Takeaways

  • The Ninth Circuit recently adopted a broader definition of work performed in “the building and construction industry,” potentially expanding the availability of the special definition of complete withdrawal applicable to certain employers and plans in the building and construction industry (the B & C Exception).
  • Since the B & C Exception shields employers from liability for a complete withdrawal unless the employer performs previously covered work on a non-union basis, this is a significant development for construction industry employers.

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Generally, an employer whose obligation to contribute to a multiemployer pension plan (MEPP) permanently ends incurs a “complete withdrawal” and becomes liable for its allocable share of any underfunding, known as “withdrawal liability.” However, a special definition of complete withdrawal—the B & C Exception—applies to MEPPs that primarily cover workers in the building and construction industry (a B & C Plan). Under this exception, an employer whose obligation to contribute to a B & C Plan on behalf of employees (substantially all of whom perform work in the building and construction industry) permanently ceases will only incur a complete withdrawal if the employer later performs work for which contributions were previously required, but on a non-contributory (e.g., non-union) basis. Since many construction employers enter a jurisdiction on a project basis and leave after completing the project, the B & C Exception can potentially shield many employers from substantial liability.

Somewhat surprisingly, ERISA does not define the term “building and construction industry.” Instead, courts have relied on the definition developed by the National Labor Relations Board (NLRB) under federal labor law.  Relying on the NLRB’s decision in Indio Paint, 1966, courts have limited their application of the B & C Exception to situations where “materials and constituent parts may be combined on the building site to form, make, or build a structure.” For example, the Second Circuit previously determined that performing cable service on prewired buildings was not “building and construction industry” work because it was surface-level work on already-constructed buildings.

However, in Walker Specialty Constr., Inc. v. Bd. of Trs. of the Constr. Indus., the Ninth Circuit diverged from other courts’ longstanding interpretation of the “building and construction industry.” While the Ninth Circuit agreed that the NLRB’s interpretation of the “building and construction industry” should apply, the court held that the NLRB’s “expansive understanding of the “building and construction industry” went beyond simply “erecting new structures.” Accordingly, the Court determined that NLRB precedent (including Indio Paint) provided a “comprehensive definition” that “included alterations, maintenance and repairs.”

Using this broader definition, the Ninth Circuit ruled that asbestos removal work qualifies as part of the “building and construction industry,” since it involves the “maintenance and repair” of fixed structures. Specifically, the court determined that removing asbestos requires significant modifications to buildings, such as demolishing asbestos-containing walls and roofs, to keep the buildings habitable. The court also found that this type of work is similar to demolition work, which was previously recognized as work in the building and construction industry.

We will continue to monitor the courts’ interpretations of the “building and construction industry” and other special rules governing withdrawal liability.  Please contact the authors or the Jackson Lewis attorney with whom you regularly work if you have questions about withdrawal liability generally or the B & C Exception specifically.  Subscribe to the Benefits Law Advisor Blog here. 

As employers begin 2026, a new wave of Employee Retirement Income Security Act (ERISA) litigation is emerging involving voluntary products that serves as an important reminder that accurate Form 5500 reporting, fiduciary best practices, and good governance procedures are important for all ERISA-governed plans. According to Jackson Lewis’s recent article, several newly filed suits allege that employers and benefit consultants breached ERISA fiduciary duties and engaged in prohibited transactions related to voluntary insurance offerings—such as accident, critical illness, and hospital indemnity coverage—by failing to prudently monitor costs, including excessive consultant commissions.  Plaintiffs argue that brokers should be treated as plan fiduciaries under ERISA. As is true for all ERISA litigation, there are ways to proactively mitigate risk. 

Members of the Jackson Lewis Employee Benefits Group can help if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.  Subscribe to the Benefits Law Advisor Blog here.

HIPAA compliance requirements continue to evolve, and recent court decisions have understandably drawn significant attention.

Last summer, we examined these developments in our Workplace Privacy Report article, analyzing how a Texas federal district court decision affected the HIPAA Reproductive Health Privacy Rule and why a subsequent Supreme Court decision may change that outcome.  The analysis remains an important resource for understanding the current state of reproductive health privacy under HIPAA.  While the litigation has curtailed significant portions of the Reproductive Health Privacy Rule, the related requirement to update Notices of Privacy Practices (NPPs) was not affected by the Texas court decision and appears to remain enforceable. As a result, covered entities should confirm their NPPs comply by the February 16, 2026, deadline. 

