United States: Benefits – 2025 Highlights and 2026 Outlook

This year has seen some key benefits developments for employers in the United States. This article outlines the key highlights from 2025 and looks ahead to 2026.

2025: Highlights

1. The “One Big Beautiful Bill Act,” signed into law on July 4, 2025, made numerous changes affecting benefit plans. Particular areas of focus included eliminating tax advantages for certain fringe benefits (e.g., bicycle commuting, moving expenses) and allowing for increases for other benefits (increased limits for dependent care assistance flexible spending accounts and educational assistance programs). In addition, significant changes were made to allow greater flexibility for individuals using high deductible health plans coupled with tax-favored health savings accounts, and for individuals and families utilizing direct primary care service arrangements (such as concierge care).

The One Big Beautiful Bill Act also introduced “Trump Accounts,” which are a form of “starter” individual retirement accounts (IRAs) that can be established for certain individuals under 18. Trump Accounts are generally subject to specific rules until the account holder turns 18, when they become subject to the general rules governing IRAs. Importantly for employers, Trump Accounts may be funded in part through employer contributions up to $2,500 per employee, presumably made on an annual basis (though the statute is unclear on this point). If an employee has more than one child, the employer can spread out the $2,500 maximum contribution over multiple children’s Trump Accounts. The employee can exclude the employer’s contribution from gross income. An employer wishing to contribute to a Trump Account must establish a separate written plan and comply with certain nondiscrimination rules.

2. The Internal Revenue Service finalized its regulations governing mandatory Roth catch-up contributions for high earners and confirmed that employers that allow catch-up contributions in their 401(k), 403(b), or governmental 457(b) plans must implement the Roth catch-up requirement in 2026. The Roth catch-up requirement was introduced through the SECURE 2.0 Act and applies to participants who are age 50 and older, and whose Social Security wages from their employee exceeded a certain threshold in the prior year ($145,000 in 2025). Participants who meet these criteria who choose to make catch-up contributions must have those contributions be designated as Roth contributions; i.e., they may not make catch-up contributions on a pre-tax basis. The new regulations, which do not come into effect until 2027, contain additional details such as the mechanics of requiring Roth catch-up contributions and correction methods. Until the regulations come into effect, employers are entitled to rely on a good-faith interpretation of the SECURE 2.0 Act.

3. We continue to see a significant amount of ERISA class action litigation targeting both defined contribution (“DC”) and defined benefit (“DB”) plans. Although we saw a short-lived decrease in the number of new ERISA “excessive fee” class actions targeting DC plans in 2023 and 2024, there has been a notable increase in new lawsuits in 2025, catalyzed by the recent wave of lawsuits challenging the longstanding and widespread practice of allocating DC plan forfeitures to company contributions. While a growing majority of district courts have dismissed the new forfeiture claims at the pleading stage, the ERISA plaintiff’s bar continues to file new lawsuits while appeals are pending in several appellate courts. We have also continued to see in 2025 a proliferation of investment-related claims, particularly with respect to stable value funds.

With respect to DB plans, the ERISA plaintiff’s bar has continued to pursue claims challenging pension risk transfers (“PRT”), particularly those involving certain insurers, and the actuarial assumptions used to convert single life annuity benefits to other payment options. In the PRT cases, the motion to dismiss rulings to date have been mixed, but mostly favored plan sponsors, with a number of courts concluding the named plaintiffs lacked standing (i.e., they failed to allege an adequate injury) to challenge the PRT transaction.

4. We have also seen in 2025 a growth in ERISA class action litigation targeting health plans. Much of the health plan litigation has focused on wellness benefits (with a particular focus on tobacco surcharges), mismanagement of out-of-network claims, prescription drug costs, allegedly deficient COBRA notices and mental health parity compliance issues. In addition, the ERISA plaintiff’s bar has recently filed a pair of lawsuits asserting novel claims that plan sponsors and fiduciaries breached their fiduciary duties by offering a preferred provider organization (“PPO”) medical insurance option that was allegedly “financially dominated” (i.e., provided same benefits at higher costs) by the plan’s high deductible health plan (“HDHP”) medical insurance option, and by failing to disclose this information to plan participants.  

