With so much happening in the employee benefits world, we bring you Benefits Catch-Up, our catch-up contribution to help you keep up with recent developments.
Eversheds Sutherland’s US Employee Benefits and Executive Compensation team – equipped with a deep knowledge of the nuances of retirement plans, health and welfare benefits, and executive compensation issues – actively monitors industry trends, regulatory changes, and best practices to provide the updates you need to know for your business.
If you missed our last catch-up for Q2 of 2025, it’s available here.
Retirement plans
Daniel Aronowitz Named DOL Assistant Secretary for EBSA
On September 18, 2025, Daniel Aronowitz was confirmed by the Senate to be the Assistant Secretary of Labor and head of the Employee Benefits Security Administration (EBSA). Assistant Secretary Aronowitz was strongly supported by the ESOP industry as he pledged to “end the war on ESOPs” during the confirmation process. He also stated that EBSA would work to modernize the 401(k) plan, suggesting, among other things, the Department of Labor (DOL) may take further steps to allow alternative asset classes (for example, lifetime income, private equity, digital assets) in these plans. Unsurprisingly, given his background in the fiduciary liability insurance industry, the Assistant Secretary has been critical of the upturn in ERISA class action litigation and the DOL’s response.
DOL Rescinds Advisory Opinion for Citigroup’s Diverse Asset Management Program
In Advisory Opinion 2025-01A, the DOL rescinded its 2023 advisory opinion covering Citigroup’s Racial Equity Asset Manager Program. Previously, Advisory Opinion 2023-01A had allowed Citi to pay investment management fees for certain diverse managers, who were retained by Citi’s ERISA plans. Following the Trump administration’s general pushback against DEI programs, the DOL rescinded Advisory Opinion 2023-01A, noting “the Racial Equity Program is not lawful – its allocation of benefits on the basis of race clearly and unambiguously violates the civil rights law.”
DOL Issues Advisory Opinion on Pension Plan Definition
On September 9, 2025, the DOL issued Advisory Opinion 2025-03A. The DOL concluded that Morgan Stanley’s investment advisor deferred compensation program is not an ERISA pension plan, but rather a bonus program.
DOL Issues Advisory Opinion Supporting Lifetime Income
On September 23, 2025, the DOL issued Advisory Opinion 2025-04A in which it concluded that a managed account program can be a qualified default investment alternative (QDIA) when the program includes a group annuity contract as part of the glide path. The guidance was welcome affirmation that insured lifetime income features can be included in managed accounts, target date funds, and similar investment offerings so long as the requirements of the QDIA regulation are otherwise met.
DOL Supports Plan Sponsors in 401(k) Plan Forfeitures Case
Since September 2023, plaintiffs have filed numerous lawsuits involving the use of 401(k) plan forfeitures, alleging that fiduciaries have breached their fiduciary duties by using forfeitures to offset employer contributions rather than pay plan expenses. Although numerous district courts have issued motions to dismiss in favor of plan sponsors, several courts have allowed the suits to continue, and three dismissed cases have been appealed to the Ninth Circuit. In connection with one of these appeals (Hutchins v. HP Inc), the DOL filed an amicus brief on July 9, 2025 siding with the plan sponsor. The DOL emphasized that it is widely accepted that a 401(k) plan can use forfeited employer contributions to pay benefits for remaining participants.
Final Catch-Up Contribution Rules
On September 16, 2025, the Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations related to two new catch-up contribution provisions under the SECURE 2.0 Act of 2022: (1) the provision that allows participants age 60 through 63 to make increased catch-up contributions (so-called “super” catch-up contributions); and (2) the requirement that catch-up contributions for higher income participants be designated as Roth contributions (Roth catch-up requirement). Notably, the regulations do not delay the effective date of the Roth catch-up contribution requirement, so plan sponsors should be working to implement this requirement in 2026. For more on the final catch-up contribution rules, see our legal alert here.
IRS Rev. Rul. 2025-15
The IRS issued Revenue Ruling 2025-15 in July, which addressed withholding and reporting obligations when participants fail to cash their retirement plan distribution checks. The Revenue Ruling builds on prior guidance issued by the IRS in 2019, and confirms that, if a plan administrator properly withholds income tax on a distribution, no adjustment or refund is permitted, even if the check remains uncashed. The plan administrator should still report the uncashed distribution on a Form 1099-R for the year of the initial distribution. If a second check is later issued to the participant, no additional withholding is required and the plan administrator does not need to issue a second Form 1099-R, unless the second distribution made to the participant has increased (for example, because of investment earnings) since the first check was issued. In that case, additional withholding and a second Form 1099-R would be needed with respect to the increase in the benefit since the first check.