At the same time, covered entities and employer-sponsored health plans should not lose sight of a separate — and firmly in place — HIPAA compliance obligation: updating their NPPs to address substance use disorder (SUD) records, also by February 16, 2026.

The U.S. Department of Health and Human Services (HHS) finalized a 2024 rule revising the Confidentiality of Substance Use Disorder Patient Records to more closely align certain parts of the HIPAA Privacy Rule with rules relating to certain federally funded substance abuse treatment programs. That rule also introduced specific notice obligations for covered entities that create, receive, maintain, or transmit SUD information. All HIPAA-covered entities that handle such SUD records must update their NPPs.

Importantly, this obligation is not limited to traditional substance use treatment programs. Health plans, employers, and other covered entities may be subject to the updated notice requirements if they receive or maintain these records as part of care coordination, payment, or other health care operations.

HHS has not issued an updated model NPP reflecting either of these changes; covered entities and plan sponsors should therefore work with counsel to draft appropriate NPP language and confirm their distribution/posting procedures before the February 16, 2026, deadline.

Members of the Jackson Lewis Employee Benefits and Privacy Practice Groups can help if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.  Subscribe to the Benefits Law Advisor Blog here. 

Our Employee Benefits attorneys offer insights into the tax and benefits aspects of the OBBBA that employers should focus on in 2026. We review key employer obligations and planning considerations for 2026, highlighting where temporary transition relief applied in 2025 and should not be mistaken for lasting flexibility.

Takeaways

  • A bipartisan bill introduced in December 2025 would amend ERISA to treat pharmacy benefit managers (PBMs) as fiduciaries when providing services to employer-sponsored group health plans.
  • If enacted, the legislation would impose fiduciary duties, require detailed compensation disclosures, and restrict contractual indemnification provisions that shift fiduciary risk to plans.
  • Employers may gain increased transparency into PBM compensation structures, but should expect potential changes to PBM contracting practices and service models.

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On December 18, 2025, bipartisan legislation was introduced in the U.S. House of Representatives, following a similar introduction in the U.S. Senate on December 17, 2025, entitled the PBM Fiduciary Accountability, Integrity, and Reform (FAIR) Act. If enacted, the FAIR Act would change significantly how pharmacy benefit managers (PBMs) operate in connection with employer-sponsored group health plans by amending the Employee Retirement Income Security Act of 1974 (ERISA) to treat PBMs as fiduciaries, impose new legal duties and transparency requirements, and prohibit contractual risk shifting.

PBMs play a central role in managing prescription drug benefits for group health plans. Their services typically include negotiating rebates with drug manufacturers, designing plan formularies, establishing pharmacy networks, and processing prescription drug claims. Under current law, PBMs generally are not considered ERISA fiduciaries and therefore are not legally obligated to act solely in the best interests of plan sponsors or participants. Supporters of the FAIR Act contend this regulatory gap has contributed to opaque pricing practices and rising prescription drug costs.

The FAIR Act would fundamentally change this framework by designating PBMs as ERISA fiduciaries for many of their core functions. As fiduciaries, PBMs would be required to act prudently and loyally, avoid conflicts of interest, and place the interests of the health plan and its participants ahead of their own financial interests.

In addition, the legislation would subject PBMs—and certain third-party administrators—to compensation disclosure requirements similar to those currently applicable to brokers and consultants. These disclosures would require PBMs to provide plan administrators with detailed information regarding the direct and indirect compensation they reasonably expect to receive in connection with plan services. This compensation may include rebates, administrative fees, and other forms of payment tied to prescription drug pricing.

The bill also would restrict PBMs’ ability to shift responsibility for fiduciary breaches back to plans through contractual indemnification provisions. This limitation could have meaningful implications for PBM contracting practices and the allocation of fiduciary risk between plans and their vendors.

To provide time for compliance and operational adjustments, the FAIR Act generally would apply to plan years beginning at least 12 months after enactment.

For employers that sponsor group health plans, the FAIR Act could result in greater transparency into PBM compensation structures and stronger alignment between PBM decision-making and plan interests. At the same time, PBMs may respond by modifying service models, pricing structures, or contractual terms to reflect their new fiduciary status. Employers may wish to review existing PBM agreements and prepare for potential changes if the legislation advances.

The FAIR Act is part of a broader federal and state effort to increase oversight of PBMs and address rising prescription drug costs. Although the bill has bipartisan and bicameral support, its ultimate fate remains uncertain. Employers should continue to monitor legislative developments and consult with benefits and legal advisors regarding potential impacts on plan administration and vendor relationships.

