New Year, New Benefits Considerations

New Year, New Benefits Considerations

Many provisions of H.R. 1, formerly known as or nicknamed the “One Big Beautiful Bill Act” (the Act), are effective as of January 1, 2026. Employers should review their benefit plans, update related processes, and refresh employee communications to reflect these changes. Below are a few highlights of key updates, including changes to Health Savings Account (HSA) and Flexible Spending Account (FSA) rules, employer credits and taxable benefits, and revisions to Affordable Care Act (ACA) Marketplace and Medicaid eligibility.

High Deductible Health Plans and HSAs

The Act expands HSA eligibility and adds flexibility for high-deductible health plans (HDHPs). HDHPs are now permitted to cover telehealth services before the deductible, retroactive for all plan years beginning after December 31, 2024.

Effective January 1, 2026, direct primary care arrangements may be paired with an HDHP without disqualifying the individual from HSA participation, provided certain requirements are met. To qualify, monthly membership fees may not exceed $150 for single coverage and $300 for employee-plus-dependent coverage. For these purposes, direct primary care generally excludes coverage for most prescription drugs, certain laboratory services, and procedures requiring general anesthesia.

Also, effective January 1, 2026, Bronze and Catastrophic health plans offered through the ACA Marketplace are treated as HDHPs, allowing enrolled individuals to contribute to HSAs.

Tax-Advantaged Accounts and Contribution Limits

The Act increases the annual contribution limit for dependent care FSAs from $5,000 to $7,500 (or $3,750 for married individuals filing separately), effective January 1, 2026. Dependent care FSA funds may be used for child care, elder care, medical, dental, and vision expenses. Employers should review cafeteria plan documents and election materials to ensure limits and eligible expense descriptions are updated.

Employer Tax Credits and Incentives

The Act increases the maximum employer-provided child care tax credit from $150,000 to $500,000, indexed for inflation, or $600,000 for eligible small businesses. It also raises the creditable percentage of qualified expenses from 25 percent to 40 percent, effective for amounts paid or incurred on or after January 1, 2026.

The paid family and medical leave tax credit has been extended and can be claimed either on wages paid during qualifying leave or on qualifying insurance premiums. Generally, employers may claim a credit between 12.5 percent and 50 percent for up to 12 weeks of wages for qualifying employees. The minimum service requirement for a qualifying employee has been reduced from one year to six months.

In addition, Section 127 of the Internal Revenue Code, governing employer-provided student loan repayment and tuition assistance, continues to allow tax-free student loan repayments or assistance of up to $5,250 per employee annually, with inflation adjustments beginning in 2027. Employers may limit eligibility to employees actively repaying student loans or require repayment if an employee leaves within a specified period.

Fringe Benefit Taxation Changes

Employer moving expense reimbursements, previously excludable from income, are now taxable beginning with tax years after 2025. These amounts must be included as taxable income, a change that may be particularly significant for employers with expatriate employees or executives who relocate for work.

ACA Marketplace Subsidies and Medicaid Eligibility Changes

The Act tightens aspects of the ACA premium tax credit (PTC) framework. The PTC is a subsidy that limits individual or household premium costs for ACA Marketplace coverage to a percentage of income, with advance payments made to insurers to reduce monthly payments. Eligibility for the PTC generally depends on income, affordability of employer coverage, government health insurance program eligibility, tax filing status, and dependent status.

Effective January 1, 2026, any excess advance PTC must be fully repaid, and PTC is unavailable during certain enrollment periods. Beginning in 2028, individuals must complete annual verification to maintain eligibility for the credit.

Executive Compensation Limits and Employer Reporting Thresholds

For publicly held corporations, the $1 million deduction limit on covered executive compensation applies on an aggregate basis across controlled group members, limiting total deductible compensation when executives receive pay from multiple affiliated entities.

With a new year underway, employers may wish to take a fresh look at their employee benefits programs.  For questions about how these changes may affect your organization or for assistance navigating new deductions and compliance obligations under the Act, contact your Varnum attorney or a member of our Employee Benefits Practice Team.

Reminder: Michigan Minimum Wage Increase Effective January 1

Michigan employers should note that a new minimum wage increase takes effect January 1, 2026. Under legislation passed in February 2025, the minimum hourly wage will rise to $13.73 per hour on January 1.

