2026 Medicare Advantage and Part D Final Rate Notice: What to Expect
Key Takeaways
CMS is expected to issue the 2026 final rate notice for Medicare Advantage (MA) and Part D plans by April 7, 2025.
The January 2025 advance notice proposed policies that would increase payments to MA plans by 2.23% on average; accounting for expected changes in coding increases CMS’ estimate to 4.33%. The increase is driven largely by a projected 5.93% growth in benchmarks, continued phase-in of a new risk model, and adjustments to risk scores.
Plans have advocated with CMS to increase cost growth projections and minimize the impact of payment and risk score adjustments, with the goal of improving on the 2.23% payment increase.
An expected MA and Part D final rule could also affect how plans and other stakeholders approach the 2026 payment year.
Why This Matters
The Centers for Medicare & Medicaid Services (CMS) is expected to finalize payment rates and policies for the 2026 Medicare Advantage (MA) and Part D programs in early April 2025. The final rate notice kicks off the sprint to submit 2026 plan bids to CMS by the June 2, 2025, deadline.
The final payment policies determine how plans approach bidding, including:
Whether and by how much they can provide core Medicare benefits below the benchmarks CMS sets.
How many rebate dollars they must spend on supplemental benefits that enrollees value.
How much they must spend to offer Part D benefits for the majority of plans that combine medical and prescription drug coverage.
A growing number of physicians are also taking note of the rate setting process. Physicians who participate in shared risk and other value-based payment models with MA plans stand to gain or lose revenue depending on the final payment rates and policies. Providers considering whether to participate in MA networks may look to the final rate notice to evaluate a program’s potential growth in the coming year, because rate increases typically lead to more generous benefits and drive enrollment.
The following key elements of the rate notice will determine the final payment update for 2026.
Growth Rate
The growth rate is CMS’s estimate of how much the cost of providing care to enrollees will change in 2026. It forms the basis for benchmark payments to plans and is primarily based on utilization trends among Medicare beneficiaries in the “traditional” or fee-for-service (FFS) program. MA plans benefit when the growth rate is high.
The advance notice estimated the 2026 growth rate at 5.93%, which is an increase over recent years. MA plans noted that this estimate relied on FFS data only through early 2024, however, and argued that using more recent data would suggest even higher utilization. Plans have urged CMS to do so for the final notice.
The advance notice also proposed “technical” adjustments to the way CMS calculates FFS utilization and costs. These adjustments would effectively lower the growth rate, and plans have urged CMS to slow or halt the changes’ implementation to limit that impact.
Stakeholders should keep in mind that the growth rate announced in the final rate notice is a national average. Benchmark payments are set at the county level, so a plan’s payments will rise or fall based on where it offers coverage and enrolls members. Payments are also affected by a plan’s Star rating and its enrollees’ health status. Plans will rely on detailed county-level data released in conjunction with the final rate notice to determine exactly how their payments will change for 2026.
Risk Model
While the growth rate determines how much the benchmark payment in a county will change for 2026, the risk model is also an important piece of payment. In 2024, CMS began phasing in an updated risk model for MA that was intended to address concerns about coding intensity that led to higher risk-adjusted payments. The transition to the new risk model is scheduled to conclude in 2026, but some plans have urged CMS to freeze the transition at the current stage or reinstate the old risk model. Even if the Trump administration is sympathetic to this request, it likely would not have enough time to reinstate the old risk model for the 2026 bid cycle. Other stakeholders have urged CMS to finish the phase-in as scheduled, arguing that the new model imposes necessary curbs on the growing gap between FFS and MA risk scores.
A separate risk model adjusts Part D payments. The Inflation Reduction Act changed Part D benefit design by shifting a greater share of risk from the government to plans. As a result, the Part D risk model has taken on added importance for plans. Almost all MA enrollees choose plans that include Part D benefits, so changes to the Part D risk model are an important part of the MA payment calculation. CMS adjusted the model in 2025 and proposed more updates for 2026 to keep up with drug prices and utilization trends. Stakeholders have generally expressed support for the proposed updates, and CMS will likely finalize them as proposed.
