Compliance Monthly Update
October 2025
A brief update on what happened the prior month in group health plan compliance at the federal level, organized chronologically. An update for the state and local level are further down. If you would like additional information, please reach out to the GBS Compliance Team.
Federal Compliance Update
Final 2025 ACA reporting forms and instructions released.
On October 2, 2025 the IRS released final 1094/1095-C forms and on October 16, 2025 final 1094/1095-B forms were released. These 2025 B and C forms support ACA reporting under IRS Code Sections 6055 and 6056. As a reminder, Forms 1094-B and 1095-B are filed by minimum essential coverage providers (including small employers with a self-insured plan) to report coverage information in accordance with Section 6055. Forms 1094-C and 1095-C are filed by applicable large employers (ALEs) to provide information that the IRS needs to administer employer shared responsibility penalties and eligibility for premium tax credits, as required under Section 6056.
- Forms are required to be filed with the IRS by February 28, 2026, or March 31, 2026 (if filing electronically). As a reminder, the electronic filing threshold was decreased (starting in 2024) so that employers filing 10 or more returns must file electronically with the IRS.
- The deadline to furnish forms to individuals is March 2, 2026. Note that effective January 31, 2024, employers no longer have to automatically send Form 1095-C to individuals, and employers can now choose to post a notice on its website informing individuals that they may request a copy of the statement (the requirement to provide the statement is met as long as the notice satisfies certain requirements that are outlined in the C-Series Form Instructions linked below). However, because the forms must still be prepared and filed with the IRS, some employers find it simpler to proactively furnish the forms to employees rather than administer and track individual requests.
- Form 1094-B
- Form 1095-B
- Form 1094-C
- Form 1095-C
Although the final instructions for both B and C form were released on November 4, 2025 links are added to this October update for convenience.
2026 cost of living adjustments (COLAs) released for health FSAs, etc.
On October 9, IRS Rev. Proc. 2025-32 was released (along with a news release) with annual inflation adjustments for numerous tax provisions for tax year 2026. This includes limit adjustments relating to health FSAs, DCAPs, qualified transportation fringe benefits, adoption assistance, QSEHRAs, and premium tax credits.
- Health FSAs. For plan years starting in 2026, the dollar limit on employee salary reduction contributions to health FSAs will be $3,400 (up from $3,300). If the cafeteria plan permits health FSA carryovers, the maximum amount that can be carried over to the 2027 plan year is $680 (up from $660). Note that if these IRS FSA limits are announced after open enrollment has ended for the next year, employers could include language in the annual enrollment materials for the health FSA allowing employees to elect the annual limit for the current plan year “as adjusted for any increase announced by the IRS for the next plan year before the next plan year begins.” This approach would allow an automatic adjustment for employees choosing this option.
- DCAPs. While the maximum amount of DCAP benefits that can be excluded from income has not been adjusted for cost-of-living changes (it is a non-indexed limit), the DCAP limit will increase beginning in 2026 to $7,500 or $3,750 depending on marital and filing status (up from $5,000/$2,500) due to changes made in the One Big Beautiful Bill that was passed earlier this year.
- Qualified transportation fringe benefits. For 2026, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits will be $340 (up from $325). The combined monthly limit for transit passes and vanpooling expenses for 2026 will be $340 (up from $325).
- QSEHRAs. For 2026, the maximum amount of payments and reimbursements under a QSEHRA will be $6,450 for self-only coverage and $13,100 for family coverage (up from $6,350 and $12,800, respectively).
- Adoption assistance exclusion and adoption credit. The maximum amount that may be excluded from an employee’s gross income under an employer-provided adoption assistance program for the adoption of a child will be $17,670 for 2026 (up from $17,280). In addition, the maximum adoption credit allowed to an individual for the adoption of a child will be $17,670 for 2026 (up from $17,280). Both the exclusion and the credit will begin to be phased out for individuals with modified adjusted gross incomes greater than $265,080 and will be entirely phased out for individuals with modified adjusted gross incomes of $305,080 or more. Beginning in 2025, up to $5,000 (indexed) of the adoption credit is refundable. For 2026, the maximum refundable amount is $5,120.