Beginning January 1, 2026, the minimum wage for tipped employees will increase to 40 percent of the standard minimum wage, $5.49 per hour, continuing a phased-in schedule in future years.

Employers should review payroll practices, budgeting, and compliance policies now to prepare for the upcoming changes. Additional increases are scheduled for 2027 and beyond, with future adjustments tied to inflation.

For questions about compliance or how these changes may affect your workforce, please contact your Varnum labor and employment attorney.

NHTSA Seeks Comments on Updating 5-Star Safety Ratings Program

NHTSA Seeks Comments on Updating 5-Star Safety Ratings Program

On Friday, December 5, the National Highway Traffic Safety Administration (NHTSA) published a notice and request for comments on a new information collection program pursuant to the Paperwork Reduction Act of 1995 (the PRA). The notice reaffirms that NHTSA is proceeding with research regarding updates to the 5-Star Safety Ratings Program, also known as the New Car Assessment Program (NCAP). Although NCAP is primarily a consumer-facing program, any changes to its rating structure or required vehicle labeling have significant implications for vehicle manufacturers and suppliers.

Congressional Requirements for Vehicle Labels

The Safety Through Informed Consumers Act of 2015, part of the larger Fixing America’s Surface Transportation Act of 2015, requires NHTSA to issue a rule to place crash avoidance information next to crashworthiness information on the stickers that manufacturers place on motor vehicles. While crash avoidance information is available on NHTSA’s website, the agency has not yet updated the 5-Star Safety Ratings information on the Monroney label.

Delays in Modernizing Safety Ratings

For more than a decade, NHTSA has worked to modernize the design of the safety ratings at the point of sale. Shifts in administration can cause delays, as each new administration seeks to align the program with its policies. However, the primary cause of delay stems from NHTSA’s interactions with the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA). OIRA can delay NHTSA rulemakings, research, and information collections for years, even when NHTSA is seeking to implement congressionally mandated rules and programs.

Next Steps for Suppliers and Manufacturers

Completing the research that OIRA, not a statute, requires is a critical step toward updating the safety information on vehicle labels. The substantive updates NHTSA made to NCAP last year, combined with a label change, would directly affect how manufacturers present crashworthiness and crash avoidance data at the point of sale and how consumers view their products. Once the research is complete, rulemaking will follow to update the regulatory requirements for Monroney label content, making early preparation essential for OEMs and suppliers involved in vehicle safety systems.

Engaging in NHTSA’s request for comments is an important opportunity to shape future requirements and ensure technical and operational feasibility. For questions, contact Varnum’s mobility attorneys.

Eco-Conscious Estate Planning and Natural Burial Options

Eco-Conscious Estate Planning

With more people seeking sustainable and meaningful end-of-life options, eco-conscious estate planning and natural burial are growing in popularity. These approaches integrate principles of sustainability, legacy, and care for future generations into the estate planning process.

Eco-Conscious Planning Options

Personal values can play a significant role in estate planning. Many individuals pursuing eco-conscious estate planning choose to:

  • Direct part of their estate to environmental nonprofits, land trusts, or conservation organizations.
  • Create a donor-advised fund to support environmental or conservation projects.
  • Include instructions about how to divide, distribute, repurpose, and steward their tangible assets, such as heirloom tools.

Landowners with ecologically significant property can generate a charitable deduction by:

  • Placing land under a conservation easement, or
  • Adding deed restrictions to preserve the land for nature or public access.

Natural Burial: A Sustainable Option

Another eco-conscious choice is a natural burial, often referred to as a “green burial.” This involves burying loved ones without using non-biodegradable material such as embalming fluid, metal or lacquered caskets, or cement vaults. Instead, natural burials use:

  • Biodegradable materials such as cotton clothing and natural fibers.
  • Simple or sustainably sourced wooden caskets.

Natural burials often take place in:

  • Natural burial grounds designed around eco-conscious practices.
  • Conservation cemeteries protected by a permanent conservation easement.
  • Designated natural-burial sections within traditional cemeteries.
  • Private burial grounds, such as family cemeteries (permits and approvals required).

Natural burial is steadily regaining popularity across the U.S. According to the National Funeral Directors Association, almost two-thirds of Americans would consider natural burial, up from half just five years ago.