Members of the Jackson Lewis Employee Benefits Practice Group can help if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.  Subscribe to the Benefits Law Advisor Blog here. 

Takeaways

For tax years 2025 -2028, the One Big Beautiful Bill Act (OBBBA) allows employees to take an above-the-line tax deduction on qualified overtime pay and qualified tips.

On November 21, 2025, the Internal Revenue Service (IRS) released IRS Notice 2025-69, which explains how individual taxpayers can calculate and claim these deductions for the tax year 2025, even if their employer does not provide any separate documentation identifying which portions of overtime or tip income may qualify for the deduction.

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IRS and Treasury Guidance

  • IR-2025-82 (IRS announces no changes to individual information returns or withholding tables for 2025 under the One, Big, Beautiful Bill Act)
  • IR-2025-92 (Treasury, IRS issues guidance listing occupations where workers customarily and regularly receive tips under the One, Big, Beautiful Bill)
  • IR-2025-110 (Treasury, IRS provide penalty relief for tax year 2025 for information reporting on tips and overtime under the One, Big, Beautiful Bill)
  • IRS Notice 2025-62 (Relief from Certain Penalties Related to Information Reporting Required in Connection with No Tax on Tips and Overtime)
  • IR-2025-114 (Treasury, IRS provide guidance for individuals who received tips or overtime during tax year 2025)
  • IRS Notice 2025-69 (Guidance for Individual Taxpayers who received Qualified Tips or Qualified Overtime Compensation in 2025)

Jackson Lewis Resources:

Background

Employer reporting obligations: The OBBBA requires employers to report on Form W-2 both

  1. the portion of an employee’s pay that is qualified overtime compensation, and
  2. the portion constituting qualified tips along with the employee’s qualifying tip-earning occupation.

However, under IRS Notice 2025-62, the IRS announced that it generally will not be enforcing these separate reporting obligations for the 2025 tax year. Formal W-2 reporting changes will begin in 2026.  

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IRS Notice 2025-69 provides examples and calculation methods for determining deductible amounts of qualified tips and qualified overtime when the employer does not provide a separate accounting. Furthermore, the Notice grants transition relief from the restriction limiting the tip deductions to only those tips received in a “specified service trade or business.”

Even though separate reporting is optional in 2025 and the Form W-2 has not yet been revised for the new tax reporting obligations, the IRS still encourages employers to provide this information voluntarily, such as by posting on an online portal, providing additional written statements, or using Box 14 of Form W-2 to show qualified overtime pay.  Employers that do not provide such additional information should anticipate employee inquiries during the 2025 tax filing season and consider proactive communication and support.

Members of the Jackson Lewis Employee Benefits Practice Group can help if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work. Subscribe to the Benefits Law Advisor Blog here.

The Internal Revenue Service recently announced its cost-of-living adjustments applicable to dollar limitations on benefits and contributions for retirement plans generally effective for Tax Year 2026 (see IRS Notice 2025-67). Most notably, the limitation on annual salary deferrals into a 401(k) or 403(b) plan will increase to $24,500, and the dollar threshold for highly compensated employees will increase to $160,000.  The more significant dollar limits for 2026 are as follows:

