Side Affects Episode 168 | Compliance in Minutes September 2026

Speaker A: Hello everyone. I'm Hayden Parsons, the marketing producer at McGo and Brabender, bringing you the September 2026 edition of Compliance in Minutes. When employees hear the words employee benefits, they might think of healthcare perks, wellness programs, pto. The list goes on. But when HR professionals hear the words employee benefits, they're likely thinking about cost management, compensation, open enrollment, and most importantly, compliance. Compliance is the cornerstone of today's insurance landscape and for good reason. As your broker, MB is committed to delivering timely compliance updates, empowering our clients to operate efficiently, overcome challenges and and remain aligned with the ever evolving laws and regulations. With that in mind, let's dive into your September 2026 compliance updates. First up, let's talk about an important ACA update for employers preparing for the 2027 plan year. The IRS has announced that the ACA affordability percentage will increase to 10.22% for plan years beginning in 2027, up from 9.96% in 2026. This percentage is used by applicable large employers or ALEs to determine whether the employee only cost of their lowest cost medical plan providing minimal value is considered affordable. Employers can use one of three affordability safe harbors, the rate of pay W2 or federal poverty Line Safe Harbor. For employers using the Federal Poverty Line Safe Harbor, a calendar year 2027 plan will be considered affordable if the employee only premium is $135.92 per month or less. The important takeaway here is that employers should determine which affordability safe harbor they will use before the plan year begins and make sure employee premium contributions are set accordingly. This is not something you want to wait until ACA reporting to figure out Next, the IRS has proposed new rules that could make non discrimination testing for Dependent Care assistance programs or DCAPs, a little easier. The proposed rules introduce a new numerical safe harbor for the eligibility test. They also make an important change to the 55% average benefits test. Under the proposal, employees who receive zero DCAT benefits during the year would no longer be included in the denominator for that test. The IRS is also proposing a new way to correct certain testing failures at the end of the year by treating excess benefits as taxable income to affected highly compensated employees or owners. The good news is that employers can rely on these proposed DCAP changes immediately while the final rule is pending. So if you sponsor a dcap, it's worth connecting with your testing vendor to see when they can begin applying the updated testing criteria. Moving on, the Department of Labor has updated its model employer chip notice the July 2026 update adds Illinois to the list of states offering premium assistance, and it also includes an updated website address for New Jersey. This notice applies to employers of any size that offer medical coverage and have employees living in states with Medicaid or CHIP premium assistance programs. One important reminder the requirement is based on where the employee lives, not where the employer is located. Employers should make sure that the latest version of the notice is included with new hire and open enrollment materials. Now let's look ahead. The Department of Labor has proposed a new electronic disclosure safe harbor that could eventually make it easier for group health plans to deliver required documents electronically. If it's finalized, employers could default to electronic delivery for participants, beneficiaries and eligible adult dependents who provide an email address or phone number. The proposal could cover documents like summary plan descriptions, Summary of Material Modifications, COBRA notices, and other required ERISA disclosures. However, there are important protections built in. Individuals would still have the right to request a paper copy or opt out of electronic delivery entirely. And because this is only a proposed rule, employers do not need to make any changes yet. For now, continue using your existing electronic or paper delivery processes. As we head toward open enrollment season, employers may also want to keep an eye on projected 2027 limits. The projected Health FSA contribution limit for 2027 is $3,500, up from $3,400 in 2026. They projected monthly limits for qualified parking and qualified transit or vanpool benefits are also expected to increase from $340 to $350 per month. These are projections, not official IRS limits, so employers should watch for the final numbers before locking in open enrollment materials. Finally, let's look at a couple of items employers should have on their radar. There continues to be significant litigation surrounding tobacco wellness programs and incentives. Recent court decisions have focused heavily on whether employers properly communicate reasonable alternatives and provide the required notices. For employers offering wellness programs, the takeaway is simple. Make sure your deadlines, communications, reasonable alternatives and plan documents are all aligned before open enrollment. And one more reminder for employers receiving medical loss ratio or MLR rebates. If a portion of the rebate belongs to plan participants, employers generally have 90 days to distribute those funds. That could mean a premium holiday, a benefit enhancement or a taxable cash payment to participants, depending on the circumstances and plan language. That's a wrap for our September 2026 compliance in minutes. Thanks for tuning in. And don't forget to subscribe for monthly updates on compliance and employee benefits and health plans.