The landscape of employee benefits and compliance is evolving rapidly, as evidenced by the recent April 2026 Regulatory and Legislative Update. This update highlights significant developments in various areas, including ERISA lawsuits, new beneficiary rules, fiduciary standards, drug cost implications, and state-specific leave programs. For employers and plan sponsors, understanding these changes is crucial for effective compliance and cost management.

ERISA Lawsuit Against Pharmacy Benefit Managers (PBMs)

A notable legal development has emerged with an ongoing lawsuit targeting pharmacy benefit managers (PBMs) under the Employee Retirement Income Security Act (ERISA). This lawsuit underscores a growing concern regarding the role of PBMs in managing prescription drug benefits. Employers who sponsor health plans may want to closely monitor the case, as its outcome could set precedents affecting how PBMs operate and the overall cost implications for employee health benefits.

New Beneficiary Rules

Regulatory changes are also introducing new beneficiary rules that aim to enhance clarity and fairness within employee benefit plans. These rules will require employers to revisit their plan documentation and ensure compliance with the updated requirements. Key aspects of the new rules include:

• Transparent Communication: Employers must provide clear information regarding beneficiary designations, including the rights and responsibilities of beneficiaries.
• Timely Updates: Plans must ensure that beneficiaries are updated in a timely manner, particularly in cases of life events such as marriage, divorce, or death.
• Streamlined Processes: The new rules aim to simplify the process for beneficiaries to claim benefits, reducing bureaucratic obstacles.

Employers should take proactive steps to update their communication strategies and administrative processes to align with these changes.

Restoration of the DOL’s Five-Part Fiduciary Test

The Department of Labor (DOL) has reinstated its five-part fiduciary test, which is critical for determining fiduciary status under ERISA. This test requires fiduciaries to meet five specific criteria when managing employee benefits, including:

• Investment Advice: Providing investment advice for a fee or other compensation.
• Discretionary Authority: Exercising discretionary authority or control over plan management or assets.
• Plan Administration: Handling any part of the plan’s administration.
• Delegation of Authority: Delegating authority to others in a fiduciary role.
• Acting in the Interest of Participants: Acting in a manner that prioritizes the interests of plan participants and beneficiaries.

The restoration of this test emphasizes the importance of fiduciary responsibility and could lead to increased scrutiny of fiduciaries’ actions. Employers and plan sponsors are advised to ensure that their fiduciary practices are in alignment with this test to mitigate any potential legal risks.

Rising GLP-1 Drug Costs

Employers may also face challenges related to the rising costs of GLP-1 (glucagon-like peptide-1) medication, which is increasingly prescribed for diabetes and weight management. These medications, while offering significant health benefits, come with high price tags that can strain health plan budgets. Employers are encouraged to evaluate their prescription drug plans and consider strategies to manage these costs effectively. Potential approaches include:

• Formulary Management: Reviewing and adjusting the formulary to ensure cost-effective medications are prioritized.
• Employee Education: Providing resources to employees about medication options, including cost-effective alternatives.
• Negotiating with PBMs: Engaging in discussions with PBMs to secure better pricing arrangements.

By implementing these strategies, employers can better manage the financial impact of rising drug costs on their health plans.

Washington State’s Paid Family Medical Leave (PFML) Split

In Washington State, a split has emerged regarding paid family medical leave (PFML), which has implications for both employers and employees. The state has made adjustments to its PFML program, allowing for more flexibility in how employees can utilize their leave. Key changes include:

• Increased Leave Duration: Employees may now access a longer duration of leave under certain circumstances.
• Expanded Eligibility: More employees are qualifying for PFML, providing additional support to those in need.
• Employer Responsibilities: Employers must remain aware of their responsibilities regarding PFML compliance and employee notifications.

Understanding these changes is essential for employers operating in Washington State to ensure adherence to the new regulations.

Virginia Leave Policies

Virginia has also made notable changes to its leave policies, reflecting a growing trend towards more supportive workplace environments. Recent legislative updates include:

• Enhanced Family Leave: Virginia has expanded its family leave provisions, allowing employees to take time off for family-related issues.
• Paid Sick Leave Initiatives: New initiatives are in place to encourage paid sick leave for employees, promoting public health and workforce stability.
• Employer Guidance: The state has provided guidelines for employers to assist in compliance with the new leave policies.

Employers in Virginia should review these updates carefully to ensure they remain compliant and can provide necessary support to their employees.

Conclusion

The regulatory and legislative changes highlighted in the April 2026 update signify a crucial moment for employers and plan sponsors. With evolving fiduciary standards, new beneficiary rules, rising healthcare costs, and state-specific leave policies, it is imperative for organizations to stay informed and adjust their practices accordingly. By doing so, they can ensure compliance, manage costs effectively, and support their workforce in today’s dynamic legal landscape.