- Excess premium tax credit penalty. In prior years, there was an indexed limit on the tax imposed if a taxpayer’s advanced premium tax credit payments for health insurance purchased through an Exchange for a year exceeded the allowed credit. But because the One Big Beautiful Bill (that was passed earlier in 2025) eliminated the cap on the recapture of advance payments of the premium tax credit, the inflation adjustment has been removed from the 2026 COLAs.
- Note that the 2026 COLAs for HSAs, HDHPs, and EBHRAs were announced by the IRS on May 1 earlier this year in Proc. 2025-19 as follows:
- HSA contribution limits. The 2026 annual HSA contribution limit is $4,400 for individuals with self-only HDHP coverage (up from $4,300 in 2025) and $8,750 for individuals with family HDHP coverage (up from $8,550 in 2025). The catch-up contribution limit for HSA-eligible individuals 55 or older remains unchanged at $1,000.
- HDHP Minimum Deductibles. For plan years beginning in 2026, the minimum annual deductible is $1,700 for self-only HDHP coverage (up from $1,650 in 2025) and $3,400 for family HDHP coverage (up from $3,300 in 2025).
- HDHP Out-of-Pocket Maximums. For plan years beginning in 2026, the limit on out-of-pocket expenses (including items such as deductibles, copayments, and coinsurance, but not premiums) is $8,500 for self-only HDHP coverage (up from $8,300 in 2025), and $17,000 for family HDHP coverage (up from $16,600 in 2025).
- EBHRA Contribution Limit. The maximum amount that may be made newly available for plan years beginning in 2026 is $2,200 (up from $2,150 for plan years beginning in 2025).
Guidance on how fertility benefits may be offered as an excepted benefit.
On October 16, the DOL, HHS, and IRS jointly released ACA FAQs Part 72 (and an associated new release) with guidance to clarify existing categories of excepted benefits that employers can use to offer fertility benefits, including fertility treatment through a specified disease or illness policy, or offering reimbursement for those services through an excepted benefits health reimbursement arrangement (EBHRA). The regulatory agencies also announced that they intend to issue future proposed rules aimed at providing additional ways that certain fertility benefits may be offered as an excepted benefit. Remember that excepted benefits are not required to comply with certain ACA coverage mandates—including the preventive services coverage mandate and the prohibition on lifetime/annual limits for essential health benefits (EHBs). So, a benefit that fits into an excepted benefit category gives a plan sponsor more flexibility. This new FAQ guidance follows the President’s executive order signed on February 18, 2025, titled “Expanding Access to In Vitro Fertilization” directing the administration to develop policy recommendations to protect and increase access to in vitro fertilization (IVF) services and to reduce the cost of IVF treatments. Here are the highlights of the FAQ guidance:
- Q1: May an employer offer fertility benefits as an independent, noncoordinated excepted benefit? Yes, an employer could offer a specified disease or illness policy that covers benefits related to infertility as a type of independent, noncoordinated excepted benefit if all the following applicable conditions are met:
- (1) The benefits are provided under a separate policy, certificate, or contract of insurance.
- (2) There is no coordination between the provision of such benefits and any exclusion of benefits under any group health plan maintained by the same plan sponsor.
- (3) And the benefits are paid with respect to an event without regard to whether benefits are provided with respect to such event under any group health plan maintained by the same plan sponsor or, with respect to individual coverage, under any health insurance coverage maintained by the same health insurance issuer.
- Q2: If an employer offers a traditional group health plan and a specified disease or illness policy that covers fertility benefits, must participants and beneficiaries enroll in the employer’s traditional group health plan in order for the specified disease or illness policy to qualify as an excepted benefit?
- Q3: Can specified disease or illness coverage, such as coverage only for infertility, be self-funded by the employer and qualify as an independent, noncoordinated excepted benefit?
- Q4: Would an individual who is enrolled in fertility benefit coverage provided as an independent, noncoordinated excepted benefit be permitted to contribute to a health savings account (HSA)? Insurance for a specified disease or illness is a type of insurance in which an individual is specifically allowed to be enrolled and still contribute to an HSA, provided they are covered by an HDHP and do not have any other types of coverage that would disqualify the individual from contributing to an HSA.
- Q5: Under existing regulations, may an employer plan sponsor offer an EBHRA that reimburses an employee’s out-of-pocket costs with respect to fertility benefits? Yes, provided it otherwise satisfies the requirements for an EBHRA.
