BENEFITS DIGEST

Wrangle works through what the proposed dependent-care testing approach would mean in practice. The 55% average-benefits test compares the average dependent-care benefits of higher-paid employees with those of everyone else, and excluding nonparticipants from the math could reduce the caps and taxable excess that highly compensated employees face. Although the rules remain proposed, the [IRS permits taxpayers to rely on them](https://www.govinfo.gov/content/pkg/FR-2026-08-11/html/2026-16314.htm) for plan years beginning before final regulations are published. Wrangle’s expectation of final rules by year-end is its forecast, not an IRS timetable.

Most HSA dollars are invested, but most HSA owners don’t invest. Devenir reports that investments account for 52% of assets while only 11% of the 42.6 million accounts hold investments. Total assets reached $192 billion, and accounts with investments averaged $23,837. That distinction matters for employers promoting HSAs as long-term savings vehicles. The aggregate investment milestone doesn’t describe how the typical employee uses the account, or whether that employee can afford to leave money invested rather than spend it on care.

40% of FSA holders in EBRI’s 3.3 million-account database forfeited money in 2024. Among those who lost funds, the average was $404. Employers can reduce avoidable confusion by making spending deadlines and any plan-specific grace period or carryover easy to find, particularly around enrollment. The figures don’t mean every account lost $404 or that participants necessarily lost more than they saved in taxes. Most account holders, 89%, received distributions during the year.

A doctor’s note doesn’t automatically make a wearable device eligible for tax-free reimbursement. Miller Johnson explains IRS guidance that turns on the device’s primary purpose and the individual’s circumstances, including whether it treats a specific disease rather than supports general health. That distinction matters to employers and administrators handling health FSA and HRA claims. A vendor’s eligibility label isn’t decisive either. Accessories require separate evaluation, and ordinary documentation requirements still apply.

Proposed IRS regulations would exclude employees who receive no benefits from the dependent care assistance program’s 55% average benefits test, a participant-only approach that should cut testing failures and the need to cap highly compensated employees’ elections. The firm reads the change as opening a practical path to the $7,500 annual limit, already in effect for 2026, for employers that held at $5,000 over testing concerns, and notes that employers may rely on the proposed rules now. The program’s other nondiscrimination tests still apply.

Sarah Brenner walks through what Medicare enrollment changes for health savings accounts. New contributions end once Medicare coverage begins because Medicare is disqualifying other coverage, but existing balances stay available, nonmedical withdrawals after 65 escape the 20% penalty while remaining taxable, and Medicare premiums generally qualify as eligible expenses while Medigap premiums do not. Delayed Part A enrollment has retroactive-coverage consequences worth flagging in employee education for workers approaching 65.

Devenir’s [midyear survey](https://www.devenir.com/hsa-assets-reach-nearly-192-billion-at-midyear-2026-with-more-than-half-now-invested/) counts nearly $192 billion across 42.6 million health savings accounts at June 30, with just over half of the assets invested. The majority-of-assets figure can mislead, since only 11% of accounts hold any investments and just over half of accounts sit under $500 including zero balances. Employer-affiliated accounts hold 65% of the assets, which is why the numbers matter to sponsors. The industry’s growth projections in the report are forecasts, and the research is provider-reported.

Two participants allege SAP America kept a PPO option whose higher premiums and lack of an employer-funded health savings account left employees paying more than they would have under the company’s Consumer Choice 90 option for the same Aetna network and services, and that fiduciaries should have noticed. The complaint pleads prudence, loyalty, and monitoring claims and asks for repayment and changes to the menu or its disclosures. The court must first determine whether the challenged conduct was subject to ERISA’s fiduciary duties at all, and the complaint’s own charts show some out-of-network spending levels where the PPO costs less, so the everywhere-and-always framing is the plaintiffs’ characterization.

Fisher Phillips assembles an open-enrollment checklist that runs from eligibility and the ACA offer requirement through prospective section 125 elections, required disclosures, and enrollment access for employees on FMLA leave or COBRA. The guide collects the 2027 dollar limits announced so far, including HSA figures the article sources to Rev. Proc. 2026-24, and flags the figures still awaiting announcement. The guide’s process reminder is that plan terms, cafeteria-plan rules and enrollment communications have to agree, and that the carrier does not handle compliance by default.

