In May 2026, the Departments of the Treasury, Labor, and Health and Human Services (collectively, the “Departments”) published proposed rules that would establish a new category of “excepted fertility benefits” under federal law.
What You Need to KnowNew Flexibility Would Allow Expanded Access to Fertility Benefits: If implemented as proposed, the rules would enable each participant to obtain a lifetime benefit valued at up to $120,000 (indexed for medical inflation for plan years beginning after December 31, 2027). Employer Participation Is Optional and Flexible: Offering an excepted fertility benefit would be entirely voluntary, and the proposed rules would allow a fertility benefit plan to be structured as a standalone benefit for which employers could charge participants premiums and impose cost sharing. Participants would not be required to enroll in a group health plan to access the benefits. The Rules Won’t Provide Tax-Free Fertility Benefits to All Employees: Tax treatment under Sections 105, 106, and 213(d) of the Internal Revenue Code (the “Code”) is unchanged under the rules as proposed, so employers still will not be able to provide benefits for participants without a diagnosis of medical infertility (including same-sex couples and individuals seeking to have children on their own) on a tax-free basis. Key Dates Are Imminent: The public comment period for the proposed rules closes on July 13, 2026. If finalized, the rules would take effect for plan years beginning on or after January 1, 2027. |
The proposed rules, which would advance President Trump’s February 2025 Executive Order 14216 titled Expanding Access to In Vitro Fertilization, are intended to make it easier for employers to offer fertility-related benefits by allowing those benefits to be provided on a standalone basis through an excepted benefit plan. This would mean that fertility benefits could be exempted from complex requirements that apply to group health plans under the Affordable Care Act (ACA) and other federal laws.
While these regulations are not yet in effect and remain subject to review after the notice-and-comment period closes on July 13, 2026, the proposal signals a significant shift in policy. Below, this Insight answers key questions about the proposed rules, explains how the rules address existing barriers to employer-sponsored fertility benefit plans, and highlights a few potential employer concerns that the proposed rules do not (yet) address.
Q: Under the existing legal structure, what is required of employers that want to offer fertility benefits?
Today, fertility benefits are treated as “group health plan” benefits and are therefore subject to the full set of market reform requirements and restrictions under federal law. This includes, among others, the ACA’s prohibition on annual and lifetime dollar limits for essential health benefits, cost-sharing limitations, and various coverage mandates imposed by the Employee Retirement Income Security Act, the Code, and the Public Health Service Act. As a standalone benefit, fertility coverage generally cannot satisfy these requirements.
In practical terms, this means that an employer that offers fertility coverage typically must integrate the coverage into its major medical plan, rather than offering it as a separate, standalone benefit. If the benefit is integrated into the employer’s major medical plan, employees must be enrolled in either the employer’s plan or another group health plan in order to access the benefit—employees who do not have group health coverage cannot be covered by the integrated fertility benefit.
Q: What are “excepted benefits,” and how would the proposed rules ease the burden on employers?
Certain categories of benefits are “excepted” from the market reform requirements described above. Familiar examples include limited-scope dental and vision coverage and employee assistance programs (EAPs). Because they are excepted, these benefits can be structured and offered separately from an employer’s major medical plan. Excepted benefits can have their own deductibles, networks, dollar limits, and plan designs without triggering compliance obligations that would otherwise make them impractical to offer on a standalone basis.
The proposed rules would add “excepted fertility benefits” as a new category of limited excepted benefits. For employers, this would provide a streamlined approach for offering fertility coverage on a standalone basis—whether alongside a major medical plan or independently of one—without having to navigate the ACA market reform requirements that can make standalone fertility benefits difficult to implement.
Q: What services would the new excepted fertility benefit cover?
To qualify as an excepted fertility benefit, “substantially all” covered benefits must be for the “diagnosis, mitigation, or treatment of infertility or infertility-related reproductive health conditions,” and “substantially all” services must be provided by licensed medical professionals.
