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Seyfarth Synopsis: Two unpublished decisions involving the same change in control severance plan went in opposite directions on the standard of review. In 2026, the Fifth Circuit applied abuse of discretion based on plan language delegating interpretive authority to the administrator. In 2025, the Tenth Circuit applied de novo review to similar facts involving the same plan because it viewed the delegation as triggered only by textual ambiguity. The divergent results underscore the importance of carefully drafted discretionary authority clauses in top hat severance plans, particularly for employers seeking to avoid de novo review of factual eligibility disputes.

What happened in the Fifth Circuit?

  • On February 26, 2026, the United States Court of Appeals for the Fifth Circuit issued an unpublished opinion affirming summary judgment for the Anadarko Petroleum Corporation Change of Control Severance Plan and its administrative committee.
  • The dispute centered on whether an executive was eligible to resign for “good reason” after a change in control based on a “material and adverse” diminishment in duties or a material reduction in base salary.
  • The plan empowers the committee to interpret the plan and to construe ambiguous, unclear, or implied terms “in its sole judgment,” and states that its interpretations and determinations are not subject to de novo review.
  • The former employee argued that the plan’s standards for “good reason” were ambiguous that therefore did not trigger the administrative committee’s discretion.
  • The court emphasized that deciding whether duties or salary were “materially” and “adversely” affected requires qualitative, comparative fact-finding—including comparing duties, authority, and compensation before and after the change in control—and concluded that abuse of discretion was the appropriate standard of review.

What happened in the Tenth Circuit?

  • In an earlier unpublished decision, Hoff v. Amended and Restated Anadarko Petroleum Corporation Change of Control Severance Plan, the Tenth Circuit addressed the same plan language and similar circumstances.
  • In this case, neither party argued the “material and adverse diminishment” language was ambiguous. Treating ambiguity as a strictly textual question, the court read the plan’s delegation as operative only if a term was ambiguous on its face.
  • Because no textual ambiguity was claimed, the court declined to defer and applied de novo review to the committee’s determination.
  • Under the de novo lens, the court independently concluded the employee’s responsibilities were materially and adversely diminished and awarded benefits.

Why the same clause produced different review standards

The Fifth Circuit treated ambiguity as arising through application. It emphasized that determining whether duties were materially and adversely diminished after a change in control requires comparative factual assessments and judgment about the significance of the changes. Because the Severance Plan grants the committee authority to interpret the plan and bars de novo review of its determinations, the court concluded that these evaluative determinations fall within the committee’s discretionary authority, making abuse of discretion the proper standard.

The Tenth Circuit instead treated ambiguity as a strictly textual question. It concluded that discretionary authority applies only when a term is ambiguous as written. Because the parties in Hoff did not argue that the material and adverse diminishment standard was ambiguous, the Tenth Circuit viewed the language as clear, found no basis to invoke the delegation of discretion, and therefore applied de novo review.

As a result, identical plan language produced two different standards of review because the Fifth Circuit recognized ambiguity in the evaluative work required, while the Tenth Circuit recognized ambiguity only when the text itself was unclear.

Practical implications for plan sponsors

Although the Fifth Circuit and Tenth Circuit opinions are unpublished and therefore not precedential, they nonetheless provide meaningful insight into how courts may approach the interpretation of severance plan discretionary clauses. The split demonstrates the vulnerability of clauses that tie deference only to ambiguous terms. To reduce that risk, consider:

  • Delegate discretion broadly. Grant the administrator explicit authority to make all determinations under the plan, including factual findings, eligibility assessments, and interpretations of all terms—whether or not ambiguous.
  • Mandate deferential review.  State that all interpretations, determinations, and findings of fact are final and binding unless arbitrary or capricious.
  • Avoid ambiguity triggers. Do not limit discretion to “ambiguous,” “unclear,” or “implied” terms; that limitation invites de novo review.
  • Call out judgment-heavy topics. Clarify that materiality assessments, comparative evaluations of duties and authority pre- and post-transaction, and compensation-change assessments fall squarely within the administrator’s discretion.