LIMIT20252026
401(k)/403(b) Elective Deferral Limit (IRC § 402(g)) The annual limit on an employee’s elective deferrals to a 401(k) or 403(b) plan made through salary reduction.$23,500$24,500
Government/Tax Exempt Deferral Limit (IRC § 457(e)(15)) The annual limit on an employee’s elective deferrals concerning Section 457 deferred compensation plans of state and local governments and tax-exempt organizations.$23,500$24,500
401(k)/403(b)/457 Catch-up Limit (IRC § 414(v)(2)(B)(i)) In addition to the regular limit on elective deferrals described
above, employees over the age of 50 generally can make an additional “catch-up” contribution not to exceed this limit. (See special rule below for those aged 60–63)		$7,500$8,000
SECURE 2.0 Super Catch-up Age 60-63 (IRC  § 414(v)(2)(E)(i)) Other than Plans described in 401(k)(11) or 408(p).$11,250$11,250
Defined Contribution Plan Limit (IRC § 415(c)) The limitation for annual contributions to a defined contribution
plan (such as a 401(k) plan or profit sharing plan).		$70,000$72,000
Defined Benefit Plan Limit (IRC § 415(b)) The limitation on the annual benefits from a defined benefit plan.$280,000$290,000
Annual Compensation Limit (IRC § 401(a)(17)) The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing.$350,000 ($520,000 for certain gov’t plans)$360,000 ($535,000 for certain gov’t plans)
Highly Compensated Employee Threshold (IRC § 414(q)) The definition of an HCE includes a compensation threshold for the prior year. A retirement plan’s discrimination testing is based on coverage and benefits for HCEs.$160,000 in the 2025 plan year (for 2026 HCE determination)$160,000 in the 2026 plan year (for 2027 HCE determination)
Highly Compensated Employee (“HCEs”)  (SECURE 2.0 Sec. 603 – IRC § 414(v)(7)) Catch-up contributions for HCEs earning above this limit in FICA wages for the prior year MUST be ROTH contributions.  Required for Plan Years beginning in 2026$145,000 (optional for 2025 HCE determination) – see IRS Notice 2023-62$150,000 in the 2025 plan year (for 2026 HCE determination)
Key Employee Compensation Threshold (IRC § 416) The definition of a key employee includes a compensation threshold. Key employees must be determined for purposes of applying the top-heavy rules. Generally, a plan is top-heavy if the plan benefits of key employees exceed 60% of the aggregate plan benefits of all employees.$230,000$235,000
SEP Minimum Compensation Limit (IRC § 408(k)(2)(C)) The mandatory participation requirements for a simplified employee pension (SEP) includes this minimum compensation threshold.$750$800
SIMPLE Employee Contribution (IRC § 408(p)(2)(E)) The limitation on deferrals to a SIMPLE retirement account.$16,500$17,000
SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii))) The maximum amount of catch-up contributions that individuals age 50 or over may make to a SIMPLE retirement account or SIMPLE 401(k) plan. (See special rule below for those aged 60-63)$3,500$4,000
SECURE 2.0 Super Catch-up Age 60-63 (IRC  § 414(v)(2)(E)(ii)) The maximum amount of catch-up contributions that individuals aged 60–63 may make to a SIMPLE retirement account or SIMPLE 401(k) plan.$5,250$5,250
Social Security Taxable Wage Base See the Social Security Contribution and Benefit Base site. This threshold is the maximum amount of earned income on which Social Security taxes may be imposed (6.20% paid by the employee and 6.20% paid by the employer).$176,100$184,500

The Jackson Lewis Employee Benefits Practice Group members can assist if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work. Subscribe to the Benefits Law Advisor Blog.

Takeaways

The Internal Revenue Service (IRS) released guidance on November 5, 2025, granting employers relief from tax penalties for failing to provide employees information related to their (1) “qualified tips” and (2) “qualified overtime compensation” that is otherwise required under the One Big Beautiful Bill Act (OBBBA). The relief applies only to the reporting obligation for the 2025 tax year.

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Background

  • Deduction for overtime pay and tipped income: For tax years 2025 -2028, the OBBBA allows employees to take an above-the-line tax deduction on qualified overtime pay and qualified tips.
  • Employer reporting obligations: The OBBBA requires employers to report on Form W-2 the portion of an employee’s pay that is qualified overtime compensation and qualified tips. For employees receiving qualified tips, employers must also identify the employee’s qualifying tip-earning occupation. The OBBBA requires the IRS to provide transition relief for tax year 2025 for employers and payors subject to the new reporting requirements.

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The IRS announced (in IR-2025-110 and IRS Notice 2025-62) transition penalty relief for the 2025 tax year for not filing correct information returns and not providing correct payee statements (i.e., a Form W-2) to employees. Specifically, employers will NOT face penalties (under Code sections 6721 or 6722) for failing to provide a separate accounting of any amounts reasonably designated as cash tips or the occupation of the person receiving such tips. In addition, employers and other payors will also NOT face penalties for failing to provide the total amount of qualified overtime compensation separately. The relief is contingent upon the Form W-2 being complete and correct regarding the aggregate amounts required (e.g., cash tips and overtime being aggregated into the usual reporting line).

The IRS still recommends that employers provide tip and overtime information to employees for the 2025 tax year. Acceptable methods include submitting information through an online portal, providing additional written statements to employees, using other secure methods, or, in the case of qualified overtime pay, entering the amount in Box 14 of the employee’s Form W-2.

The Jackson Lewis Employee Benefits Practice Group members can assist if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work. Subscribe to the Benefits Law Advisor Blog here.

