1761579481-4415-5270-lxb_photonGoCBxiaRO0lxb_photo-
Growtika, Unsplash

Artificial intelligence (AI) is transforming many industries — and employee benefit plan administration is no exception. In the latest episode of Seyfarth’s Health Care Beat podcast, co-hosts Chris DeMeo and Amanda Genovese continue their discussion on AI & Health Care: Innovation, Regulation, and Reality with Employee Benefits attorney Caroline Pieper. Together, they explore how AI is shaping health plan administration, particularly when it comes to claims administration.

This conversation explores:

  • Where AI is already making an impact in streamlining administrative processes, reducing costs, and improving member experiences;
  • The evolving regulatory landscape, including compliance and fiduciary duties under ERISA;
  • Key legal and ethical considerations when adopting AI tools or partnering with vendors that leverage machine learning in plan operations; and
  • Practical steps employers and plan administrators can take now to harness innovation responsibly.

As health plans and their administrators increasingly turn to technology to manage complexity and efficiency, understanding the balance between innovation and compliance is critical.

Listen to Episode 53, here.

glen-rushton-Uwl7TRuTZqE-unsplash
REGISTER HERE

Wednesday, October 22, 2025
12:00 p.m. to 1:00 p.m. Eastern
11:00 a.m. to 12:00 p.m. Central
10:00 a.m. to 11:00 a.m. Mountain
9:00 a.m. to 10:00 a.m. Pacific

About the Program

The Treasury and IRS have released final regulations implementing key SECURE 2.0 provisions, including the Roth catch-up requirement for high earners and the enhanced “Super Catch-Up” contribution limits for participants ages 60 to 63. These final regulations provide much-needed clarity for plan sponsors and administrators but also raise important questions about plan design and administration.

Join Seyfarth’s Employee Benefits team as they break down what the final regulations mean in practice, including:

  • How to determine who is subject to the Roth catch-up requirement and apply the FICA wage threshold.
  • Key design and administrative approaches for implementing the Roth catch-up requirement, including real-world examples based on different catch-up contribution schemes.
  • Correction methods for Roth catch-up contributions.
  • Implementation and plan amendment considerations for the new Super Catch-Up limits.

Speakers

Lisa Loesel, Partner, Seyfarth Shaw LLP

Diane Dygert, Partner, Seyfarth Shaw LLP

Irine Sorser, Partner, Seyfarth Shaw LLP

REGISTER HERE

If you have any questions, please contact Sadie Jay at [email protected] and reference this event.

To comply with State CLE Requirements, CLE forms requesting credit in IL or CA must be received before the end of the month in which the program took place. Credit will not be issued for forms received after such date. For all other jurisdictions forms must be submitted within 10 business days of the program taking place or we will not be able to process the request.

Our live programming is accredited for CLE in CA, IL, and NY (for both newly admitted and experienced).  Credit will be applied as requested, but cannot be guaranteed for TX, NJ, GA, NC and WA. The following jurisdictions may accept reciprocal credit with our accredited states, and individuals can use the certificate they receive to gain CLE credit therein: AZ, AR, CT, HI and ME. For all other jurisdictions, a general certificate of attendance and the necessary materials will be issued that can be used for self-application. CLE decisions are made by each local board, and can take up to 12 weeks to process. If you have questions about jurisdictions, please email [email protected].

Please note that programming under 60 minutes of CLE content is not eligible for credit in GA. programs that are not open to the public are not eligible for credit in NC.

jakub-zerdzicki-ykgLX_CwtDw-unsplash

Seyfarth Synopsis: Earlier today, Treasury and the IRS issued highly-anticipated final regulations addressing several changes to the catch-up contribution provisions implemented by SECURE 2.0.  Proposed regulations were issued earlier this year (see our Legal Update here), and administrative questions lingered following the issuance of the proposed regulations. The much-welcomed final regulations answer a number of open questions that we had been grappling with following the enactment of SECURE 2.0 and the issuance of the proposed regulations earlier this year. Below is a high-level overview of several pressing issues that have been addressed by the final regulations. We will be issuing a more comprehensive Legal Update on the final rules in the coming days.