5. In the area of ERISA’s fiduciary duties, there were a number of developments, including the following: 

Alternative Assets for Defined Contribution Plans

As we previously reported, on August 7, President Donald Trump signed an Executive Order titled “Democratizing Access to Alternative Assets for 401(k) Investors” (the “Order”), which encourages the US Department of Labor (“DOL”) and other federal agencies to create a pathway for more defined contribution retirement plans to offer participants exposure to “alternative assets,” including private equity, real estate, and digital assets. The Order directs the agencies to further the Trump Administration’s policy to provide every American preparing for retirement with “access to funds that include investments in alternative assets when the relevant plan fiduciary determines that such access provides an appropriate opportunity for plan participants and beneficiaries to enhance the net risk-adjusted returns on their retirement assets.” In response to this directive, on August 12, 2025, the DOL rescinded its December 2021 guidance, which suggested that most plan fiduciaries lack the experience to adequately evaluate private equity instruments.

Lifetime Income Products in Defined Contribution Plans

As reported in our Legal Update on this issue, in Advisory Opinion 2025-04A, issued on September 23, the DOL has helpfully amplified its regulatory guidance regarding the ability to include lifetime income products in investment options intended to be “qualified default investment alternatives” (QDIAs) as defined in ERISA section 404(c)(5) and the Department’s regulation at 29 CFR 2550.404c-5 (the QDIA regulation). More specifically, DOL addressed a gap in the regulations by clarifying that—as in the case of a target date fund or balanced fund—a managed account solution that includes a lifetime income product can qualify as a QDIA, provided it satisfies the transferability requirements and other provisions of the QDIA regulations. The lifetime product included in the managed account solution at issue was a variable annuity contract with a guaranteed minimum withdrawal feature.

2026: Outlook

1. Amendments to non-governmental qualified plans (such as 401(k) plans), 403(b) plans, and IRAs under the SECURE and SECURE 2.0 Acts must be adopted by December 31, 2026. Plan sponsors should work with their counsel and recordkeepers on preparing all necessary amendments. (Note, however, that amendments to non-governmental 457(b) plans must be adopted by the end of 2025.)

2. As employers work to implement the Roth catch-up contribution requirement, clear communication with participants will be key. Plan sponsors are also encouraged to review the new Roth catch-up regulations to determine whether any changes need to be made to their Roth catch-up programs prior to the regulations’ coming into effect in 2027.

3. We anticipate the ongoing wave of ERISA class action litigation involving DC and DB plans to continue in 2026 as we wait to see how federal courts respond to the ERISA plaintiff’s bar’s new legal theories. With appeals pending in a growing number of cases, the decisions in those cases could have a material impact on the litigation landscape going forward.

4. We also anticipate that health plan litigation will continue to grow in 2026, as health plans and pharmacy benefit managers continue to be a focus of both the US Department of Labor and the ERISA plaintiff’s bar. Moreover, we expect that rising health care costs generally will be a target of the current administration, and that this could result in increased disclosure or compliance requirements for plan sponsors. Plan sponsors and plan fiduciaries are encouraged to review their health plan documents and fiduciary governance procedures, and to monitor health plan costs.

5. We anticipate that the development by asset managers of various types of investment products with alternative assets and lifetime income features for 401(k) plans will continue, and that pursuant to the Trump Executive Order we will see further agency guidance regarding the criteria plan fiduciaries that should apply when vetting investment products that include alternative assets—and possibly even a safe harbor, in limited circumstances.

Plan sponsors and plan fiduciaries have weathered significant changes in 2025, and we expect they will see more of the same in the coming year. If you have questions or would like to discuss what these changes mean for your plans now and in 2026, please contact any of the authors, or any other member of the US Mayer Brown Employment & Benefits team.