-generated transcripts or summaries for plan committee meetings. These records may be discoverable in litigation and could include statements that are misinterpreted or taken out of context. Manually drafted minutes remain the safer approach.
For more information or to discuss how these developments may affect your organization, please contact your Nixon Peabody Employee Benefits attorney.