The takeaway

Unpublished or not, these decisions are a timely reminder that the breadth and framing of a severance plan’s discretionary authority clause can decide the standard of review—and, with it, the outcome of a court’s review of close eligibility disputes. Employers should review their severance plans and discuss with legal counsel if the delegation of authority in its plan will ensure the maximum deference is afforded to the plan decisionmaker’s eligibility decisions.

Please contact the authors or the employee benefits attorney at Seyfarth with whom you usually work if you have any questions regarding the review standards in your severance or other ERISA plans.

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Seyfarth Synopsis: Since Trump Accounts made their debut as the “New Kid on the IRA Block” in December 2025, Treasury and the IRS have released proposed regulations that add important—but not always simplifying—details to the program. 

The proposed regulations, released on March 9, focus heavily on pilot contribution eligibility and enrollment, adding new protections against multiple accounts being opened for the same child. Unfortunately, none of the newly proposed regulations speak to the mechanics of employer contributions to Trump Accounts. 

Confirmed Designs

The proposed regulations specify that the $1,000 federal pilot contribution applies only to children born 2025–2028, who are U.S. citizens with a Social Security Number (SSN) and have no prior pilot program election on file.

Authorized individuals can elect to open a Trump Account for a child at any time from SSN issuance through the end of the year in which the child turns 17. The IRS reaffirmed the use of Form 4547 to establish a Trump Account and request the $1,000 pilot program contribution.

Trump Account contributions cannot begin until July 4, 2026. An annual $5,000 total contribution cap will apply (including up to $2,500 from employers). Importantly, the proposed regulations confirm that any pilot program contributions do not count towards the annual $5,000 limit. Investments remain limited to index funds primarily composed of U.S. equity investments.

As a reminder, Trump Account funds generally remain locked until the year the child turns 18 and will typically follow traditional IRA rules after the child turns 18 (at which point the funds can be used for a variety of qualifying purposes, including education expenses, job training, down payment on a first home, capital to start a small business, and retirement).

Administrative Questions

On April 6, 2026, Treasury announced that the Bank of New York Mellon Corporation (“BNY”) will manage initial Trump Accounts and develop an associated app. Robinhood will serve as the brokerage and initial trustee of Trump Accounts.

Otherwise, many open questions remain with respect to the establishment and administration of Trump Accounts. For employers specifically, unanswered questions include applicable ERISA exemptions, plan document requirements and coordination with Section 125 cafeteria plans—all issues Treasury says it will address at a later date.

Takeaway

The Trump administration remains committed to the Trump Account program and eligible families will have the option to open a Trump Account when submitting their 2025 federal tax return. However, many open questions remain. We expect additional guidance later this year.

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Since 2019, Congress has enacted three major pieces of legislation impacting retirement plans, significantly changing the retirement landscape. The legislation contained a number of amendments to the Internal Revenue Code and the Employee Retirement Income Security Act, as amended, that impact employer-sponsored retirement plans (e.g., 401(k) plans, 403(b) plans, defined benefit plans, and even Puerto Rico plans).

In a nutshell, the legislation we’re talking about includes:

  1. SECURE Act (1.0).  Signed into law on December 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was by far the most significant overhaul of the retirement plan landscape since the Pension Protection Act of 2006. Click here and here for more information.
  2. CARES Act.  The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020.  The CARES Act included provisions that provided a much-needed lifeline for participants during the unprecedented COVID-19 pandemic. Click here for more information.
  3. SECURE Act 2.0. SECURE 2.0 made even more changes to the retirement plan landscape (90+), with phased effective dates. Many of the mandatory provisions are already effective. Click here for more information.

Some of the changes impacting retirement plans are mandatory (i.e., they MUST be adopted), while others are optional (i.e., they MAY be adopted at the election of the plan sponsor).  Also, many of the mandatory provisions are already in effect, meaning that plans must currently be complying with some of these provisions from an operational perspective. The IRS and DOL have been hard at work on issuing regulations and other guidance on many of these provisions, and we’ve been given some additional time to adopt any necessary plan amendments. However, the deadline for adopting most amendments is December 31, 2026, which is fast approaching.