1. Designated Roth Contributions Counted for Purposes of Roth Catch-up Requirement

Under the proposed regulations, designated Roth contributions made by a participant at any point within a calendar year must be counted towards satisfying the Roth catch-up requirement (“Roth Catch-Up Requirement”). This provision caused administrative concerns and several commenters asked that the final rules make this permissive so that plans had the choice as to whether to include Roth deferrals made by the participant at any point in the calendar year towards the Roth Catch-Up Requirement. The final regulations provide plan administrators that use the deemed Roth approach with some – but not universal – flexibility. The final regulations do not seem to go so far as making this optional approach available in all situations, which we will cover in the forthcoming Legal Update. 

Continue Reading Final Catch-Up Rules: What Now? (Spoiler Alert: There is No Extension)
epd-blog-880x545-1-656x406

Benefits and Beyond: What Happens to PTO, Health Insurance, Retirement Plans, and other Benefits?

When an employee passes away, their benefits don’t just vanish into the HR ether. There’s a surprising amount of paperwork, plan rules, and tax codes that come into play—and yes, you’ll probably need to call your benefits administrator (and maybe your benefits lawyer). The general rule applies – if there is a designated beneficiary, then any benefits go directly to that designated beneficiary – end of story.  If not, well then, those benefits typically belong to the estate and should not be distributed until you receive direction from the personal representative of the estate.  Also, if you have a beneficiary designation for a plan that is NOT subject to the Employee Retirement Income Security Act (ERISA) (e.g., a bonus plan or an equity plan), please understand that there is always a possibility that underlying state law may conflict with the beneficiary designation and state law typically controls.  If you have a potentially contentious situation, consider consulting with a benefits attorney before you process payments.

Accrued Vacation/PTO: Pay It Out or Let It Go?

In California and many other states, accrued vacation and PTO are considered wages—which means they must be paid out just like final wages. Sick leave, on the other hand, is usually not payable unless your policy or local laws says otherwise.

Pro tip: If your policy is silent, don’t assume silence is golden. Check your handbook before you cut that check, and follow the process required for final wages after death in your state.

Health Insurance: COBRA to the Rescue

When an employee dies, if the employee was carrying their spouse and dependents on their employer-sponsored healthcare policy, their spouse and dependents may be eligible for COBRA continuation coverage for up to 36 months.  Employers should:

  • Notify the plan and/or COBRA administrators promptly,
  • Avoid promising “we’ll keep the cost the same”—unless you really mean it (and can actually do it—the administrative processes and IRS rules applicable to subsidized COBRA premiums can be very complex).

Life Insurance: The One Benefit Everyone Remembers

If your company offers group life insurance, now’s the time to dust off those beneficiary forms. The insurer will handle the payout, but you’ll need to:

  • Notify the carrier,
  • Provide a death certificate,
  • Confirm the beneficiary on file (and hope it’s not the ex-spouse from 2009)
  • If an ex-spouse from 2009 is, in fact, named as the beneficiary (this happens all the time!), review the plan document to see if it includes any specific provisions regarding the validity of that election.  If not, the ex-spouse is likely entitled to the benefit.  Time to call your benefits attorney!

Bonus tip: Encourage employees to update their beneficiaries regularly. It’s awkward when the payout goes to someone they unfriended years ago.

Retirement Plans: Let the Plan Do the Talking

401(k) and pension plans are governed by plan documents and federal law. Your job is to:

  • Notify the third-party plan administrator,
  • Provide necessary documentation,
  • Stay out of the way unless and until you receive a request for further direction from the third-party plan administrator.

