Federal News Roundup for July 10, 2025

Supreme Court Ruling Allows Trump to Resume Mass Layoffs

The U.S. Supreme Court on Tuesday, July 8, cleared the way for the administration of President Donald Trump to downsize numerous federal agencies and pursue mass government job cuts. The results may work to dramatically reshape the purpose and activities of these agencies (e.g., the Equal Employment Opportunity Commission, Social Security Administration, Pension Benefit Guaranty Corporation, National Labor Relations Board) and remove tens of thousands of workers from the government payrolls.

The case, Donald J. Trump, President of the United States, et al., v. American Federation of Government Employees, et al., sought to determine whether Trump’s Feb. 11 executive order directing federal agencies to prepare for reductions in force (RIFs) was lawful.

In an 8-1 decision (Justice Ketanji Brown Jackson dissented), the court sided for the plaintiff. While stating the executive order was likely lawful, the unsigned, 17-page ruling document cautioned, “We express no view on the legality of any agency RIF and reorganization plan produced or approved pursuant to the executive order and memorandum.”

Justice Sonia Sotomayor concurred in the grant of stay but added context in the document, writing, “I agree with Justice Jackson that the president cannot restructure federal agencies in a manner inconsistent with congressional mandates. Here, however, the relevant executive order directs agencies to plan reorganizations and reductions in force ‘consistent with applicable law,’ and the resulting joint memorandum from the Office of Management and Budget and Office of Personnel Management reiterates as much. The plans themselves are not before this court, at this stage, and we thus have no occasion to consider whether they can and will be carried out consistent with the constraints of law.”

The order lifts a May 22 injunction issued by Judge Susan Illston at the U.S. District Court for the Northern District of California that indefinitely halted efforts to conduct layoffs at more than a dozen federal departments and agencies. Illston, an appointee of former President Bill Clinton, had opined that Trump’s executive order was likely unlawful and such wide-scale layoffs required congressional authority.

Tax Law May Trigger Renewed Push for Benefit Proposals

The One Big Beautiful Bill, signed into law by President Trump on Friday, July 4, includes plenty of policies and programs within its 870 pages. However, the final version that was passed by the Senate and finalized by Trump left a host of benefit-related proposals on the cutting-room floor, including those from the House of Representatives version aimed at:

Increasing the flexibility of health savings accounts (HSAs) and flexible spending arrangements (FSAs);
Putting into federal law the framework for individual coverage health reimbursement arrangements (ICHRAs); and,
Setting federal rules for pharmacy benefit managers (PBMs).

As such, watch for members of Congress as well as the Senate to shed fresh light on:

HSAs, since the House version of the omnibus bill laid out several targeted account expansions, including:
- Making HSAs more accessible and useful to those aged 55 and over (e.g., allowing those still employed and enrolled in Medicare Part A to continue to make contributions to their account);
- Making changes to contribution limits and introducing new spousal contribution and catch-up rules;
- Allowing HSA account holders to use more healthcare services and providers; and,
- Making additional expenses (e.g., fitness facility membership fees) eligible for HSA reimbursement.
FSAs, since the final tax law omitted provisions that would have allowed individuals to:
- Roll over amounts from health FSAs or health reimbursement arrangements (HRAs) into an HSA, even for those newly enrolled in a high-deductible health plan (HDHP); and,
- Be HSA-eligible even if their spouse was enrolled in a general-purpose health FSA.
ICHRAs, which were based on regulatory guidance. These account-based health plans:
- Provide employers an alternative to offering a traditional group health plan to their employees;
- Allow employers to provide defined non-taxed reimbursements to employees for qualified medical expenses, including monthly premiums and out-of-pocket costs like copayments and deductibles.
- Stipulate that employees must be enrolled in individual health insurance coverage (e.g., through the Affordable Care Act Marketplace) to use the funds. These accounts are only for employees, not self-employed individuals.
PBMs, through the:
- Pharmacy Benefit Manager Transparency Act, which aims to: (1) regulate PBMs by prohibiting certain practices and increasing operational transparency; (2) keep PBMs from engaging in “arbitrary, unfair or deceptive” pricing practices; and, (3) mandate greater transparency in their dealings with health plans and pharmacies.
- Prescription Pricing for the People Act, which aims to: (1) require the Federal Trade Commission (FTC) to complete a study examining the effects of consolidation on pricing in the PBM industry, as well as “other potentially abusive behavior by PBMs”; and, (2) instruct the FTC to provide policy recommendations to Congress to improve competition and protect consumers.