Because there have been so many mandatory and optional changes impacting retirement plans, our team has prepared a tool/checklist that our clients can use to review the plan and figure out what, if anything, plan sponsors must do to get their documents in compliance with all of these new rules by the December 31, 2026 amendment deadline. 

For plans that use a pre-approved document, these changes and the December 31, 2026 amendment deadline still apply, but the draft amendments will be prepared by the pre-approved provider. In the interim, we recommend reviewing the checklist with your Seyfarth Shaw attorney to confirm that all mandatory provisions have been/will be implemented, and to identify any optional changes the plan sponsor has adopted/would like to adopt.

We encourage you to speak with your Seyfarth Shaw attorney ASAP regarding your retirement plan and next steps.

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If you are tired of keeping track of which retirement plan investments are deemed “good” and which are suddenly “bad”, we have encouraging news. The Department of Labor’s (“DOL’s”) latest proposed rule goes back to the fundamentals and our favorite mantra—it’s not what you pick, it’s how you pick it.

The DOL’s proposed rule on selecting and monitoring 401(k) and 403(b) investment options emphasizes process over product. In doing so, it reinforces a long-standing ERISA principal—prudence is measured by the quality of a fiduciary’s decision-making, not by investment outcomes.

At the core of the proposal is a six‑factor, asset‑neutral framework for evaluating designated investment alternatives, including target‑date and other asset‑allocation funds. No investment asset class or strategy is singled out for special treatment, favorable or otherwise. Notably, the proposal says nothing about the recent boogeymen of crypto or ESG. Instead, the focus remains where committees are most comfortable (and regulators most consistent): a disciplined process, informed oversight, and contemporaneous documentation.

For fiduciary committees, the message is familiar but worth repeating—committee minutes matter, benchmarks matter, liquidity and valuation deserve attention, and knowing when to rely on expert advice is crucial.

📌 Our Legal Update summarizes the proposed rule, explains the new prudence safe harbor, and highlights practical considerations for committees reviewing their investment selection and monitoring practices.

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Anastassia Anufrieva, Unsplash

It has been nearly 20 years since Internal Revenue Code Section 409A transformed the rules governing nonqualified deferred compensation (NQDC). Many employers updated written plan documents by the 2008 deadline—and haven’t touched them since.

As the 20‑year mark approaches, now is the perfect moment for a quick compliance check. Over time, plan administration often drifts from what the written document actually says. And with Code Section 409A’s unforgiving rules, even small mismatches can trigger significant tax implications for the participant, including immediate income inclusion, a 20% penalty tax on the amount involved, and additional penalties and interest.

Worse yet, Code Section 409A often limits an employer’s ability to fix problems simply by amending the written plan document. In many cases, the only real options are correcting past errors using the IRS correction guidance and tightening operational practices going forward.

Code Section 409A also applies more broadly than many assume. Common examples include:

  • Severance arrangements (often exempt—but not always)
  • Long‑term incentive plans
  • Phantom stock plans
  • RSUs that vest well ahead of settlement (which commonly occurs when “retirement” is a full vesting trigger)

Two decades later, Code Section 409A is still a trap for the unwary. A quick, focused review now can help prevent surprises later. Start with:

  • Revisiting deferred compensation and severance plans last updated around 2008
  • Confirming that administration matches the written plan document
  • Reviewing newer severance and incentive plans and individual arrangements for hidden Code Section 409A issues
  • Addressing problems proactively before audits, transactions, or disputes arise

Some specific compliance touchpoints to consider include:  

  • Providing new participants with clear and timely communications regarding their eligibility and deferral election timing requirements, the nature of the deferred compensation arrangement, and the consequences of late or incomplete elections. 
  • Periodically confirming that all plan participants continue to meet the plan’s eligibility criteria.
  • Ensuring commission structures are clearly documented and election deadlines align with Section 409A timing rules.

By taking time now to re-examine plan documents and administrative procedures, employers can prevent costly errors and ensure your program continues to operate smoothly for the next decade and beyond.

If you would like assistance with conducting a Section 409A compliance review or updating plan documentation, Seyfarth’s employee benefits team is here to help.

