HEALTH PLAN SERVICE PROVIDER INVESTIGATIONS, ICHRAS AND ASSOCIATION HEALTH PLANS: WHERE IS DOL HEADED?

In addition to providing clients with full-service HR support – payroll, employee benefits administration, and risk management –PEOs are responsible for helping ensure that the benefits provided to their clients comply with the law. Given their role in the provision and administration of employee benefits, PEOs should be closely tracking what is happening at the Department of Labor’s Employee Benefits Security Administration (or EBSA), the primary enforcement agency for employer-sponsored benefits.

EBSA, is responsible for issuing regulations and enforcing the requirements that the Employee Retirement Income Security Act, or ERISA, imposes on employee benefit plans. Over time, the agency has assumed an increasingly active role in its oversight of those plans. Under the current administration, EBSA has undergone a number of changes – in resources and staffing as well as regulatory and enforcement priorities – all of which affect how the agency will interact with employee benefit plans, including those offered by PEOs.

At first glance, a smaller EBSA under an administration focused on deregulation and with a newly appointed assistant secretary that is supportive of employers in sponsoring employee benefit plans would suggest a hall pass for most employers and plan sponsors. However, given EBSA’s view of PEOs as having a dual role as both plan sponsors and commercial service providers, PEOs should not expect a moratorium on agency action. Instead, PEOs should expect a more intentional EBSA in search of opportunities to leverage thin resources. PEOs – as entities that oversee plans covering dozens to hundreds of client employers, should watch closely what initiatives the agency prioritizes and where it directs its resources.

RESOURCE AND STAFFING CHANGES

EBSA’s historical staffing levels hovered at approximately 900 full-time employees, and the agency routinely reported that it had one investigator for approximately every 14,000 benefit plans it had enforcement jurisdiction over. The first year of the current administration emphasized government efficiency, including by streamlining staffing across agencies. Employees across the government, including at EBSA, were offered early retirement, or for those not eligible, were offered an opportunity to resign while remaining on paid administrative leave through the end of the fiscal year. EBSA lost a significant portion of its workforce through these initiatives and natural attrition, reporting staffing levels around 580 full-time employees earlier this year. A staffing loss of this scale directly affects the agency’s ability to carry out its mission, including its ability to issue regulations and conduct investigations.

More recently, EBSA has worked to rebuild its workforce, but in a strategic manner that PEOs should pay close attention to. The agency has undertaken a campaign to hire large numbers of benefits advisors – the front-line staff responsible for assisting individuals with complaints. This targeted hiring matters because the agency initiates most investigations through public complaints. With more benefit advisors available to intake and review client worksite employee (WSE) inquiries/complaints regarding PEO-sponsored master plans, it is plausible that PEOs may in fact see more (not less) investigations of their master plans and related actions—even in a lighter-touch enforcement environment. It will be worth watching how this staffing shapes the number and types of investigations the agency ultimately pursues. PEOs may want to review its process for handling WSE benefits-related complaints to ensure that viable complaints are addressed and other concerns are responded to with sufficient explanation.

ENFORCEMENT PRIORITY SHIFTS

Earlier this year, the agency announced its enforcement priorities, highlighting where it will focus limited resources to drive broad-based plan compliance and address abusive practices and bad actors. Although not a national project, EBSA indicated that it will continue its longstanding commitment to identifying abusive multiple employer welfare arrangements, or MEWAs, and to preventing fraudulent MEWA operators from opening new arrangements in other states.

Many PEOs take the position that a PEO-sponsored health plan is not a MEWA (but instead a single employer plan). However, EBSA has, in certain prior statements and enforcement actions characterized PEO-sponsored plans as MEWAs. MEWA status would trigger Form M-1 filing obligations and a patchwork of state oversight on top of ERISA. Against this backdrop, the agency’s renewed focus on investigating MEWAs signals that it will continue to review and enforce ERISA’s requirements on plans sponsored by multiple employers. Accordingly, PEOs would be wise to evaluate how they view their plans and ensure that plan administration as it relates to ERISA’s requirements (e.g. COBRA) and regulatory filings (such as the Form 5500 and Form M-1) are consistent. Additionally, PEOs should anticipate continued EBSA interest in their PEO-sponsored plans regardless.

