Mark Rosenfeld, Author at Spotlight on Benefits

DOL Proposes New PBM Fee Disclosure Rules

On January 30, 2026, the Department of Labor (DOL) published proposed regulations that would require pharmacy benefit managers (PBMs) to disclose direct and indirect compensation that PBMs (and their affiliates, agents, and subcontractors) receive in connection with providing pharmacy benefit management services (or advice, recommendations, and referrals regarding such services) to self-insured group health plans. If an employer has engaged a third-party administrator to provide services, including pharmacy benefit management services, for its self-insured group health plan, the third-party administrator is responsible for obtaining the required information from the PBM and disclosing it to the employer.

The DOL proposal would not apply the disclosure obligations with respect to governmental plans, small employer health reimbursement arrangements, or fully insured group health plans, although the DOL may revisit its application to fully insured plans in future rulemaking.

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Roth Catch-Up Rules for Rehires: What Employers Need to Know Under the Final Regulations

SECURE 2.0 and the final IRS regulations on Roth catch-up contributions introduce a significant administrative consideration for employers and plan administrators: how does the Roth-only catch-up rule apply to rehired employees?

Background

Section 603 of the SECURE 2.0 Act requires catch-up contributions to be made as after-tax Roth contributions if the contributing employee received wages in the prior calendar year that exceed $150,000 (and as adjusted for inflation). Wages are defined as FICA wages (as reported in Box 3 of Form W-2) paid by the employee’s common law employer in the prior year (or paid by a common paymaster or other company-controlled group member if the company has elected permissive aggregation of wages).

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The Roth Catch-Up Contribution Requirement and a Statutory Merger

As the Roth catch-up contributions become effective this month, issues not addressed in the final regulations are coming to light.

Question: Our company completed a statutory merger — how does that impact the Roth catch-up contributions requirement?

Answer: Based on past IRS guidance, it is more than likely that an employee of either company in a statutory merger that was subject to the Roth catch-up contribution requirements of SECURE 2.0 Act prior to the statutory merger will continue to be subject to the Roth catch-up contribution requirements after the merger. Similarly, if the statutory merger occurs midyear, the employee’s compensation for the year of the merger will include compensation paid by either entity.

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Updated Guidance: Minnesota Paid Family Leave and Defined Contribution Plan Compensation

In IRS Notice 2026-6, the IRS issued a one-year extension of the tax treatment of medical benefits received by an employee through a paid family leave program (PFL). Minnesota has implemented the one-year extension and will not be treating PFL medical benefits as W-2 compensation that must be reported by the employee’s employer for 2026. Accordingly, employers sponsoring a qualified retirement plan that covers Minnesota employees will have an additional year to consider the impact of the PFL medical benefit taxation on their retirement plan’s administration.

Previously we reviewed how medical benefits received by an employee pursuant to Minnesota’s PFL would impact an employee’s W-2 compensation for purposes of a qualified retirement plan. With the one-year extension from the IRS and the Minnesota Department of Employment and Economic Development, employers in Minnesota will not have to include PFL medical benefits on the employee’s W-2 for 2026 and therefore will not have an impact on the definition of compensation in the employer’s retirement plan.

Unless additional guidance is issued, beginning in 2027 the state of Minnesota will be requiring employers participating in the state’s program to report PFL medical leave benefits (not family benefits) on the employer’s Form W-2 and this may implicate the definition of compensation in the employer’s defined contribution retirement plans. Employers should review the definition of compensation in their retirement plan documents to determine whether any action is needed prior to 2027.

We will continue to monitor and provide updates. If you have any questions, please reach out to your Faegre Drinker benefits counsel.

IRS Announces 2026 Retirement Plan Limits

The Internal Revenue Service (IRS) recently announced the 2026 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans. The IRS modestly increased the applicable limits for 2026. The following limits apply to retirement plans in 2026:

The limit on elective deferrals under 401(k), 403(b) and eligible 457(b) plans increased to $24,500.
The limit on catch-up contributions by participants aged 50 or older is increased to $8,000. This means that the maximum amount of elective deferral contributions for those participants in 2026 is $32,500.
The enhanced catch-up contribution limit for those ages 60-63 in 2026 did not change and remains $11,250. This means that the maximum amount of elective deferral contributions for these participants in 2026 is $35,750.
The Internal Revenue Code (Code) Section 415 annual addition limit is increased to $72,000 for 401(k) and other defined contribution plans, and the annual benefit limit is increased to $290,000 for defined benefit plans.
The limit on the annual compensation that can be taken into account by qualified plans under Code Section 417 is increased to $360,000.
The dollar level threshold for becoming a highly compensated employee under Code Section 414(q) remains $160,000 (which, under the look-back rule, applies to HCE determinations in 2027 based on compensation paid in 2026).
The dollar level threshold for becoming a “key employee” in a top-heavy plan under Code Section 416(i)(1) is increased to $235,000.
The Roth catch-up wage threshold is increased to $150,000 (which applies to determinations in 2026 based on FICA wages in 2025).