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Seyfarth Synopsis: The Department of Health and Human Services has delegated enforcement authority to the Office of Civil Rights for 42 CFR Part 2, which protects the confidentiality of substance use disorder records. Covered entities must update their HIPAA documents to reflect these changes by February 16, 2026.

On August 25, 2025, the U.S. Department of Health and Human Services (HHS) Office of the Secretary authorized the Director of the Office for Civil Rights (OCR) to enforce the “Confidentiality of Substance Use Disorder (SUD) Patient Records” regulations found at 42 CFR Part 2, including the right to impose civil penalties, issue subpoenas and take corrective actions for noncompliance. These rules, finalized in February 2024, aim to protect the privacy of patients’ SUD treatment records, and require updates to HIPAA Privacy Policies and Notices of Privacy Practices.

Continue Reading Enforcement of Substance Use Disorder Records
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Michael Discenza, Unsplash

Seyfarth Synopsis:

As we closed out 2025, Governor Kathy Hochul signed into law the New York “Trapped at Work Act,” which amends the New York Labor Law by prohibiting employers from requiring “employment promissory notes” and similar stay‑or‑pay provisions as a condition of employment. The law took effect on December 19, 2025.

Background

Effective December 19, 2025, New York’s Trapped at Work Act (the “Act”) significantly restricts the use of stay‑or‑pay provisions in employment agreements. These provisions typically require an employee to repay certain costs—often framed as training, onboarding, or other employer expenditures—if the employee resigns before a specified date.

Importantly, the Act applies to “workers,” a term defined more broadly than W‑2 employees. Under the statute, a “worker” includes not only traditional employees but also independent contractors, subcontractors, interns, externs, apprentices, volunteers, and other individuals who perform work or services for an employer, whether or not they are on the payroll. Because the definition sweeps in both employees and many non‑employee categories, the Act may apply to a wider range of agreements than employers traditionally consider in the onboarding context.

What the Act Prohibits

With limited exception, the Act prohibits employers from requiring, as a condition of employment, any “employment promissory note.” The term is defined broadly to include any agreement, instrument, or contract provision that:

  • requires the worker to pay the employer if the worker leaves before a particular time; or
  • frames the required payment as reimbursement for training provided by the employer or a third party.

Accordingly, any clause conditioning continued employment on repayment of training‑related or onboarding‑related costs if the worker separates before a stated period is now unlawful.

Employers that violate the Act may face civil penalties of up to $5,000 per violation.

Although the Act does not create a stand‑alone private right of action, a worker who is sued by an employer attempting to enforce a prohibited agreement may recover the employee’s attorneys’ fees if the employee successfully defends against the claim.

Exceptions

The Act contains several narrow exceptions. The following categories of agreements are permitted:

  • Repayment of sums advanced to a worker that are unrelated to training
  • Payment for employer‑provided property sold or leased to the worker
  • Sabbatical‑related agreements for educational personnel
  • Requirements contained in collective bargaining agreements

These exceptions are limited, and employers should carefully evaluate any repayment provision to ensure it fits squarely within one of these categories.

Effective Date and Open Questions

The Act provides that, as of December 19, 2025:

“no employer may require, as a condition of employment, any worker or prospective worker to execute an employment promissory note.”

Based on this language, the Act appears to apply only to agreements executed or entered into on or after December 19.  However, it remains to be seen whether the New York State Department of Labor will attempt to enforce the Act in situations where an agreement was signed before December 19 but the employer seeks repayment or enforcement after that date.

The Act authorizes the New York State Department of Labor to promulgate rules and regulations, which are expected to provide additional interpretive guidance, including on issues such as scope, exceptions, and potential retroactive application.

What Employers Should Do Now

Employers should take immediate steps to ensure compliance:

  • Review offer letters, onboarding documents, training acknowledgments, bonus agreements, and any other documents that may include stay‑or‑pay provisions.
  • Remove or revise any repayment language that may qualify as a prohibited employment promissory note.
  • Avoid enforcing existing repayment obligations until they are reviewed for consistency with the Act.
  • Assess broader retention strategies, especially for multi‑state employers, given similar developments in California and other jurisdictions.
  • Employers should be aware that on January 6, 2026, a New York Assembly member introduced Bill A09452, which would provide a series of amendments to the Act (including delaying the effective date to December 19, 2026) designed to address several concerns expressed by employers.  For information related to those proposed amendments, see Seyfarth’s legal update “Proposed Amendments to NY “Trapped at Work Act” May Ease Burden on Employers.”