The Departments contemplate a wide range of covered services under an excepted fertility benefit plan, including:
- diagnostic testing, including blood tests, semen analyses, hormone panels, and procedures such as laparoscopies and hysteroscopies;
- treatments to address the underlying causes of infertility, including for conditions such as polycystic ovary syndrome, endometriosis, uterine fibroids, thyroid disorders, varicoceles, and male-factor infertility;
- ovulation induction (oral or injectable medications);
- intrauterine insemination;
- IVF and other assisted reproductive technology procedures;
- fertility counseling and education; and
- pre-conception care, fertility awareness-based methods, and lifestyle interventions.
The proposed rules also specifically permit coverage for the assessment of the fertility health of the covered employee’s partner, where the partner is also a plan participant or beneficiary. Notably, the Departments expressly state that the excepted fertility benefit is not intended to include abortion or abortion-related services.
Q: Are there limits on how much an excepted fertility benefit plan can pay?
Yes. The proposed rules would impose a lifetime dollar limit of $120,000 per participant (inclusive of any benefits provided to the participant’s covered beneficiaries). For plan years beginning after December 31, 2027, this cap would be indexed for medical inflation using the medical care component of the Consumer Price Index.
The Departments explained that they set the $120,000 lifetime limit after considering that a single IVF cycle can cost $15,000 to $20,000, and that the average patient requires approximately 2.5 cycles to achieve a successful pregnancy. The $120,000 limit is intended to give employers the flexibility to offer a benefit generous enough to cover multiple fertility treatments while still keeping the benefit sufficiently “limited” to satisfy the statutory framework for excepted benefits.
The Departments specifically solicited comments on the appropriateness of the $120,000 lifetime limit and on whether an annual dollar limit (for example, up to $15,000 per year with unused amounts carrying over) might be more practical for employers and participants than a lifetime cap.
Q: What conditions must an employer satisfy to offer the excepted fertility benefit?
To qualify as an excepted fertility benefit, the coverage must satisfy four conditions:
- Scope of Benefits: Substantially all coverage must be for the diagnosis, mitigation, or treatment of infertility or infertility-related reproductive health conditions, and substantially all covered services must be provided by licensed medical professionals.
- Lifetime Dollar Limit: The plan must impose a lifetime maximum that does not exceed $120,000 (indexed for medical inflation after December 31, 2027).
- Separate from Major Medical or “Not an Integral Part” of the Plan: The fertility benefit must either be provided under a separate insurance policy or be “not an integral part” of the employer’s primary group health plan. For self-insured plans to meet this test, the employer must make a traditional group health plan available to participants who are offered the fertility benefit, and participants must be allowed to decline enrollment in the group health plan without losing access to the fertility benefit. This mirrors the approach used for excepted benefit health reimbursement accounts (HRAs) and health flexible spending accounts (FSAs).
- Written Notice: The plan must provide participants and beneficiaries with a written notice describing the coverage, including a summary of benefits and limitations (including the lifetime dollar limit), how to access network providers, and how to submit claims. The notice must be written at no higher than an 8th-grade reading level and must be provided before the first enrollment opportunity and annually thereafter. The Departments stated that this notice is required in addition to any notice requirements otherwise applicable to excepted benefits, including a summary plan description.
Importantly, employers are not required to contribute to the cost of the fertility benefit; they may charge participants premiums and impose cost sharing, as is permitted for standalone dental and vision coverage.
Q: When would the proposed rules take effect?
As proposed, the rules would apply to plan years beginning on or after January 1, 2027. The Departments solicited comments on whether this timeline is workable for employers and insurers, and on whether the rules should instead take effect immediately upon finalization to allow early adopters to move quickly. The comment period closes July 13, 2026.
What the Proposed Rules Don’t Address: Ongoing Challenges for Employers
While the proposed rules represent a step forward for employers seeking to expand fertility benefits, they leave several significant issues unresolved. Three of the most important are addressed below.
Q: Will fertility benefits provided under an excepted benefit plan be tax-free for all employees?
One long-standing issue with providing fertility benefits to employees is that only “medical expenses” under Code Section 213(d) can be covered on a nontaxable basis. To qualify as a Section 213(d) “medical expense,” fertility-related treatment must be provided to overcome a condition of medical infertility. As the Internal Revenue Service (IRS) has previously confirmed, for employees seeking fertility treatments but who do not have a diagnosis of infertility—including same-sex couples or individuals who want to conceive a child on their own—this means that fertility benefits cannot be provided on a nontaxable basis.