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Minnesota Paid Family Leave and Defined Contribution Plan Compensation

Beginning in 2026, Minnesota will implement a paid family leave program (PFL) that provides family leave and medical leave benefits. The State of Minnesota will be requiring employers participating in the State’s program to report PFL medical leave benefits (not family benefits) on the employer’s Form W-2 — and this may implicate the definition of compensation in the employer’s defined contribution retirement plans. Employers should review the definition of compensation in their retirement plan documents to determine whether any action is needed prior to 2026.

Background on Minnesota PFL Taxation

On October 1, 2025, the Minnesota Department of Employment and Economic Development issued guidance on the taxation of contributions to the Minnesota PFL program and distributions from the program. This guidance only applies to employers participating in the PFL program administered by the State of Minnesota and will not apply to a fully insured or self-funded PFL program.

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IRS Issues Final Roth Catch-up Rules and What You Need to Know

On September 16, 2025, the Internal Revenue Service (IRS) published final rules on the Roth catch-up contribution requirements of SECURE 2.0 Act (Final Rules). Many of the requirements from the proposed rules are retained, although there have been some changes to try and ease plan administrative issues.

Background on Roth Catch-Up Contribution Changes

Section 603 of the SECURE 2.0 Act requires catch-up contributions to be made as after-tax Roth contributions if the contributing employee received wages in the prior calendar year that exceed $145,000 (and as adjusted for inflation). The definition of wages is defined as FICA wages. All eligible participants must have the opportunity to elect Roth catch-up contributions (and Roth cannot be limited to just those employees earning above the $145,000 wage limit as adjusted).

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Stop the Presses – Annual Funding Notice Guidance Issued

On April 3, 2025, the Department of Labor (DOL) issued guidance on the Annual Funding Notice changes made by the SECURE Act 2.0 and provided model notices. Pension plan administrators should review and revise their annual funding notices in light of the new guidance.

Background

Section 343 of SECURE Act 2.0, passed December 29, 2022, implemented changes to the annual funding notice provided to defined benefit pension plan participants. The changes became effective for plan years beginning after December 31, 2023. For calendar year pension plans, the 2024 Annual Funding Notice (due no later than April 30, 2025) would be the first notice implementing the new rules. The DOL had not issued guidance or provided a model notice until the afternoon of April 3, 2025.

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IRS Issues 83(b) Election Form

Internal Revenue Code Section 83(b) elections can now be made on a standard IRS Form 15620. Previously, 83(b) elections were made on self-drafted forms. Individuals making an 83(b) election can still submit a self-drafted form, if desired.

Background on 83(b) Elections

An 83(b) election is typically made at the time a taxpayer receives a grant of unvested property, like restricted stock or profits interests. Under Code Section 83(a), property is taxed when vested and no longer subject to a substantial risk of forfeiture. Code Section 83(b) allows a taxpayer to accelerate the timing of the income tax inclusion to be as of the date of grant (prior to the property right vesting and becoming nonforfeitable). Taxpayers will make an 83(b) election in the hopes that the property’s value is lower as of the grant date than the vesting date, and to ease the administrative burden of determining the value of property at various vesting dates.

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Correcting Automatic Enrollment Errors

The SECURE 2.0 Act made it easier for retirement plan sponsors to correct automatic enrollment errors. As a policy matter, Congress strongly supports automatic enrollment provisions in retirement plans, and making it easier to correct errors should (hopefully) encourage retirement plan sponsors to add such features to their plans. This post focuses on the automatic enrollment correction provisions of the SECURE 2.0 Act. (For an overview of the SECURE 2.0 Act for defined contribution plan sponsors, click here.)

Correcting Automatic Enrollment Errors

Section 350 of the SECURE 2.0 Act codified a safe harbor correction for automatic enrollment errors into the Internal Revenue Code. Prior to the SECURE 2.0 Act, automatic enrollment errors were eligible for correction under EPCRS (Employee Plans Compliance Resolution System) but were often subject to a sunset provision by the IRS (although that sunset provision had been extended previously).

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