Benefits Monthly Minute
The March Monthly Minute highlights the DOL’s restoration of the 1975 investment advice fiduciary rule as well as recent employer wins in tobacco surcharge and PBM litigation.
Biden-Era Fiduciary Rule Rollback
In response to final judgments entered in the Northern and Eastern Districts of Texas, on March 17, 2026, the Department of Labor vacated the Biden administration’s 2024 fiduciary rule. The vacatur restores ERISA’s five-part test for determining whether a person is an investment advice fiduciary. In general, under ERISA § 3(21), a person is an investment advice fiduciary to the extent he or she renders “investment advice” for a fee or other compensation with respect to any money or property of a plan, or has any authority or responsibility to do so. Regulations issued in 1975 further provide that for advice to constitute “investment advice,” a financial institution or investment professional must:
- Provide investment advice to the plan;
- On a regular basis;
- Pursuant to a mutual agreement, understanding or arrangement;
- That will serve as the primary basis for investment decisions; and
- The advice is individualized for the plan’s particular needs.
KMK Comment: The vacatur of the 2024 fiduciary rule is a win for insurance and brokerage groups that viewed the rule as wrongly imposing ERISA fiduciary status on securities brokers and insurance agents absent a relationship of trust and confidence. Furthermore, the DOL has no plans to engage in notice and comment rulemaking which reduces the likelihood of modifications to the five-part test, at least in the short term.
Wells Fargo Prevails in PBM Fee Litigation
On March 3, 2026, a Minnesota district court dismissed the amended complaint in Navarro v. Wells Fargo & Company, finding -- for a second time -- that plaintiffs lacked standing to bring ERISA fiduciary breach claims against Wells Fargo over allegedly inflated prescription drug prices and excessive fees paid to its PBM, Express Scripts. The ruling is based largely on the fact that Wells Fargo's self-funded health plan granted the company discretion to set participant contribution rates, which are impacted by many variables, thus the court concluded that plaintiffs could not trace concrete financial injury to the alleged PBM overpayments. The court further held that the claims were not redressable, since even if the court were to order Wells Fargo to remit a payment to the plan to remedy purported overcharges, nothing would prevent Wells Fargo from offsetting its own employer contributions instead of reducing participant contributions.
KMK Comment: The outcome in this case parallels the earlier Johnson & Johnson litigation, as reported in the January 2025 Monthly Minute, where nearly identical PBM-related ERISA claims were dismissed on standing grounds. Arguably, these rulings suggest a trend of federal courts treating PBM fee claims against self-funded welfare plans with skepticism. However, PBM pricing practices still raise fiduciary concerns. For this reason, self-insured employers should work with counsel to ensure plan documents clearly preserve sponsor discretion over contribution-setting, proactively review and document PBM selection, arrangements, and fee negotiations, and take care to satisfy their fiduciary duty to monitor plan service providers, including PBMs.
Employers with Smoker Surcharge Programs Can Breathe Easier
This week an Ohio federal court granted Progressive’s motion to dismiss a challenge to its wellness program. Plaintiffs in the case claimed that they were wrongfully charged a tobacco surcharge and/or paid a vaccine surcharge to maintain health coverage under Progressive’s self-insured health plan. Under the wellness program, tobacco-free participants paid $15 less per pay period for coverage than tobacco users, and those who received the COVID vaccine paid $25 less per pay period. Plaintiffs alleged that the program failed to offer the “full reward” (including a retroactive refund to the beginning of the plan year) once an alternative standard was met, and that the plan materials failed to comply with ERISA’s notice requirements.
In dismissing the case, the court found that Progressive’s SPD description of the wellness program – which substantively matched the sample language provided in the wellness regulations – satisfied ERISA’s notice requirement. And, interestingly, the court declined to interpret the wellness regulations’ “full reward” requirement as requiring a retroactive reward. In reaching this conclusion, the court noted that “the statute does not say anything about a retroactive reward and there is no reason to imbue the statute with such a requirement.”
KMK Comment: Similar to the recent Bally’s smoker surcharge case (reported in the November 2025 Monthly Minute), the Progressive court’s interpretation of the meaning of “full reward” is a distinct departure from many prior tobacco surcharge cases. These latest decisions support prospective elimination of a surcharge upon meeting the standard without requiring retroactive refunds. The decision also gives the green light to notices that closely track the regulatory language, although close attention to program notices remains essential to ensure legal compliance. Overall, this new wave of smoker surcharge decisions lends additional support to plan sponsors when defending wellness program designs.
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.