- Q6: May an employer offer benefits for coaching and navigator services to help employees and their dependents understand their fertility options under an EAP that qualifies as a limited excepted benefit?
Prescription drug pricing agreements and TrumpRx.
The Trump administration has announced a direct-to-consumer website and two deals to bring most-favored-nation (MFN) pricing to American patients with the goal that the U.S. will pay no more than the lowest prices charged in other developed countries.
- On September 30, the Trump administration issued a Fact Sheet and announced:
- It will be rolling out a direct-to-consumer website (called TrumpRx) where individuals can buy prescription drugs direct from the manufacturer at a significant discount, rather than through their insurance.
- That also, the administration had reached a deal with drug manufacturer Pfizer for it to charge Medicaid MFN pricing, matching the lowest price charged in other developed nations. Pfizer will also join the new TrumpRx website.
- Then on October 10, the Trump administration issued another Fact Sheet announcing a second deal with AstraZeneca to bring Medicaid MFN pricing to Americans, matching the lowest price charged in other developed nations. AstraZeneca will also join TrumpRx. The Administration indicated agreements with other drug manufacturers will be forthcoming.
Reminder about December 31 gag clause attestation reporting deadline. This is the third year that group health plans and health insurance issuers must complete their annual Gag Clause Prohibition Compliance Attestations (GCPCAs). New this year, the GCPCAs must also confirm the lack of gag clauses in any “downstream agreements.”
- As a reminder, group health plans and insurers are prohibited from entering into agreements with providers, provider networks, or entities offering provider network access that contain any contractual term directly or indirectly restricting the plan or insurer from disclosing specified data and information, such as cost or quality of care data (a “gag clause”). Plans and insurers are required to annually attest to their compliance by submitting the GCPCA by December 31 each year.
- After the initial attestation (that occurred in 2023), each subsequent attestation covers the period from the date of the prior attestation through the date of the subsequent attestation. For example, if a plan submitted last year’s GCPCA on November 30, 2024, and submits this year’s GCPCA on November 15, 2025, the GCPCA’s “attestation period” would be December 1, 2024, to November 15, 2025, and the “attestation year” would be 2025.
- NEW: Group health plans must not only confirm the lack of gag clauses in their contracts with plan service providers and TPAs, but they must also confirm the lack of gag clauses in any “downstream agreements.” A downstream agreement is an agreement between the plan’s service provider and a third party. If a downstream agreement includes a clause that has the effect of restricting the plan’s access to the requisite information, then there is a prohibited gag clause in the downstream agreement. Presumably, plan sponsors will need to rely on insurer’s and TPA’s confirmations about any gag clauses in their downstream agreements because it is unlikely the insurer/TPA will allow plan sponsors to review their 3rd party contracts.
- If a plan identifies a gag clause, or has experienced a prohibited restriction through a downstream contract, FAQs Part 69 instructs attesters to (a) request the provision be removed; or (b) if unable to remove the provision, identify the prohibited clause in the plan’s attestation.
- For fully-insured plans, if the insurance carrier submits the attestation on behalf of the group health plan, the requirement is considered met. Self-insured plans can enter into a written agreement to have their TPA submit the attestation on their behalf. However, a self-insured plan sponsor remains liable for any compliance failure.
- See our GBS Gag Clause Removal & Attestations webpage for more information and guidance.
- See also the CMS GCPCA website for FAQs, submission instructions, a user manual, and the webform used for GCPCA submissions.
State/Local Compliance Update
A brief update on what happened the prior month in group health plan compliance at the state and local level, listed alphabetically. If you would like additional information, please reach out to the GBS Compliance Team.
California
California expands reasons employees can take leave under paid sick and safe time law.
On October 1, Governor Newsom signed AB 406 that expands the reasons employees can take leave under California’s Healthy Workplaces Healthy Families Act (HWHFA), the statewide paid sick and safe time law. Effective January 1, 2026, AB 405 will allow employees to use leave if they or a family member are a victim of certain crimes and are attending judicial proceedings related to that crime, including, but not limited to, any delinquency proceeding, a post-arrest release decision, plea, sentencing, postconviction release decision, or any proceeding where a right of that person is an issue.
New California PBM law takes effect starting in 2026.