Please contact either of the authors or the employee benefits attorney at Seyfarth with whom you regularly work if you have any questions regarding compliance with these new restrictions.

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Seyfarth Synopsis: The IRS recently issued Notice 2025-68, providing initial guidance on a new savings vehicle: Trump Accounts, created under Section 530A of the Internal Revenue Code by the One, Big, Beautiful Bill Act (OBBBA). While proposed regulations are still forthcoming, the recent IRS guidance provides a high-level overview of various Trump Account features, including the employer contribution option.

What are Trump Accounts?

A Trump Account is a new type of traditional IRA established for the exclusive benefit of a child and must be designated as a Trump Account at inception. Trump Accounts are designed to encourage early savings for children and will operate under special rules during a “growth period,” which lasts from the time of account creation until January 1 of the year the beneficiary turns 18. Trump Accounts are tax-deferred savings accounts for children and will generally follow traditional IRA rules after the child turns 18, at which point the funds can be used for a variety of qualifying purposes, including education expenses, job training, down payment on a first home, capital to start a small business, and retirement. 

How do Trump Accounts work?

An authorized individual (parent, guardian, or other relative) can elect to open a Trump Account on IRS Form 4547 or an online portal (that is expected to be available in mid-2026). The IRS creates the initial account and coordinates it with an approved trustee (usually a bank).

The following contributions may be made into Trump Accounts:

  1. $1,000 in federal contributions under the pilot program for U.S. citizen children with Social Security Numbers born after December 31, 2024 and prior to January 1, 2029;
  2. Contributions from parents or others up to $5,000 annually (not tax deductible but indexed after 2027);
  3. Qualified general contributions from state, local or tribal governments or 501(c)(3) organizations;
  4. Employer contributions, up to $2,500 annually (indexed after 2027), which contributions are excluded from the employee’s gross income; and
  5. Qualified rollover contributions between Trump Accounts.

These contributions are not considered income for the account beneficiary when made.

Trump Accounts may be invested in certain “eligible investments,” which investments will generally include certain low-cost index-tracking mutual funds, ETFs, and other index funds comprised of equity investments in primarily U.S. companies.

How does this impact employers?

Employers have no legal obligation to contribute to Trump Accounts, but tax-exempt employer contributions may enhance employee benefit offerings. Specific administration details are still forthcoming, but recent IRS guidance confirms the following: 

  • Employers may contribute up to $2,500 to employees’ or their children’s Trump Accounts pre-tax. Please note that any employer contributions count towards the general $5,000 contribution limit mentioned in item 2 above.
  • The $2,500 limit applies on a per employee basis, meaning that if any employee has multiple children with Trump Accounts, the employer’s aggregate contributions to those children’s Trump Accounts may not exceed $2,500. 
  • Any employer contributions must be made pursuant to a written plan document and the contributions must comply with applicable nondiscrimination testing rules (which will likely look similar to the nondiscrimination testing rules applicable to Dependent Care Spending Accounts).
  • The IRS also intends to issue additional guidance explaining how an employer can facilitate employee contributions to Trump Accounts for the employee’s dependents through a Section 125 cafeteria plan. 

As with many new policy initiatives, Trump Accounts raise more questions than answers at this stage. Key issues remain regarding how these accounts will be funded and administered. We will continue to monitor developments closely and share updates as regulatory guidance emerges. In the meantime, please reach out to your Seyfarth benefits attorney with any questions.

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Josh Hild, Unsplash

Seyfarth Synopsis: Effective January 1, 2026, new California law prohibits stay-or-pay clauses in contracts of employment with limited exceptions.