Estate Planning That Aligns with Personal Values

Sustainability-minded individuals have many options for eco-conscious estate planning and end-of-life planning. Our attorneys help clients incorporate personal values into their estate plans through creative strategies that reflect their environmental and ethical priorities.

To design an estate plan that aligns with your values, contact our Estate Planning Practice Team for guidance.

2025 summer associate Tony Mayotte contributed to this advisory. Tony is currently a student at the University of Michigan Law School.

Estate Planning for Intellectual Property Owners: Protect Your Creative Legacy

Estate Planning for Intellectual Property Owners: Protect Your Creative Legacy

For professionals who create or own intellectual property (IP), including inventors, artists, developers, athletes, or entrepreneurs, estate planning takes on added importance and complexity. Intellectual property can be a person’s most valuable asset, yet it is often overlooked or poorly documented in estate plans.

Why Estate Planning for Intellectual Property Matters

Traditional estate plans typically include a will, financial and medical powers of attorney, and often one or more trusts. However, owners of IP assets face additional considerations. Intellectual property assets, including patents, copyrights, trademarks, and trade secrets, often have legal protections or restrictions and may generate ongoing income through royalties. Additionally, most forms of IP require continuing maintenance that must be timely satisfied.

Without careful planning, IP rights may become difficult to transfer, become the subject of disputes, lose value, or even be abandoned entirely. Incorporating IP management into your estate plan ensures your creative and economic legacy is protected.

Steps to Include Intellectual Property in Your Estate Plan

To plan for IP assets, start by confirming that all intellectual property is registered and ownership accurately recorded, so the legal owner is clearly identified. In the United States, this typically means registration with the U.S. Patent and Trademark Office (USPTO) or the U.S. Copyright Office. Next, list and describe your IP assets in your estate planning documents to ensure they can be transferred, licensed, or maintained appropriately.

Coordinate your estate plan with any existing IP contracts, licensing agreements, and ownership documentation. For example, IP held through a business or subject to employment-related restrictions may have transferability limitations that need to be addressed.

Managing IP Assets and Future Income

A well-structured estate plan clearly states who will inherit your intellectual property, who will manage it, and what authority each stakeholder will have. For creators or business owners with ongoing revenue from IP, such as books, software, designs, or patents, it is essential to decide how to handle that income stream.

Work with your attorney to determine whether the rights and revenue will pass to one or more beneficiaries, be sold, be transferred to a business partner, or be managed by a corporate entity. The management rights and the rights to revenue are distinct interests that do not necessarily need to be transferred to the same people or entities, and it often makes sense to separate them for estate planning purposes.

Using Trusts to Protect and Manage Intellectual Property

In many cases, creating a trust to hold and administer your IP may offer added flexibility, privacy, and continuity. A trust can help ensure professional management of your intellectual property, providing your beneficiaries with the financial benefits of IP ownership without giving them legal control over decisions.

It is essential to name a trustee with the specialized knowledge and experience needed to license your work, collect royalties, and enforce your rights. For valuable IP portfolios, certain trusts can also improve estate and gift tax efficiency.

Preserve and Protect Your Creative Legacy

Thoughtful estate planning for intellectual property ensures that your creative work and its financial value are preserved, protected, and aligned with your long-term goals.

For guidance on managing and transferring IP assets, contact your Varnum attorney or a member of our Estate Planning or Intellectual Property Practice Teams.

2025 Florida Condominium Budget Reform: New Reserve Funding and Vote Rules

Varnum Viewpoints

  1. Condominium associations required to obtain a SIRS, should update it if they plan to use the newly authorized reserve funding vehicles.
  2. If a budget includes substantial discretionary increases, the board is now required to proactively propose an alternative budget, and the membership must vote before the board can adopt the higher budget.

The 2025 legislative session brought many changes to Chapter 718, which governs Florida condominium associations. Two of those changes are impacting the drafting and approval of 2026 budgets for many Florida condominiums.

New Reserve Funding Options

Condominium associations with three or more habitable stories that are required to obtain a structural integrity reserve study (SIRS) may now use loans, lines of credit, and special assessments as a source of reserve funding. If a majority of all unit owners authorize the board to obtain or use one of these financial vehicles, the association can budget for reserve funding based on anticipated funds, even if they have not yet been deposited into the bank account. This could result in lower annual reserve contributions for structural items.

