Benefits Monthly Minute
The July Monthly Minute highlights the DOL’s new proposed electronic disclosure rule, a significant employer-friendly tobacco-surcharge ruling, and a Seventh Circuit decision reinforcing the importance of express authority in POAs purporting to waive QJSA rights.
DOL Proposes New "Notice and Access" Electronic Disclosure Rule for Group Health Plans
On July 23, 2026, the Department of Labor released a proposed rule that would create a new "notice and access" electronic disclosure safe harbor for group health plans. The proposed safe harbor, which applies only to group health plans, would allow plan administrators to default to electronic delivery by posting required disclosures on a secure website or portal and sending participants an electronic Notice of Internet Availability (NOIA) via email or text. This would be a significant departure from the existing and outdated 2002 regulatory safe harbor, which largely limits default electronic delivery to employees who are "wired at work" and requires affirmative consent from others. Importantly, the proposed rule -- which would apply to many documents that a health plan is required to furnish under ERISA -- does not permit direct email delivery of documents due to concerns about transmitting protected health information (PHI).
Before relying on the new safe harbor, plan administrators must provide participants with an initial paper notification of the shift to default electronic delivery, including instructions for accessing documents and an explanation of opt-out rights. Participant protections are built into the rule and allow individuals to request free paper copies and elect opt outs going forward.
KMK Comment: If finalized, this rule will give health plan sponsors a practical pathway to deliver required ERISA disclosures electronically, without obtaining individual affirmative consent or limiting e-delivery to "wired at work" employees. Employers should evaluate whether their existing benefits portals or insurer/TPA websites meet the proposed rule's accessibility, searchability, and confidentiality standards, confirm accurate electronic contact information for participants, and develop processes to handle paper-copy requests and opt-out elections. No further action is needed at this time. The KMK Benefits Group will monitor this proposed rule and report when it becomes final.
Court Dismisses Tobacco Surcharge Class Action Against Target
On July 22, 2026, a Minnesota federal court granted Target Corporation's motion to dismiss a putative ERISA class action challenging its tobacco surcharge program. The plaintiffs -- current and former employees subject to an approximately $800 annual surcharge for tobacco use -- alleged that Target's wellness program violated ERISA and that Target breached its fiduciary duties in administering the program and mismanaging the surcharge proceeds. The court rejected the claims on the merits and due to plaintiffs’ lack of Article III standing:
- First, on the "full reward" requirement, which mandates that a compliant wellness program make the full incentive available to all participants at least once per year, the court applied the abuse-of-discretion review because Target's SPD explicitly grants the plan administrator discretionary authority to construe plan terms. The court found Target's interpretation reasonable: that the $800 surcharge is defined as an annual, aggregate obligation, such that a participant who becomes tobacco-free or completes the cessation program mid-year is entitled to retroactive reimbursement of amounts already deducted.
- Second, on the physician-accommodation notice issue, the court exercised independent judgment under Loper Bright and concluded that the statute enumerates specific disclosures -- availability of a reasonable alternative standard and the possibility of waiver -- and does not require notice that a physician's recommendations will be accommodated. In so holding, the court noted that the “‘best reading of the statute’ – that is, ‘the one the court would have reached if no agency were involved’ -- is that ERISA does not impose a physician-accommodation notice requirement.”
- Third, the court dismissed the fiduciary duty claims: the derivative claim (based on administering a noncompliant plan) failed because the underlying ERISA violations fell flat, and the independent self-dealing theory (alleging Target misused surcharge proceeds) was dismissed for lack of Article III standing because plaintiffs identified no concrete, particularized injury stemming from Target's handling of the funds.
The Target case is one of a growing number of employer-friendly rulings in the nationwide wave of tobacco surcharge class actions and one of the first to squarely apply the Supreme Court's Loper Bright framework to the DOL's physician-accommodation notice regulation.
KMK Comment: This decision reinforces that careful plan administration, clear SPD drafting and attention to statutory requirements create a strong defense in tobacco surcharge litigation. Plan sponsors should ensure that SPDs contain grants of discretionary authority to construe plan terms, clearly communicate the availability of a reasonable alternative standard (such as a cessation program) in all plan materials describing the wellness program, and document a compliant reimbursement structure. We expect other circuits will address the validity of the DOL's physician-accommodation notice regulation post-Loper Bright. The KMK Benefits team will keep you apprised of how this issue unfolds.
Power of Attorney Must Expressly Authorize Waiver of Spousal Survivor Annuity Rights
In Havlik v. University of Chicago, the Seventh Circuit upheld a plan administrator’s rejection of a spousal consent form signed by an attorney-in-fact whose power of attorney (POA) did not expressly authorize waiver of survivor annuity rights under a retirement plan. According to the court, the case centered on a critical document: a beneficiary change form submitted a few weeks before the participant’s death transferring pension benefits from the participant’s spouse to his grandchildren. An agent (specifically, the participant’s son-in-law) acting under a Wisconsin POA had signed a spousal consent form to waive the participant's spouse's qualified joint and survivor annuity (QJSA) rights under two University of Chicago retirement plans. While the POA granted the agent authority to "name or change the beneficiary or beneficiaries under any … qualified retirement accounts," it did not expressly authorize him to waive the spouse's survivor annuity rights. Both TIAA (the recordkeeper) and the University (the plan administrator) rejected the form. The appeals court held that the applicable Wisconsin statute requires an express, specific grant of authority in a POA for an agent to waive the principal's right to be a beneficiary of a joint and survivor annuity, and that authority to "name or change" beneficiaries was insufficient.
KMK Comment: When a spousal consent form is submitted by an attorney-in-fact, plan administrators should carefully verify that any underlying POA expressly and specifically authorizes the agent to waive the spouse's QJSA rights in accordance with applicable law. In many cases, a general grant of authority or power to change beneficiaries is not sufficient. The KMK Benefits team is available to assist plan administrators in reviewing beneficiary designation changes, spousal consent forms and POAs to ensure consistency with plan documents and applicable law.
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.