EBN’s case for early FSA reminders is behavioral. An estimate the article attributes to Money.com puts annual forfeitures around $4 billion, and the fix offered is repeated fall messaging with concrete eligibility examples that reaches spouses and dependents too. Plans differ on carryovers, up to $680, and on grace periods that can run to March 15, so reminders have to match the plan’s actual terms. The interviewed expert works for Health-E Commerce, which operates FSA Store, a commercial interest readers can weigh.

Calling individual coverage health reimbursement arrangements CHOICE may make them easier to explain, but benefits specialists disagree about whether the new name will attract employers. These arrangements let employers contribute toward employees’ individual health insurance instead of offering a traditional group policy. Benefitbay’s Brandy Thompson sees clearer messaging in the rebrand, while StretchDollar’s Marshall Darr argues that administrative obstacles matter more than terminology. The EBN report points to renewal timing, individual-market premiums, provider networks and contribution levels as practical concerns. Take Command Health’s Jack Hooper wants changes that would make the arrangements work more smoothly with marketplace assistance. Those are proposals and industry preferences, rather than changes employers can assume the new label has already delivered.

EBN’s award-winner roundup is a working catalog of enrollment season tactics from benefits managers at LandCare, BMO, Koch, Aflac and a handful of nonprofits. The common thread is retiring the two-week crash course in favor of year-round education, so enrollment becomes, in one manager’s phrase, a confirmation of informed decisions. Koch uses data to place its on-site enrollment events and tracks selection remorse as the thing to minimize, the University of Pittsburgh targets communications by age, tenure and enrollment history instead of one-size-fits-all blasts, a Louisiana health system is building its campaign around new state pharmacy laws that change what employees pay per fill, and a nonprofit set a measurable goal of a 5 percent increase in dependent care FSA enrollment. Aflac’s benefits chief supplies the market datapoint, with supplemental insurance offered by 31 percent of employers while 95 percent of employees call it essential.

Vanguard’s How America Saves data show 51 percent of workers earning $150,000 or more hit the 401(k) contribution limit last year, down from 60 percent in 2018, and the share fell from 22 to 10 percent in the $100,000 to $149,999 band. Vanguard attributes part of the drop to mechanics, since higher limits and wage growth make the max harder to reach, but EBRI’s Craig Copeland describes a real behavioral shift. Some savers contribute enough to receive the full employer match, then direct additional savings to health savings accounts, Roth IRAs or brokerage accounts. Their reasons include tax diversification and, depending on the account and withdrawal, easier access to the money. Fidelity counts a record 769,000 401(k) millionaires, and while 97 percent of its plans now offer a Roth option, only about 19 percent of workers with access use it. Alicia Munnell supplies the counterweight, “We all need a little discipline and a little guardrails.”

Non-grandfathered group health plans have been living with expanded breast cancer screening requirements since plan years beginning on or after December 20, 2025, which for calendar-year plans meant this past January. Under HRSA’s updated women’s preventive services guidelines, follow-up imaging and pathology needed to complete a screening that starts with a mammogram, including MRIs, ultrasounds and biopsies, must be covered in-network without cost sharing, and plans must provide individualized patient navigation for breast and cervical cancer screening, person-to-person help spanning assessment, system navigation, referrals and education. Covering these services before the deductible doesn’t prevent otherwise eligible employees from contributing to a health savings account. Check that insurers and claims administrators are processing the follow-up services as preventive care, and that plan summaries explain the coverage.

Will Prest’s test for a financial wellness program is whether it helps an employee choose, not just learn. His composite employee juggles a 401(k), an HSA, credit card debt and a parent she helps support, and every tool she’s offered addresses one slice without ranking her priorities. EBRI’s 2025 employer survey found more than three quarters of firms ran cost-benefit analyses on their wellness offerings, and connecting standalone benefits remains one of the sticking points employers name. He’d ask any vendor three questions. Can employees compare options against the benefits they actually have? How do they reach a qualified human when they’re stuck? And what turns a decision into action? Measure follow-through, he argues, not logins.

A Q&A on why employees pick the wrong plan: they shop by per-paycheck deduction and miss the drug-tier copays, coinsurance, and employer HSA contributions that decide actual cost. The advice is simple and travels well. Compare what each plan would cost for the care you actually use, and check that your doctors and prescriptions are covered. A familiar insurer's name doesn't guarantee a familiar network, a trap the piece calls incumbent bias.