Pension Risk Transfer Litigation
The pension risk transfer litigation cases continue to move through the courts. Federal district courts issued decisions on motions to dismiss in Bueno v. G.E. Company (Northern District of New York, September 24, 2025), Doherty v. Bristol-Myers (Southern District of New York, September 29, 2025), and Piercy v. AT&T, (District of Massachusetts, September 30, 2025). In Bueno, the court dismissed the plaintiffs’ suit on the basis that they lacked standing to bring the suit, while the court in Piercy concluded that the plaintiffs had standing, but had failed to allege facts demonstrating violations of ERISA. On the other hand, the court in Doherty held that the plaintiffs had standing and had sufficiently pled facts in support of defendants’ breach of fiduciary duty claims. To date, courts have published decisions in five pension risk transfer cases and there are approximately eight cases in which courts have not ruled on motions to dismiss.
Executive Order: Democratizing Access to Alternative Assets for 401(k) Investors
On August 7, 2025 President Trump signed an executive order supporting alternative investments in 401(k) plans, directing the Secretary of the DOL to clarify the DOL’s position on alternative investments and “the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets under ERISA.” The DOL defined “alternative assets” broadly to include, among other things, private equity and debt, digital assets, and lifetime income vehicles. The order also directed the DOL to coordinate its issuance of guidance with other regulators such as the Securities and Exchange Commission.
DFVCP Updates
EBSA recently updated its DFVCP online interface, making it more user-friendly.
Health and welfare benefits
One Big Beautiful Bill Act
The One Big Beautiful Bill Act was signed into law on July 4, 2025 and contains a number of provisions that impact employee compensation and benefits, including the permanent telehealth extension that allows plans to cover telehealth services before an individual reaches their deductible without impacting health savings account (HSA) eligibility, an increased dependent care spending account limit, and new “Trump Accounts.” For more on the One Big Beautiful Bill Act and how it may impact plan sponsors, please see our legal alert.
Tobacco Surcharge Case
In September, the US District Court for the Western District of Tennessee partially denied Sedgwick Claims Management Services Inc.’s request for a motion to dismiss in a case centered around a tobacco surcharge under Sedgwick’s group health plan. The plaintiff claimed that Sedgwick did not provide the required notice of a reasonable alternative to meeting program requirements and avoiding a surcharge, in violation of ERISA. The Court allowed some of the plaintiff’s claims to survive the motion to dismiss, holding that there was a question as to whether Sedgwick’s “Quit for Life” program met the requirements of a reasonable alternative. As a result, the court held that the plaintiff had plausibly alleged that the plan materials failed to appropriately notify participants of a reasonable alternative. The case highlights the importance of reviewing tobacco surcharge materials for compliance.
Gender-Affirming Surgery Exclusion and Title VII
In September, the Eleventh Circuit overturned a district court’s decision that excluding gender-affirming surgery under a county health insurance plan violated Title VII, which prohibits employers from discriminating on the basis of race, color, religion, sex or national origin. In Lange v. Houston County, Georgia, the court relied heavily on a recent Supreme Court decision upholding a Tennessee ban on hormone therapy for gender dysphoria in minors (United States v. Skrmetti), and held “[a]lthough the plan does not cover sex change surgeries, it does not treat anyone differently based on a protected characteristic. Because the exclusion is not facially discriminatory under Title VII, we reverse the district court’s judgment….”
Shared Responsibility and Affordability Percentage Updates
In July, the IRS issued Revenue Procedure 2025-25, increasing the affordability threshold to 9.96% of the federal poverty line, 9.96% of monthly wages, and 9.96% of W-2 wages for the three ACA affordability safe harbors.
Ninth Circuit - UHC Claim Denial
In July, the US Court of Appeals for the Ninth Circuit vacated a district court’s decision with respect to a denial by United Healthcare (UHC) of an individual’s medical claims, holding that the district court had erroneously concluded that UHC had not abused its discretion in denying the claim. The Ninth Circuit stated that although the district court correctly concluded that UHC’s claims denial was insufficient and did not provide the plaintiff with a sufficient rationale for the denial, the district court applied the wrong test in considering whether UHC had abused its discretion. The court cited UHC’s “procedural irregularities” in the claims denial process, and noted that the district court had not fully understood UHC’s rationale behind the denial. The Ninth Circuit held that it was necessary to augment the administrative record and retry the case.
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