Instead, any fertility benefits provided to such individuals may only be provided as taxable benefits. This can create administrative challenges for employers, as they must ensure that nontaxable fertility benefits are provided only to those whose fertility-related expenses constitute “medical expenses” under Section 213(d).
The proposed rules do not address this issue. The Departments are silent on the tax treatment of benefits provided under an excepted fertility benefit, and the classification of coverage as an “excepted benefit” does not, by itself, change the income tax analysis limiting tax-favored status to Code Section 213(d) “medical expenses.” Employers that want to extend fertility benefits to employees on a nontaxable basis will need to ensure that such benefits are provided only for those employees with a condition of medical infertility, absent further IRS guidance or separate legislative action.
Q: Can employees who are enrolled in a high-deductible health plan (HDHP) and eligible to contribute to a Health Savings Account (HSA) also participate in an excepted fertility benefit?
Under the rules governing HSAs, an individual is eligible to contribute to an HSA only if they are covered by an HDHP and are not covered by any other “health plan” that provides coverage before the HDHP deductible is satisfied. A reasonable concern is that a fertility benefit offering first-dollar coverage—meaning that it pays benefits without requiring the participant to first meet a deductible—could be treated as “other coverage” that disqualifies the employee from contributing to an HSA.
The IRS has previously addressed this issue in other contexts. For example, the IRS has confirmed that excepted benefit HRAs do not disqualify participants from HSA eligibility. However, no comparable guidance has been issued specifically addressing whether an excepted benefit providing first-dollar coverage would similarly be “disregarded” for HSA eligibility purposes, and the proposed rules do not resolve this question with respect to fertility benefits.
Q: What about coverage for long-term storage of eggs and other reproductive materials?
The tax treatment of reproductive material storage (i.e., eggs, sperm, and embryos) is another area that remains unclear under existing guidance and the proposed rules.
The general approach that has emerged in practice is as follows: the costs associated with freezing and storage of eggs and other reproductive materials, when incurred as part of an active fertility treatment cycle, have generally been treated by employers as related to the treatment itself, and therefore eligible for pre-tax coverage (to the extent the treatment constitutes a “medical expense,” as discussed above). Short-term storage costs (typically up to one year) have been treated similarly, as incidental to the fertility cycle.
Longer-term storage, however, is a different matter. When an employee freezes eggs or other reproductive materials for “elective” reasons—for example, to preserve future fertility options without any current diagnosis or treatment plan—the prevailing view among benefits practitioners is that such costs are not incurred to treat an existing medical condition and therefore do not constitute “medical care” under Section 213(d). As a result, employer reimbursements for ongoing, elective long-term storage are generally considered taxable income to the employee.
As with fertility benefits for employees without an infertility diagnosis, determining whether reproductive-material storage constitutes a “medical expense” creates an administrative burden for employers. The proposed rules do not yet address this issue, so employers with nontaxable fertility benefits should continue to ensure that storage expenses are directly related to an active fertility treatment cycle.
What Employers Should Do Now
The proposed rules represent a significant development for employers seeking to offer or expand fertility benefits. If finalized, they would give employers a new, flexible vehicle for providing standalone fertility coverage.
In the near term, employers should:
- review their current fertility benefits, if any, to assess whether they could be restructured as excepted fertility benefits under the proposed rules;
- consider submitting comments by the July 13, 2026, deadline, particularly on issues such as the appropriate dollar limit, the HSA interaction, and the timing of applicability; and
- work with benefits counsel to assess the tax treatment of any fertility benefits currently offered, particularly for employees who may not have a medical infertility diagnosis and for benefits involving long-term storage of reproductive materials.
The tax and HSA issues described above are not created by the proposed rules: they predate them. But the increased attention on fertility benefits that will follow from this rulemaking makes it an opportune time for employers to evaluate their current programs and, where appropriate, seek guidance from counsel.
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For additional information about the issues discussed in this Insight, please contact the attorney(s) listed on this page or the Epstein Becker Green Employment, Labor & Workforce Management attorney who regularly handles your legal matters.
Staff Attorney Elizabeth Ledkovsky contributed to the preparation of this Insight.