Under new Section 16608 of the California Business and Professions Code, effective January 1, 2026, employers are prohibited from entering into an employment contract or other contract relating to the employment relationship that requires an employee to repay any amount to the employer upon termination of employment, except in specific limited circumstances. The law provides that contracts with non-compliant stay-or-pay provisions will be treated as void. Also, an affected employee can bring a civil lawsuit in which they can seek damages in the amount of the greater of their actual damages or $5,000, injunctive relief, and attorneys’ fees and costs related to the lawsuit.

One of the exceptions to the prohibition on these repayment obligations, that will likely be the most commonly used, is for discretionary payments made at the outset of employment (e.g. sign-on bonuses or relocation reimbursements) if each of the following conditions are met: (1) the promise to repay is in a separate written agreement; (2) the employee is notified of the right to consult an attorney no less than five days prior to signing the agreement; (3) any repayment obligation cannot be longer than 2 years; (4) the amount to be repaid must be prorated upon termination for the remaining retention period; (5) no interest is charged on the repayment amount; (6) the employee must be given the option to instead defer the payment to the end of the fully-served retention period with no repayment obligation; and (7) repayment can only be required if the employee voluntarily elects to leave or if the employee is terminated for misconduct (as defined in the CA labor code).

The new code section also has other exceptions relating to repayment of tuition assistance, certain government loans, and residential leasing or purchase assistance. For further information on these exceptions and an in depth discussion of the new law, see Seyfarth’s prior blog post here. 

Note that the new law is not triggered by a provision promising to pay an amount after a certain retention period is completed (without any repayment obligation) or otherwise deferring payments to a future date.

Employers should review existing offer letters and other employment contracts with California employees to identify payments or other benefits offered in exchange for an employee’s promise to repay upon termination of employment prior to completing a retention period. Any agreements with these provisions will need to be amended to fit into an exception, or to remove the repayment obligations.  

This shift will also require employers to rethink how they offer sign-on and other retention bonuses to employees in California in the future. Restructuring these payment arrangements in a thoughtful manner will not only help employers to avoid costly penalties and litigation, but also should give employers a competitive advantage in recruiting and retaining employees in California.

Please contact the author or the employee benefits attorney at Seyfarth with whom you usually work if you have any questions regarding compliance with these new California restrictions.

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Seyfarth Synopsis: Recently the IRS issued Rev. Proc. 2025-32 and 2025-61, announcing the cost-of-living adjustments to certain welfare and fringe benefit plan limits for 2026 and applicable dollar amounts for the remainder of 2025.

2026 Limits for Certain Health and Fringe Benefits

The Affordable Care Act (ACA) established the Patient-Centered Outcomes Research Institute (“PCORI”), to support research on clinical effectiveness. The PCORI is funded (through the Patient-Centered Outcomes Research Trust Fund) in part by fees paid by certain health insurers and sponsors of self-insured health plans (“PCORI fees”). The PCORI fee is determined by multiplying the average number of covered lives for the plan year times the applicable dollar amount, and is reported and paid annually (by July 31) to the IRS using Form 720 (Instructions to Form 720 are available here). The applicable dollar amount as set by the IRS for plan years ending on or after October 1, 2024 and before October 1, 2025 was $3.47 per covered life.

The IRS has issued Notice 2025-61 announcing the applicable dollar amount that must be used to calculate the fee for plan years that end on or after October 1, 2025, and before October 1, 2026. This 2025-61 PCORI fee is $3.84 per covered life, an increase of $0.37 per covered life from 2025. The PCORI fee for a 2025 calendar plan year, calculated as $3.84 per covered life, is due by July 31, 2026.

For more information on paying the PCORI fee, see our prior posts here and the IRS website here. Also refer to this IRS page for a helpful chart describing the applicability of the PCORI fee to various health arrangements.

On October 9, 2025, the IRS announced 2026 cost-of-living adjustments to various tax related limits, including the dollar limits for contributions to health flexible spending accounts (Health FSAs) and qualified transportation fringe benefit programs.  

The 2026 cost-of-living adjustments (and the changes from 2025) for these plans, from 2025-32 and 2025-61 are summarized in the table below:

Please contact the employee benefits attorney at Seyfarth Shaw LLP with whom you usually work if you have any questions regarding these or other limits on health and welfare and related plans.