Benefits Monthly Minute
The October Monthly Minute sums up the DOL’s new fertility coverage guidance, and evaluates the outcome of a recent retirement plan ESG investing case and smoker surcharge settlement.
Trick or Treat? Court Finds ERISA Fiduciary Breach in ESG Investing Case, But Says No to Monetary Damages
A Texas district court recently ruled in Spence v. American Airlines that American Airlines’ focus on environmental, social and governance (“ESG”) investing amounted to a breach its duty of loyalty by failing to act solely in the plan’s best financial interests. However, despite the evidence of disloyalty, the court found no breach of the duty of prudence given defendants acted in accordance with prevailing industry practices. What’s more, the court further concluded that the plaintiff failed to establish actual monetary losses, and for this reason, American Airlines was not required to pay any money damages.
KMK Comment: This is a very interesting case involving the fiduciary pitfalls of ESG investing. The outcome includes only narrowly-tailored injunctive relief and no monetary damages, so as not to undermine proper management of the plan. Nevertheless, plan sponsors should be mindful of the court’s admonition against focusing on non-pecuniary interests in order to avoid unwanted litigation and judicial oversight of plan investment activities.
Expanded Fertility Coverage Access in the Pipeline
In accordance with Executive Order 14216, "Expanding Access to In Vitro Fertilization," the Department of Labor released guidance on October 16, 2025, in the form of FAQs, intended to increase access and reduce costs for infertility treatment. As noted below, the new guidance generally clarifies the existing categories of excepted benefits employers can use to offer fertility benefits and other ways employers can support fertility coverage, noting that:
- an employer may offer fertility benefits as an independent, noncoordinated excepted benefit, if the applicable conditions are met (noting that to be considered an independent, noncoordinated excepted benefit, the benefit may not be offered on a self-funded basis).
- an individual enrolled in fertility benefit coverage provided as an independent, noncoordinated excepted benefit would be permitted to contribute to a HSA.
- an employer may offer an excepted benefit HRA that reimburses an employee's out-of-pocket costs with respect to fertility benefits.
- an employee assistance plan (“EAP”) will not be considered to provide benefits that are significant in the nature of medical care solely because it offers benefits for coaching and navigator services to help individuals understand fertility options.
KMK Comment: Although the newly released FAQs do not necessarily expand access to fertility coverage, they do highlight certain ways fertility coverage can be supported through existing benefit frameworks. Future rulemaking will likely address recognition of fertility coverage as an excepted benefit that an employer may offer on a self-funded basis. While the rulemaking may help to pave the way for employers to offer standalone fertility coverage, pricing and affordability concerns have yet to be addressed.
Feel the Burn: Smoker Surcharge Litigation Settles for $4.7M
In one of the latest smoker surcharge cases to settle, Performance Food Group has agreed to a gross settlement amount of $4.7M pursuant to an agreement executed earlier this month. The settlement covers participants who incurred smoker surcharges as far back as 2018. This staggering result comes on the heels of the Virginia district court’s decision to deny defendant’s motion to dismiss, rejecting the employer’s arguments under Loper Bright that plaintiff’s reading of the regulations was not the “best reading” and that the statute does not require participants to receive the full reward for mere participation in a smoking cessation program.
KMK Comment: This settlement is consistent with other smoker surcharge penalties that we’ve seen in the past, and it is one of the first cases to address Loper Bright’s possible application to the smoker-surcharge regulations. The overarching message of the case is that employers should continue to carefully apply smoker surcharges in line with a strict reading of federal wellness regulations.
The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.
Lisa Wintersheimer Michel
513.579.6462
lmichel@kmklaw.com
John F. Meisenhelder
513.579.6914
jmeisenhelder@kmklaw.com
Antoinette L. Schindel
513.579.6473
aschindel@kmklaw.com
Kelly E. MacDonald
513.579.6409
kmacdonald@kmklaw.com
Rachel M. Pappenfus
513.579.6492
rpappenfus@kmklaw.com
KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.