The third-party administrator will often engage directly with the family members and handle distributions to the designated beneficiary, and you’ll avoid the risk of misdirecting funds.  However, in more complex or potentially contentious cases, the third-party administrator may request direction from you before proceeding with a distribution.  With these potentially contentious cases, don’t rush to authorize the payout.  If you rush, you may ultimately find out the plan paid the wrong person with no way to recover the funds, leaving you on the (financial) hook to process the same payment to the correct person.  If your third-party administrator is asking you for direction, that’s often a sign that it is a potentially contentious situation and a discussion with your benefits attorney might be warranted. 

Extra Support: The Generous Employer’s Dilemma

Sometimes, doing the right thing feels obvious—like covering funeral costs, offering a death benefit, or continuing health coverage for a grieving family at the active employee rate. But in the world of employment law and tax codes, good intentions can come with unintended consequences (and IRS forms).

“We Want to Help” — That’s Great! But…

Employers often want to go above and beyond when an employee passes away. Common gestures include:

  • Paying out unused sick leave (even if not required),
  • Offering a lump-sum death benefit,
  • Continuing salary for a period of time,
  • Covering funeral or memorial expenses,
  • Subsidizing COBRA coverage.

All of these are generous—and potentially taxable, reportable, or legally complex.

Tax Traps to Avoid

  • Posthumous wages are still considered compensation and must be reported on a Form 1099-MISC (not a W-2) if paid after the year of death.
  • Death benefits may be treated as taxable income to the recipient unless structured through a qualified plan or insurance.
  • Gifts from the company (e.g., funeral contributions) may be taxable unless they meet narrow IRS exceptions.
  • Subsidizing COBRA may inadvertently result in taxable income to the covered family members if not structured correctly.

Translation: If you’re writing a check out of kindness, make sure it doesn’t come with a surprise tax bill for the grieving spouse.

ERISA and Benefit Plan Pitfalls

If you offer a death benefit that looks like a retirement or welfare plan (e.g., continued salary or life insurance), you might accidentally trigger ERISA obligations. That means:

  • Plan documents,
  • Fiduciary duties,
  • Annual filings,
  • And possibly a call to your ERISA counsel.

How to Be Generous—Safely

  • Be proactive and review your existing death benefit policies for clarity and legal compliance before an employee passes away. 
  • Coordinate with legal and tax advisors before offering anything outside your standard policies.
  • Document the intent and structure of any payments.
  • Communicate clearly with the family about what’s being offered, advise them to consult with their own tax professionals to determine how it will be taxed, and when to expect it.

Pro Tip:

If you want to offer ongoing support, consider setting up a formal employee assistance fund or life insurance benefit in advance. It’s cleaner, clearer, and far less likely to trigger a call from the Department of Labor.

Final Checklist: Don’t Let Grief Lead to Legal Trouble

When an employee passes away, emotions run high—and so can legal risk if you miss a step. Best to develop a formal process/checklist based on your employee population to help HR and payroll teams stay compliant, compassionate, and clear-headed.[1]

Conclusion: A Final Act of Respect

Losing an employee is never just a policy issue—it’s a human one. But in the midst of grief and logistics, employers have a unique opportunity: to handle the final details with care, clarity, and compassion. Whether it’s issuing a final paycheck, navigating benefits, or offering extra support to a grieving family, every step you take sends a message about your values.

Yes, the rules are complex. Yes, the paperwork is real. But getting it right isn’t just about compliance—it’s about honoring someone’s contributions in a way that’s both lawful and meaningful.

So, take a breath, follow your processes, and don’t be afraid to ask for help. Because when it comes to final pay and benefits, doing the right thing matters—both on paper and in people’s hearts.

[1] This article does not deal with extremely rare circumstances which should be discussed with counsel, such as the application of a “slayer statute” (slayer statutes exist in most states and operate to bar a person responsible for the death of another from receiving any financial benefit.)The application of slayer statutes can be complex and varies by state, and a full discussion is beyond the scope of this article. Employers facing such circumstances should consult legal counsel to ensure compliance with applicable laws.

iStock-1331374129-edited

Let’s face it—no one wants to think about what happens when an employee dies. It’s a deeply human moment, and yet, somewhere between the condolences and the memorial service, someone in Human Resources is quietly asking: “So… what do we do about their final pay?”