Bill Aims to Let Workers Use HSA, FSA or HRA for Wearable Tech

Rep. David Schweikert (R-Arizona) recently reintroduced the Wearable Equipment Adoption and Reinforcement and Investment in Technology Act (WEAR IT) bill. Schweikert and Ami Bera (D-California) sponsored a similar bill in 2023 that didn’t make it out of committee.

The new bill would amend the Internal Revenue Code of 1986 to allow workers to spend up to $375 per year from their HSAs, FSAs or HRAs on wearable healthcare technologies.

The bill defines such technologies as a device or software (including subscriptions) that:

“Is worn on the body or used primarily in connection with a device that is worn on the body.”
And, “Either collects and analyzes physiological data for the diagnosis, cure, mitigation, treatment or prevention of a disease, impairment or health condition; or assists the rendering of a diagnosis or provides a treatment, mitigation or cure for any disease, impairment or health condition.”

DOL Pulls Plan to End Subminimum Wage for Disabled Workers

The U.S. Department of Labor (DOL) on Monday, July 7, withdrew a rule it had proposed under the presidential administration of Joe Biden that would have prohibited employers from paying people with disabilities less than the federal minimum wage.

The proposal, which was published for public comment in the Federal Register on Dec. 4, 2024, would have:

Prohibited the agency from issuing certificates that allow employers to pay disabled workers less than federal minimum wage (currently $7.45 per hour).
Given employers with existing certificates three years to phase out the practice of paying subminimum wages.

In withdrawing the proposal, the DOL stated it “does not have the statutory authority” to end a Congressionally mandated program designed to remove employment barriers for the disabled. Section 14(c) of the Fair Labor Standards Act (FLSA) currently stipulates that the DOL’s Wage and Hour Division may issue certificates to employers that allow them to pay disabled workers subminimum wage if their disabilities impair earning or productivity capacity.

According to a DOL fact sheet, “Subminimum wages must be commensurate wage rates based on the worker’s individual productivity, no matter how limited, in proportion to the wage and productivity of experienced workers who do not have disabilities performing essentially the same type, quality and quantity of work in the geographic area from which the labor force of the community is drawn.”

GOP Senators Unveil Contractor-Focused Bill Package

Republican Senators Bill Cassidy (Louisiana), Tim Scott (South Carolina) and Rand Paul (Kentucky) on Monday, July 7, introduced a legislative package that seeks to:

Alter federal labor by enabling 27 million American independent workers to access portable workplace benefits, like healthcare and retirement; and,
Provide consistency and clarity in how an independent contractor is defined, making it easier for workers to find jobs that allow for flexibility and independence.

The Unlocking Benefits for Independent Workers Act, sponsored by Cassidy (chair of the Senate’s Health, Education, Labor and Pensions committee), would:

Establish a safe harbor under federal law for employers that would like to voluntarily provide benefits;
Apply to any benefit or protection commonly provided to full-time employees, such as retirement and healthcare benefits; and,
Apply to emerging models where firms may pay into portable accounts, or any combination of those arrangements.

The Independent Retirement Fairness Act, also sponsored by Cassidy, would allow independent workers to participate in certain retirement plans (e.g., pooled employer plans and single employee pension individual retirement accounts) that are already available under federal law.

The Modern Worker Empowerment Act, sponsored by Scott (chair of the Senate’s Banking, Housing and Urban Affairs committee) and adjoined to a companion bill previously proposed in the House of Representatives by Kevin Kiley (R-California), would:

Create a federal test to determine if a worker is an employee or contractor; and,
Generally make it easier for workers to be classified as contractors.

The Association Health Plans Act, sponsored by Paul, would amend the Employee Retirement Income Security Act of 1974 (ERISA) to give small business employees, sole proprietors and gig workers the ability to aggregate together and access health insurance through association health plans (AHPs).

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