Takeaways

  • Generally, plan sponsors should be prepared to implement the Roth catch-up rule for taxable years beginning after December 31, 2025 (i.e., January 1, 2026, for calendar year plans).  This will require coordination with ERISA counsel, the company’s payroll provider, and the plan’s recordkeeper and third-party administrator.
  • Be prepared to discover mistakes and correct them quickly.

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Article

On September 16, 2025, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued Final Regulations (Treasury Decision 10033) under Section 603 of the SECURE 2.0 Act. Section 603, as enacted, generally requires that catch-up-eligible participants whose prior-year FICA wages exceeded $145,000 (as indexed) make all catch-up contributions as designated Roth contributions for taxable years beginning after December 31, 2023.  However, in Notice 2023-62, the IRS provided an administrative transition period for calendar years 2024 and 2025, during which plans could continue to accept pre-tax catch-up contributions without violating the statute. The Final Regulations confirm this transition relief remains in effect only through December 31, 2025, and clarify that full compliance with the mandatory Roth catch-up rule is required for taxable years beginning after December 31, 2025 (i.e., January 1, 2026, for calendar-year plans). The Final Regulations generally apply to taxable years beginning after December 31, 2026, with 2026 administration permitted under a reasonable, good-faith interpretation. Finally, note that the regulations also provide delayed applicability for collectively bargained plans.

This article focuses on the impact of the Final Regulations on non-collectively bargained and non-governmental 401(k) plans.

Mandatory Roth Catch-Up Rule

The Roth catch-up rule requires that any catch-up eligible participant (i.e., any participant who is or will reach age 50 by the end of the taxable year) whose FICA wages for the preceding calendar year exceed $145,000 (as indexed) must designate all catch-up contributions as Roth contributions.  All catch-up eligible participants must be allowed to designate their catch-up contributions as Roth, but the Final Regulations make clear that a plan cannot require that all catch-up eligible participants designate catch-up contributions as Roth if they do not exceed the wage threshold.  If a plan does not have a designated Roth program, participants subject to the Roth catch-up rule may not make catch-up contributions.

Determining Who is Subject to the Roth Catch-Up Rule

The Final Regulations clarify that a plan determines whether a participant satisfies the $145,000 (as indexed) threshold by using the FICA wages reflected in Box 3 of the participant’s Form W-2 for the prior year from the participant’s common law employer.  In certain situations, FICA wages from multiple employers may be aggregated.  For example, in the calendar year of an asset purchase, a successor employer may aggregate the wages of a predecessor employer under the successor-predecessor rules.

Administrative Issues Implementing the Roth Catch-Up Rule

Plans may provide for deemed elections with respect to catch-up contributions. Participants who are subject to the Roth catch-up rule, and have elected to make catch-up contributions, are “deemed” to have elected to designate those contributions as Roth.  To implement deemed elections, participants must have an effective opportunity to decide not to make catch-up contributions.  The deemed election may apply either when pre-tax contributions reach the 402(g) limit or when combined pre-tax and Roth contributions reach that limit, which is helpful for plans that provide the spillover method.  The deemed election must end within a reasonable time after the participant is no longer subject to the Roth catch-up rule, or when an amended Form W-2 shows that the participant does not satisfy the threshold.

Correction Methods for Mandatory Roth Catch-Up Failures

Mistakes are bound to happen as plans work through the complexities of implementing the Roth catch-up rule.  The Final Regulations provide two correction methods plans may use to correct Roth catch-up failures.  As a condition of using the correction methods, plans must have adopted practices and procedures reasonably designed to ensure compliance with the mandatory Roth catch-up rule and must provide for deemed elections. The same correction method must be used for similarly situated participants, and the method used cannot be based on a participant’s investment gains. 

The regulations discuss two correction methods: a W-2 correction method and an In-Plan-Roth Rollover method.  Both options have unique challenges and advantages.  Plan sponsors should consult their ERISA counsel to discuss their best options. 

The regulations also allow for no correction in certain circumstances.  Correction is not required if the amount of the pre-tax catch-up contribution that should have been designated as a Roth contribution does not exceed $250 (not including earnings or losses). Or if the failure is due to an amended Form W-2, reflecting that the participant was subject to the Roth catch-up rule, is filed or provided after the correction deadline.

The Jackson Lewis Employee Benefits Practice Group members can assist if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.  Subscribe to the Benefits Law Advisor Blog here.