It’s not cold-hearted—it’s compliance. When an employee passes away, employers are suddenly faced with a tangle of legal, tax, and benefits questions that don’t come up in your average HR handbook. Who gets the final wages? What about that bonus they were about to earn? Can we offer extra support to the family without triggering a tax nightmare?

This article is here to help you navigate those questions with clarity, compassion, and just enough levity to keep you from crying over these potentially complex issues. We’ll walk through the general rules, the risks, and the right way to honor your employee’s legacy—and hopefully without running afoul of state laws or those pesky tax entities (think IRS, state income tax and probate laws).[1]

Let’s get into it.

Final Wages: Payroll’s Most Morbid Deadline (now with Probate!)

When an employee passes away, employers often want to act quickly and compassionately. But before you cut that final paycheck, take a breath—because generally, final wages are considered the property of the deceased employee’s estate, not something you can simply hand over to the nearest grieving relative.

Who Gets Paid? (Hint: It’s Not Always the Spouse)

Unless your state has a statute that allows for direct payment to a surviving spouse or beneficiary, final wages are subject to general estate or probate laws and must be paid to the employee’s estate. That means:

  • You may need to wait for a court-appointed personal representative to step forward.
  • You’ll likely need a death certificate and legal documentation (e.g., letters testamentary or a small estate affidavit).
  • The payee on the check will depend on the legal documents provided and may be the Estate of the Deceased, one or more individuals, or the trustee(s) of a trust.
  • Risks? If you pay the wrong person, you could face a claim from the estate, beneficiaries, or even creditors at some point later that the funds were given to the wrong person.

Approximately 35 states have statutes that allow private employers to pay some or all of the final wage payments directly to a surviving spouse or other beneficiary. Some states (like California) allow for simplified procedures—for example, paying wages up to a certain amount directly to a surviving spouse or next of kin outside of full probate.[2] But these exceptions are state-specific. Bottom line – it would be wise to know this ahead of time because the process for private employers to pay out final wages is governed by state-specific laws.

Common requirements in these statutes include verifying the claimant’s entitlement through an affidavit or declaration, adhering to an order of preference among heirs (e.g., spouse, children, parents), and observing payment limits that vary by state. (For example, Colorado imposes no such limit, but Rhode Island limits the amount the employer can pay to the beneficiary to $150.00!) Many states impose caps on the amount of final wages that can be paid without formal estate administration, and employers are generally protected from liability if payments are made in compliance with these laws. Finally, some states may have a “small estate” exception to probate, thus allowing the payment of the final wages if the total estate value is within the specified amounts.

Timing: It Depends on the State

While many states require prompt payment of final wages after separation, the rules change when the separation is due to death. Some states impose specific deadlines if they allow for payment to the surviving spouse, estate or authorized recipient, while others defer to probate timelines. Specified timeframes range from 30 to 45 days in some states.

Pro tip: Don’t assume your usual final paycheck rules apply. Check your state’s labor code and/or probate statutes—or better yet, consult counsel.

Avoid These Common Mistakes

  • Automated Payment in Accordance with Old Direct Deposit Information: Banks may freeze accounts upon death, or someone may have access to the account who is not entitled to the funds.
  • Paying a family member without legal authority: Even if they mean well, they may not be the rightful recipient.
  • Skipping tax considerations: Post-death wages are still taxable income, but how you report them (W-2 vs. 1099-MISC) depends on timing. The IRS has very specific rules concerning such payments. (see IRS Publication 15 (Circular E), Employer’s Tax Guide.)

Pro Tip:

If you’re tempted to just direct deposit the final wages and call it a day, pause. Once an employee dies, their bank account may be frozen. A paper check made payable to the correct legal recipient is often the safer route.