The 2026 national enforcement project update also highlighted barriers to mental health and substance use disorder benefits and surprise billing as projects. Under the mental health project, the agency will target the most serious violations by plans and service providers that block individuals from accessing their promised benefits. While not framed as a mental health parity initiative, the project builds on EBSA’s parity enforcement work. The surprise billing project focuses on ensuring that plans comply with the protections that were enacted under the No Surprises Act. Both are health care priorities that reach plans that PEOs administer, and both are being pursued, where possible, at the service-provider level to achieve correction across many plans at once.

While the national project update focuses on what the agency will prioritize in enforcement, the agency issued a field assistance bulletin (FAB 2026-01) outlining its approach to enforcement generally. The bulletin lays out four guiding principles for all enforcement activity:

• Focusing enforcement on the most egregious conduct and significant harm.
• Ensuring whenever possible that EBSA is not regulating by enforcement, guaranteeing fairness, prior notice, and clarity to the regulated community.
• Performing a proper review by senior agency officials of all critical enforcement initiatives.
• Committing that EBSA’s enforcement will be timely and responsive.

Taken together, these principles suggest that EBSA will focus its efforts on bad actors who lack a reasonable process in administering their plans. Even though the agency has spotlighted a number of enforcement priority areas, the bulletin suggests that enforcement actions should focus on clearly communicated violations of the law. The priorities and bulletin also suggest that EBSA will focus on service provider investigations rather than plan sponsor-level investigations as a mechanism to both leverage limited resources and achieve widespread corrective action. PEOs should document their processes, including plan administration decisions and vendor selection, in order to demonstrate a reasonable process consistent with FAB 2026-01.

EBSA’S REGULATORY AGENDA

Despite the strain on resources, EBSA has an aggressive regulatory agenda. Transparency and health care disclosure continue to be a major focus under this administration, as a cornerstone of their approach to lowering health care costs and promoting choice and competition. In practice, this means that plan sponsors are likely to receive more information than ever before about their coverage from their service providers – which raises a question for PEOs and their clients: what must a plan sponsor actually do with that information to discharge its responsibilities under ERISA? Receiving more data without a process to evaluate and act on it could potentially create exposure.

EBSA is also likely to revisit other priorities that were established during the first Trump administration. As with its renewed efforts to strengthen the transparency regulations, the agency will likely renew efforts to increase choice in coverage options, including by revamping ideas introduced under the first Trump administration such as Individual Coverage Health Reimbursement Arrangements, or ICHRAs, and Association Health Plans, or AHPs. PEOs will especially want to pay attention to any regulatory activity on association health plans to ensure that there are no unintended spillover effects for the plans that PEOs sponsor.

KEY TAKEAWAYS

While this administration has emphasized deregulation and scaled-back enforcement, given their dual role as plan sponsor and commercial service provider, PEOs should expect EBSA – an enforcement agency at its core –to continue to regulate and enforce ERISA’s requirements. The agency’s issuances to date signal an intent to continue carrying out its mission – developing effective regulations; assisting and educating workers, plan sponsors, fiduciaries, and service providers; and enforcing the law. In the near term, plans may feel a modest reprieve as the agency absorbs staffing losses and recalibrates its priorities. However, as staffing levels recover and administration priorities take effect, plans are likely to feel a renewed—though redirected—impact from EBSA’s enforcement and regulatory efforts.

This article is designed to give general and timely information about the subjects covered. It is not intended as legal advice or assistance with individual problems. Readers should consult competent counsel of their own choosing about how the matters relate to their own affairs.