Proposed IRS rules would clarify how employers check whether dependent care benefits disproportionately favor highly paid employees, the first real testing guidance since these requirements took effect in 1981. One test requires average benefits for other participating employees to reach at least 55 percent of the average for highly compensated participants. Under the proposal, employees who receive no benefits wouldn't count in that calculation. Proskauer's example shows why that matters. A program where 11 highly compensated employees and 4 others each elect $7,500 passes this test, because the averages match. The proposal also sets criteria for who can be made eligible and would let employers correct certain failures by including amounts in income and reporting them on Form W-2. The [proposed rule](https://www.federalregister.gov/documents/2026/08/11/2026-16314/employer-contributions-to-trump-accounts-and-nondiscrimination-rules-for-dependent-care-assistance) would apply to plan years beginning after final rules are published, though employers may rely on it now. Ask your testing provider what rules it's applying for 2026 and what would change if the proposal becomes final.

Morningstar's annual HSA study has assets up 19 percent in 2025 on $14.9 billion of net inflows, credited to competition from lower fees and stronger investment menus. Providers reported little evidence so far that the new federal eligibility expansion has driven participation. Fidelity again rates highest on spending accounts; HSA Bank, which the report discloses is Morningstar's own HSA provider, earned its first high investment mark; seven of eleven providers now offer brokerage windows.

An individual coverage health reimbursement arrangement reimburses employees for individual health insurance they buy themselves, so the employer sets its contribution in advance rather than underwriting a group plan's claims. Adoption is still concentrated among employers with fewer than 50 employees, and industry-wide enrollment is roughly one million people, but the broker channel is moving: 56 percent of brokers now recommend or implement the model, and the share that has moved at least one client onto an ICHRA has more than doubled since 2024, to 37 percent. "ICHRA is a culture change," Zorro's Ben Light says in the piece, and the education burden lands on the employer.

Segal's read of the section 129 proposed regulations puts the testing mechanics up front: the eligibility test pairs a reasonable-classification standard with a numerical safe harbor, no more than a quarter of total benefits may flow to five percent owners, and average benefits for the non-highly compensated must reach 55 percent of the HCE average, counting only employees who actually use the program. The correction path may matter most in practice. Certain failures can be cured by reporting excess benefits as taxable income on the affected W-2s by the deadline. Sponsors may rely on the proposed rules now; comments close September 25.

Seyfarth finds the practical wins in the proposed Section 129 regulations. The average benefits test now counts only employees who actually receive DCAP benefits, which should make the 55 percent threshold easier to satisfy, and salary reduction arrangements may disregard employees earning under $25,000. A new correction mechanism lets an employer cure a failed average benefits or owner concentration test by moving the excess into affected individuals' W-2 income, preserving tax favored treatment for everyone else. Comments close September 25 with an October 15 hearing, and employers may rely on the proposal now.

Employer contributions to Trump Accounts are excluded from income but count as wages for FICA and FUTA, a cost that FSA and HSA contributions do not carry. A contribution program may not steer money to a preferred trustee, so payroll must accommodate whatever custodian each employee's dependent uses, and contributions are reported on the W-2 under a new code. On the dependent care side, the average benefits test counts only participating employees in the denominator, relief for sponsors who kept failing the test with every eligible employee counted, and a failing program can preserve favorable treatment for everyone else by moving only the excess benefits into highly compensated employees' income by the W-2 deadline. Employers may rely on the proposal immediately.

Two sets of proposed regulations address how employer-sponsored Trump Account contribution programs will operate and how account assets may be invested before a beneficiary turns 18. Seyfarth walks through the requirements, including a separate written plan document, a $2,500 per-employee cap on tax-favored Section 128 contributions, cafeteria plan elections for employee pre-tax contributions to dependents' accounts, and nondiscrimination testing that tracks the dependent care FSA rules. Contributions default to an S&P 500 index ETF with ESG index funds off the table, and open questions remain, from tracking eligible dependents to coordinating contributions across a controlled group.