Bonuses and Commissions: The Ghosts of Compensation Past

Ah, bonuses and commissions—the glittering promise of future reward. But what happens when the employee who earned that bonus or commission is no longer around to collect it? Is this part of “final wages”? Can you still pay it? Should you? And who gets it?

Earned vs. Discretionary: The Great Divide

The key question is whether the bonus or commission was earned before the employee’s death, often governed by a written plan or policy.   If it was, it generally must be paid along with the final wages (or at the later time specified by the plan or policy)—yes, even if the employee didn’t live to see the check hit their account.

Bonuses:  It Pays (Pun Intended) to Have a Plan

Commissions: The Plot Thickens

As a first step for bonuses, check the written plan document or policy.  It will often specify how the bonus payment should be handled upon an employee’s death.  For example, is the company still obligated to pay the bonus even if the employee passed before the end of the performance period or the bonus payment date?  Who is entitled to the bonus upon the employee’s death?  Is payment accelerated or made at the same time as all other bonus payments?  How is the bonus calculated if the employees passes away in the middle of the performance period?   A well-drafted bonus plan or policy will provide answers to all of the questions.  And if there is no plan or policy (or the plan or policy is silent on these questions), we generally recommend deferring to applicable state wage and hour laws based on the state where the employee performed the work.

Commissions often fall into a gray area. If the sale closed and the commission was due before death, it’s typically owed and would also be part of the final wages. But if the deal was still in the pipeline, or the commission required continued employment, you may have more flexibility.

Tip: Check your commission agreements. If they say, “must be employed at time of payout,” courts may still find that language unenforceable if the employee died after earning the commission. (Because, well, they didn’t exactly quit.) Better yet, consider addressing this issue in the Plan itself to avoid any ambiguity!

Who Gets the Bonus or Commission?

Just like final wages, these payments don’t go to the office snack fund. They’re typically treated as part of the final wages and follow the same rules we discussed above.

Avoid the “Surprise Bonus” Trap

If you’re feeling generous and want to pay a bonus posthumously that wasn’t earned or promised, that’s lovely—but it may be treated as a gift or death benefit, with different tax consequences. (Spoiler: the IRS doesn’t do sentimentality.)

This blog is part one of a two-part series. Stay tuned for Part 2, coming Thursday, August 21st.

[1] This Article summarizes the requirements for private employers. Public employers are often subject to different rules.

[2] Check out Seyfarth’s March 16, 2026, California Peculiarities Blog that focused on obligations for final wages to the surviving spouse after death for California employees: Till Death Do You Part—Wages Of The Dearly Departed.

In this episode, Richard is joined by Alan Wilmit, serving as co-host, as they welcome Ada Dolph, a Partner in Seyfarth’s ERISA Litigation group, to unpack the complexities of pension risk transfers (PRTs). Ada explains what PRTs are, how they’re used to manage pension liabilities, and why they’re drawing increased scrutiny. The conversation covers recent litigation trends, the impact of the Supreme Court’s Thole decision, and the evolving focus on Article III standing. Grab your coffee and tune in for practical insights on what fiduciaries need to know as PRT-related class actions continue to emerge.

Read the full transcript of the episode here.

Browse Episodes | Follow on Soundcloud | Follow on Apple Podcasts │Follow on Spotify

josh-appel-NeTPASr-bmQ-unsplash

Seyfarth Synopsis: Just before its summer recess, the Supreme Court agreed to review whether multiemployer pension funds can impose withdrawal liability based on actuarial assumptions adopted after the relevant plan year. The expected decision may have significant implications for employers’ ability to assess the impact of a contemplated withdrawal.

At the end of June, the Supreme Court granted certiorari in M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, No. 23-1209 (U.S. June 30, 2025 amended July 3, 2025) to consider an important question in calculating how much employers withdrawing from multiemployer pension funds are legally obligated to pay.