Florida Statutes section 718.112, however, still provides that “the reserve amount for [structural] items must be based on the findings and recommendations of the association’s most recent structural integrity reserve study.” Because most SIRS were completed in 2023 and 2024, before this legislation, the operational concern is that the budget will not comply with Chapter 718 unless it matches the reserve funding with the most recent SIRS. Associations wishing to take advantage of loans, lines of credit, or special assessments to contribute to reserve funding must also update their SIRS to reflect these new assumptions and anticipated revenue sources. 

Changes to Budget Approval Procedures

Historically, Chapter 718 has placed guardrails on a condominium association’s ability to increase its budget. Until this year, the unit owners had the right to petition and force a vote of the membership on an alternative (and usually lower) budget when the budget increased by more than 15% from the prior year’s budget. The general idea was that the board had jurisdiction over the budget, except that the membership could mobilize if the budget increased too much.

The new legislation requires the board of directors to proactively schedule and hold a vote of the membership before it can adopt a budget that increases by more than 15% compared to the prior year’s budget. This switch now requires the board to seek permission before adopting significant budgetary increases. In contrast, the statute previously authorized the membership to request an alternative budget after the fact if the membership objected.

Step 1: Determining if a Membership Vote is Required

Procedurally, two things must occur. First, the Board must determine whether the budget forces a membership vote. The statute now excludes certain expenses from the calculation, including required reserves, non-recurring maintenance, repair, and replacement expenses for structural reserve components, and insurance premiums. If these factors drive the increase, the budget may not require a special vote. Boards, however, cannot use decreases in insurance premiums to offset increases.

Step 2: Creating a Substitute Budget

If the budget triggers a vote, the board must create a “substitute budget that does not include any discretionary expenditures that are not required to be in the budget” and schedule a membership meeting before adopting the 2026 budget. The law does not define “discretionary expenditures,” which may make it difficult to determine which items must be included.    

The substitute budget is approved if a majority of all voting interests vote in favor. If the membership vote fails, the board may adopt the budget with the proposed increases.

By updating structural integrity reserve studies and carefully reviewing budgets with discretionary increases, boards can leverage new funding options while ensuring compliance and transparency. For guidance on implementing these updates or reviewing your association’s 2026 budget, contact your Varnum attorney.

Watch this video to hear more from Steve Adamczyk.

2026 Cost of Living Adjustments

The Internal Revenue Service has announced the 2026 cost of living adjustments for employer benefit plan limits. These adjusted amounts may require updates to open enrollment materials, or supplements to open enrollment materials if they have already been published using 2025 or projected numbers. The adjusted amounts generally apply for plan years beginning in 2026, although some apply specifically to the 2026 calendar year. Please click for a printer-friendly version of the table below.

Employee Benefits Plan

Plan Year
2026
2025
401(k), 403(b), 457 deferral limit
$24,500
$23,500
Catch-up contribution limit (age 50 or older by end of year)
$8,000
$7,500
Catch-up contribution limit (age 60, 61, 62, or 63 by end of year)
$11,250
$11,250
Roth catch-up contribution limit
$150,000 or more in FICA wages in 2025
N/A
Annual compensation limit
$360,000
$350,000
Annual benefits payable under defined benefit plans
$290,000
$280,000
Annual allocations to accounts in defined contribution plans
$72,000 (but not more than 100% of compensation)
$70,000 (but not more than 100% of compensation)
Highly compensated employee
Compensation more than $160,000 in 2025 plan year
Compensation more than $155,000 in 2024 plan year

Health Savings Accounts

Calendar Year
2026
2025
Maximum contribution
Family
Self
$8,750
$4,400
$8,550
$4,300
Catch-up contribution limit (age 55 or older by end of plan year)
$1,000
$1,000
Minimum deductible
Family
Self
$3,400
$1,700
$3,300
$1,650
Maximum out-of-pocket
Family
Self
$17,000
$8,500
$16,600
$8,300

Social Security

Calendar Year
2026
2025
Taxable wage base
$184,500
$176,100
Maximum earnings without loss of benefits
Under full retirement age

Year you reach full retirement age
$2,040/mo. ($24,480/yr.)

$5,430/mo. up to mo. of full retirement age ($65,160/yr.)
$1,950/mo. ($23,400/yr.)

$5,180/mo. up to mo. of full retirement age ($62,160/yr.)