On October 11, Governor Newsom signed SB 41 introducing a comprehensive set of new regulations for PBMs operating in the state. SB 41 imposes an explicit fiduciary duty on PBMs to act in the best interests of their payer clients, which include both self-insured and fully insured ERISA health plans. The law also prohibits spread pricing and steering to PBM-affiliated pharmacies, mandates 100% passthrough of rebates, requires state licensure, and introduces comprehensive disclosure obligations. There will likely be ERISA preemption challenges to portions of this law, and the courts have held that state laws that interfere with the uniform regulatory scheme ERISA creates for self-insured employer plans can be preempted. However, where state laws merely regulate business conduct of non-ERISA entities and do not impose design or benefit mandates on ERISA-governed plans, then such provisions are more likely to survive ERISA preemption.
California expands state’s paid family leave to cover leave for designated persons.
On October 13, Governor Newsom signed SB 590 that effective July 1, 2028, expands eligibility for benefits under the state paid family leave program to include individuals who take time off to care for a seriously ill designated person.
Maryland
New guidance released for Maryland FAMLI program.
Maryland has issued proposed regulations to implement the Family and Medical Leave Insurance (FAMLI) program, as well as a set of new FAQs on contributions, general questions, claims, commercial plans, and employer action items. As a reminder, the FAMLI program requires employers to provide eligible employees with job-protected leave to care for themselves or a family member with salary continuation for up to 12 weeks. Employer contribution requirements are scheduled to begin January 1, 2027, with paid leave benefits available starting January 3, 2028.
Massachusetts
2026 Massachusetts paid family and medical leave contribution rates and benefit maximums released.
The Massachusetts Department of Family and Medical Leave has announced the 2026 weekly benefit amount and contribution rates for employers and employees under the Paid Family and Medical Leave Act. The benefit contribution rate will remain at 0.88% of eligible wages for employers with 25 or more covered individuals (split between covered individuals’ payroll withholding and an employer contribution). The contribution rate will remain at 0.46% of eligible wages for employers with fewer than 25 covered individual (this contribution rate is less because small employers are not required to pay the employer share of the medical leave contribution). The maximum weekly benefit will increase from $1,170.64 to $1,230.29.
New York
New York City expands earned safe and sick time benefits.
On October 25, New York City enacted legislation that amends the Earned Safe and Sick Time Act (ESSTA). The key provisions of the amendments (that go into effect on February 22, 2026) include: (a) expanded leave provisions where covered New York City employers must provide employees with an additional 32 hours of unpaid safe and sick time, frontloaded at hire (in addition to the 40 to 56 hours already provided under the ESSTA); (b) new permissible uses for safe and sick time, including care for a minor child, attending legal proceedings for subsistence or housing benefits, public disasters, and incidents of workplace violence; and (c) formally codifying prenatal leave requirement where employers must also provide 20 hours of paid prenatal leave per 52-week period, which is concurrent with New York State law.
2026 New York State paid family leave contribution rates released.
The contribution rate paid by employees for the New York Paid Family Leave program will increase to 0.432% in 2026 (up from 0.388% for 2025), and the amount that can be paid by an employee is capped at an annual maximum of $411.91 in 2026 (up from $354.53 for 2025). Employees earning less than the New York State Average Weekly Wage ($1,833.63 per week), will have an annual contribution amount less than the cap of $411.91, consistent with their actual wages.
Oregon
New payroll disclosure law.
A new Oregon law will require a detailed explanation of each benefit contribution or deduction starting January 1, 2026. Oregon employers must provide all new hires with a thorough explanation of the earnings and deductions that will be found on their itemized pay statement. This statement must also list every pay rate, benefit deduction and contribution that may apply and the purpose for each contribution or deduction. The Oregon Bureau of Labor & Industries (BOLI) outlines further expectations and provides a sample template on their Paycheck Deductions site.
Washington
2026 Washington Paid Family and Medical Leave (PFML) contribution rates released.
Washington recalculates the PFML rate annually each October and has announced that the rate will increase to 1.13% of each employee’s gross wages for 2026. Employers will pay 28.57% of the total premium and employees will pay 71.43%. For comparison, the current 2025 premium rate is 0.92% with employers paying 28.48% of the total premium and employees paying 71.52%. As a reminder, businesses with fewer than 50 employees are not required to pay the employer portion of the premium. However, they must still collect the employee premium or pay employees’ premiums on their behalf.