Withdrawing employers have to pay a portion of the fund’s unfunded vested benefits (i.e. the amount of vested benefits that a fund is legally obligated to pay but for which the fund does not have sufficient assets to meet). The withdrawal liability calculation is to be determined based on the fund’s financials as of the end of the plan year before the withdrawal. It can take many funds six months if not more after the end of a plan year to finalize their year-end financials and thus be able to issue a withdrawal liability assessment in the following plan year. In that interim, as the financials are being finalized, fund actuaries have on occasion changed actuarial assumptions, such as interest rates or mortality tables, retroactive to the prior plan year.

Continue Reading Changing Last Year’s Assumptions This Year: Gotcha or Copacetic?
micheile-henderson-SoT4-mZhyhE-unsplash

Seyfarth Synopsis: Under the current administration, the Department of Labor has once again changed course on its view of permissible investing strategies for retirement plans, warming to crypto and private equity, and confirming their distrust of ESG.

Over the last decade, there has been quite a bit of back and forth surrounding permissible investments in retirement plans, as well as the standard under which such investments should be scrutinized. Instead of issuing guidance that interprets and applies the requirements and standards of ERISA, at times Department of Labor (“DOL”) guidance appears to be either belatedly responding to the explosion of litigation in this area or promoting partisan agendas depending on the administration in power at the time. See our prior discussion of the whipsawing on ESG and crypto investing here, here, here, here, here and here. With the latest change in administration, we are back at it again.

During the second quarter of 2025, the Trump administration has signaled that it is considering several significant changes to the available investment options for 401(k) and 403(b) plans. Here’s a summary of the key developments:

401(k) Plans

  • Cryptocurrency. On May 28, 2025, the Department of Labor (“DOL”) issued Compliance Assistance Release (“CAR”) No. 2025-01, which fully rescinded its 2022 guidance. The 2022 guidance had directed 401(k) plan fiduciaries to use “extreme care” before including cryptocurrencies as an investment option for plan participants. In CAR No. 2025-01, the DOL explained that it was rescinding the guidance to restore its “neutral approach” to plan investments and strategies, and clarified that when evaluating a particular investment, “a plan fiduciary’s decision should consider all relevant facts and circumstances and will ‘necessarily be context specific.’” Further, in a footnote to the CAR, the DOL explained that the guidance also applies to “digital assets,” which includes tokens, coins, crypto assets and any derivatives.
  • ESG-Related Investments. Also on May 28, 2025, the Trump administration informed the Fifth Circuit Court of Appeals that the DOL is planning to issue a new rule to replace the Biden-era rule on environmental, social, and governance (“ESG”) investing strategies in ERISA retirement plans. This new rule is expected to rescind the Biden-era rule that permitted ERISA fiduciaries to analyze ESG-specific investment factors during their investment review process. We anticipate that the forthcoming DOL rule (which will likely be in the spring of 2026) will severely limit the permitted use of ESG factors during the ERISA fiduciary investment review process.
  • Investing in Private Equity.  A forthcoming executive order from the Trump administration is expected to instruct the DOL, the Treasury and the Securities and Exchange Commission (SEC) to assess the feasibility of permitting private equity investments within 401(k) plans. If permitted, this change could open the $9–$12.5 trillion 401(k) retirement market to private equity funds, offering access to potentially higher-return assets.  Plan fiduciaries should remain cautious, as private equity investments may introduce higher fees, increased risks, and limited liquidity. This may add fuel to the existing fire of 401(k) fee class action litigation alleging that plan fiduciaries have breached their fiduciary duties under ERISA by allowing excessive fees to be charged to their plan.

403(b) ­Plans

On May 20, 2025, the House Financial Services Committee approved the Retirement Fairness for Charities and Educational Institutions Act of 2025 (the “Act”) through a bipartisan vote of 43-8. While it is likely that the Act’s passage may take some time and is subject to potential revisions, if enacted in its current form, the Act would amend existing securities law to permit most 403(b) plans (including qualified 403(b) plans and governmental 403(b) plans) to include collective investment trusts (“CITs”) as part of the investment options offered to participants. This change would significantly increase the investment options available to participants in 403(b) plans, which are currently limited to annuity contracts and custodial accounts. Notably, existing law permits 401(k) plans to offer CITs as investment options. Numerous 401(k) plan sponsors have added CITs to their investment menus because CITs typically offer lower expense ratios as compared to their mutual fund counterparts.