Groom collects its August publications in one place, spanning DB plan funding rules, 45S credit and Saver's Match guidance, dependent care nondiscrimination, the wellness program enforcement relief, the e-delivery proposal, and the tobacco surcharge litigation.

New proposed regulations make it easier for dependent care flexible spending accounts (“DCFSAs”) to pass applicable nondiscrimination rules under the Internal Revenue Code and, in particular, the “average benefits test.”

PSCA's annual Health Savings Account survey found 83% of eligible employees contributed to their HSAs in 2025, up from 73% a year earlier, while only about a quarter of employers actively position HSAs as part of a long-term retirement savings strategy. NAPA's read: participation is no longer the problem, and the open opportunity for employers is helping workers treat the accounts as more than a spending vehicle.

PSCA survey finds more than 80% of employees contribute to their workplace Health Savings Accounts, but not enough workers are tapping their unique tax advantages.

Employers that provide a Dependent Care Assistance Program will be pleased to learn that for the first time in 45 years, the IRS has issued guidance on how to apply the nondiscrimination rules that apply to DCAPs.

Dependent Care Assistance Programs are subject to the nondiscrimination rules that are set forth in Internal Revenue Code Section 129 (Section 129).

Mercer reads the August 11 proposed regulations the way plan sponsors will experience them: testing requirements for dependent care FSAs get easier to satisfy, and employers may rely on the proposed rules immediately.

Eversheds Sutherland works through the August 11 proposed regulations on Trump Account employer contribution programs and the parallel DCAP nondiscrimination rules, a law-firm companion to the consultant takes already in this run.

Aon's Compliance and Policy Consulting team digs into the DCAP half of the August 11 proposed regulations: clarified nondiscrimination testing that should raise passing rates, especially on the average benefits test, where only employees actually contributing are counted and workers earning under $25,000 may be excluded. Employers may rely on the proposed rules for 2026 plan-year testing now. Comments are due September 25, with a public hearing set for October 15.

The number behind the EBRI release covered here Wednesday: average HSA balances hit a record $5,532, while just 18 percent of accountholders invest any assets outside cash.

PLANSPONSOR's angle on the same EBRI study: HSAs are being used as spending accounts, with only 18 percent of participants investing beyond cash.

Average HSA balances hit a record high, but EBRI finds most account holders still contribute well below the maximum and few invest beyond cash. The accounts are growing as savings vehicles faster than they are maturing as investment vehicles.

The companion analysis: for the first time, comprehensive regulatory guidance on dependent care assistance program nondiscrimination testing under section 129, including the 55 percent average-benefits test that has run on informal practice for decades.

Mayer Brown's analysis of Monday's proposed regulations: the up-to-$2,500 tax-free employer contribution to Trump Accounts, the workplace-program nondiscrimination and reporting requirements, and the first formal guidance on the 55 percent average-benefits test for dependent care assistance programs.

The adviser-side angle on the proposed regulations: pre-tax payroll deductions similar to health savings accounts, though other vehicles may offer better benefits for some families.

Lockton's compliance team digs into the section 129 half of this week's proposed regulations and finds the detail vendors will care about most: the 55% average benefits test denominator counts only employees actually receiving dependent care assistance, not the whole workforce. The alert walks through correction mechanics for failed tests and advises employers to test early and verify their vendor's methodology for 2026.

Treasury and the IRS proposed the framework for employer Trump account contribution programs: a separate written plan, eligibility classes tested under DCAP-style nondiscrimination rules including a 90% sliding-scale safe harbor, written employee notification, and W-2 reporting, with employees able to exclude up to $2,500 per year of employer contributions. The proposal also updates the section 129 DCAP nondiscrimination rules themselves, reflecting the OBBBA's increase of the dependent care exclusion to $7,500. Employers may rely on the proposed rules now; comments are due September 25 and a public hearing is set for October 15.

Before adopting a Trump Account (OBBBA Section 530A) contribution program, Mayer Brown advises employers to benchmark it against existing benefits like dependent care FSAs and 529 plans, check whether enough employees have young dependents to benefit, and weigh administrative cost against real recruitment value.

Effective for plan years beginning on or after January 1, 2026, the statutory limit on tax-free contributions to a Code Section 129 Dependent Care Assistance Program increased from $5,000 to $7,500 (and $2,500 to $3,750 for married individuals filing separately).