Social Security Retirement Age

Year of Birth
Retirement Age
Prior to 1938
Age 65
1938
65 and 2 months
1939
65 and 4 months
1940
65 and 6 months
1941
65 and 8 months
1942
65 and 10 months
1943 – 1954
66
1955
66 and 2 months
1956
66 and 4 months
1957
66 and 6 months
1958
66 and 8 months
1959
66 and 10 months
1960 and later
67

To see how this applies in your situation, contact our Employee Benefits Practice Team.

MPSC Approves Consumers Energy Tariff for Large Data Centers

MPSC Approves Consumers Energy Tariff for Large Data Centers

The Michigan Public Service Commission (MPSC) on November 6, 2025, approved Consumers Energy’s application to amend its General Service Primary Demand (GPD) rate tariff to address service for large data center customers.

The order, issued in Case No. U-21859, establishes new rules for customers with a minimum service threshold of 100 megawatts (MW), or aggregated loads of 100 MW with individual sites of at least 20 MW under common ownership.

The commission added provisions to ensure that other ratepayers are not subsidizing data center costs, while leveraging potential system benefits created by large, consistent data center demand.

Key Provisions Approved by the Commission

Under the order, data centers taking service under the amended tariff will be subject to several new requirements, including:

  • Contract term: Minimum 15-year agreement, with a possible ramp-up period of up to five years.
  • Automatic extensions: Five-year extensions, with four years’ notice required for termination.
  • Minimum billing demand: Monthly billing at 80 percent of contract capacity.
  • Administrative fee: Upfront project proposal fee of $100,000, reconciled to Consumers Energy’s actual costs.
  • Financial security: Default collateral requirement equal to half of the required exit fee, decreasing over the contract term, in the form of a standby irrevocable letter of credit or cash,  not including a parent guarantee.
  • Exit fee: If the customer leaves early, the fee equals the minimum monthly bill multiplied by the agreement’s remaining months. Consumers Energy must attempt to mitigate this cost, potentially by reallocating unused capacity.
  • Contract adjustment: With four years’ notice, customers may request a one-time capacity reduction of up to 10 percent.
  • Service suspension: Possible if demand exceeds the contracted capacity by 1 MW or more.

Consumers must file ex parte applications with the commission prior to each large-load customer’s taking service to show compliance with the tariff requirements and that the costs caused by the interconnecting large-load customer to be served under this tariff are not being paid for by other customers. 

The commission did not address cost allocation, rate design, or broader issues related to the impact of data center load on the state’s renewable and clean energy standards in this order, emphasizing the urgency of implementing the protections in the new tariff.

Background on the Application

Consumers Energy initially filed its application on February 7, 2025, on an ex parte basis, seeking to amend its GPD tariff, the company’s existing rate for large industrial customers, to better manage the risks and requirements of serving new data centers with loads of 100 MW or more.

The utility proposed that these amendments would ensure equitable treatment between data centers and other ratepayers while supporting Michigan’s clean energy transition.

Stakeholder Proceedings and Issues Raised

After several parties objected to ex parte treatment, the MPSC opened an expedited contested case with formal hearings and briefing.

Intervenors included Michigan Attorney General Dana Nessel, several data center interests, environmental organizations, an association of industrial customers, as well as several clean energy trade associations, which were represented in the case by Varnum attorneys Laura Chappelle, Timothy Lundgren, and Justin Ooms.

Among the issues raised by intervenors were:

  • Whether data centers should receive unique rate treatment or be included under a general large-load tariff.
  • Whether the 100 MW threshold should be raised or lowered.
  • Whether large-load customers should remain under Rate GPD or be placed in a new rate class.
  • Whether contract terms, billing provisions, and financial protections were overly strict or insufficient.
  • How data center growth might affect Michigan’s clean energy and carbon reduction goals.
  • Whether customers should be required to submit clean energy sourcing plans or be permitted to obtain a preference for interconnection if they submit clean energy sourcing plans.
  • Whether the tariff should contain options to maximize the input large customers can have into the resources serving their loads, and maximize the efficiency with which these loads can be served.

Impact and Next Steps

The MPSC’s decision provides greater clarity and predictability for data center developers and operators seeking service from Consumers Energy.

For more information about how this ruling may affect data center projects or energy procurement strategies, contact your Varnum attorney or a member of the firm’s Energy or Data Center Practice Teams.