We’ll continue to monitor developments in this space. For more information, contact your Seyfarth Shaw employee benefits attorney.

suzy-brooks-BbpEbkAy818-unsplash

Seyfarth Synopsis: On July 4, 2025, Donald Trump signed the One Big Beautiful Bill (OBBB) into law. Although most have focused on the sweeping tax reform included in the OBBB, a number of key employee benefits provisions are included in the OBBB as well. Most significantly, the OBBB expands access to and eligible expenses payable from Health Savings Accounts (HSAs), solidifies first dollar coverage for telehealth under high-deductible health plans (HDHPs), and permanently increases the annual contribution limit for dependent care flexible spending accounts (FSAs) for the first time since 1986. Most of the benefits-related changes become effective January 1, 2026. This legal update provides an overview of the OBBB’s employee benefits provisions and any actions that employers need to take for their employee benefit plans now or in the future.

Click here to read the full Legal Update.

joshua-woods-hUREQwNYiZQ-unsplash

Seyfarth Synopsis: In a closely watched decision, the Supreme Court has upheld the authority of the U.S. Preventive Services Task Force (Task Force), preserving the Affordable Care Act’s (ACA) requirement that health plans cover preventive services–such as HIV prevention medication–without cost sharing. The ruling ensures continued access to a wide range of preventive care for millions of Americans.

Background: The Role of the Task Force

The Task Force, originally established by the Department of Health and Human Services (HHS) and later codified by Congress in 1999, is a panel of volunteer experts appointed by the HHS Secretary. Its mission is to issue evidence-based recommendations on preventive health care.

When Congress passed the ACA in 2010, it leveraged off of the existence of the Task Force by requiring health plans to cover its recommended preventive services without any cost-sharing requirements. One such service is Apretude for pre-exposure prophylaxis (known as PrEP), a medication used to prevent HIV. However, some employers have objected to covering certain services –like PrEP–arguing that they prevent health conditions that those sponsors believe result from life styles that are in conflict with their religious beliefs.

The Braidwood Challenge

One such employer, Braidwood Management, Inc., served as lead plaintiff challenging the ACA’s preventive care mandate in Kennedy v. Braidwood Management, Inc. The plaintiffs argued that the Task Force members were unconstitutionally appointed because they were not nominated by the President and confirmed by the Senate. They claimed that this invalidated the Task Force’s recommendations, and, by extension, the ACA’s preventive care requirements.

The U.S. District Court for the Northern District of Texas and the Fifth Circuit Court of Appeals agreed with the plaintiffs, ruling that the Task Force members were improperly appointed under the Constitution’s Appointments Clause.

Despite the change in administration, the current Trump administration continued to pursue the appeal of the Fifth Circuit decision to the Supreme Court, defending the ACA’s preventive care provisions.

The Supreme Court’s Decision

The Supreme Court reversed the Fifth Circuit’s decision, holding that Task Force members are “inferior officers” whose appointments by the HHS Secretary are consistent with the Appointments Clause. The Court clarified that only “principal officers” must be appointed by the President with the advice and consent of the Senate. Congress may allow inferior officers to be appointed by department heads, which it did in this case.

The Court also emphasized that the Task Force operations are under the supervision of the HHS Secretary, who retains the authority to review, block or remove members and their recommendations.

What This Means for Employers and Insurers 

The ruling preserves the ACA’s preventive care mandate, meaning employer-sponsored health plans must continue to cover Task Force-recommended services without cost sharing. Notably, however, there may still be exemptions from ACA mandates for employers with sincerely held religious beliefs. For plan sponsors, it’s business as usual—no immediate changes are required to plan design or coverage.