Normalization Factor
The normalization factor is a highly technical adjustment CMS makes to risk scores and payments to account for changes in the FFS population’s underlying risk. It is one of the few levers CMS has, besides the growth rate, to dial MA payments up or down in a given year. How CMS calculates the normalization factor can have a big impact on payment. Because the healthcare disruptions of the COVID-19 pandemic made it difficult to identify risk trends, CMS has varied its calculation approach in recent years. For 2026, CMS proposed to use the same calculation method as in 2025, which would result in substantial cuts to MA risk scores and payments. Plans have urged CMS to adopt a different calculation approach that would soften the payment impact of the normalization adjustment.
In 2025 CMS changed the way Part D normalization is applied by creating separate factors for plans that combine MA and Part D benefits (MA-PDs) and plans that offer Part D benefits only (PDPs). CMS’s rationale was that Part D risk scores have increased much faster for MA-PDs than for PDPs. CMS proposed to continue this method in 2026, which could mean large reductions in Part D risk scores and payments to MA-PDs. Plans have argued that lower Part D risk-adjusted payments will lead to higher Part D premiums, which they must “buy down” with rebate dollars in order to offer plans that include both medical and drug coverage with no monthly premium. About 60% of MA enrollees enrolled in a $0 premium plan in 2025.
Stars Rating System
High scores in the Stars Rating System trigger bonus payments for MA plans and are an important marketing tool. The 2026 advance notice discussed several measure updates and work on potential changes like simplifying the measures and methods used to calculate ratings but most Stars changes come through rulemaking, not the rate notice process. While stakeholders should not expect to see any of these changes formalized in the final rate notice, they offer a preview of rulemaking to come.
Upcoming Final Rule
The final rate notice is not CMS’s only opportunity to make changes to the MA and Part D programs for 2026. In late 2024, CMS released a proposed rule for MA and Part D with provisions that would take effect in 2026. The final rule is now under review at the Office of Management and Budget, so CMS potentially could finalize some or all of those provisions in time for the 2026 bid cycle. One key proposal would allow Part D plans to cover anti-obesity medications such as Wegovy and Zepbound. While plans and other stakeholders have raised serious concerns about this proposal and urged CMS not to finalize it, many beneficiaries have expressed support.
The Bottom Line and What to Expect
When releasing the advance rate notice, CMS estimated MA payment rates would rise by 2.23% for 2026, on average. After factoring in expected trends in diagnosis coding, the agency projected an average MA payment rate increase of 4.33%. The advance rate notice was released under the Biden administration, so changes in the final rate notice might illuminate the Trump administration’s approach to MA. A bottom-line increase that improves on the 2.23% in the advance notice might bode well for plans and their physician partners. Anything less than 2.23% might signal rough seas ahead for the MA program.
The Trump Administration Proposes Changes to Regulations Governing Insurance Subject to the Affordable Care Act
In its first major attempt to reform the Affordability Care Act (“ACA”), the Trump Administration issued a proposed rule on March 10, 2025 (“Proposed Rule”) amending regulations governing insurance coverages subject to the ACA.[1] Public comments on the Proposed Rule will be accepted for consideration until April 11, 2025.
In conjunction with the Proposed Rule, the Centers for Medicare & Medicaid Services (“CMS”) issued a statement explaining that the proposed regulations include “critical and necessary steps to protect people from being enrolled in Marketplace coverage without their knowledge or consent, promote stable and affordable health insurance markets, and ensure taxpayer dollars fund financial assistance only for the people the ACA set out to support.” To support its position, CMS cited a report from the Paragon Health Institute suggesting “4 to 5 million people were improperly enrolled in subsidized ACA coverage in 2024, costing federal taxpayers up to $20 billion.” The impact analysis that accompanies the Proposed Rule shows that the Proposed Rule will reduce enrollment in the ACA plans, reduce the number of people who access premium tax credits and cost-sharing reductions that make coverage more affordable, and limit benefits available to individuals including, specifically, coverage for services related to a sex-trait modification as an essential health benefit.
As summarized below, the Proposed Rule contains a variety of key changes to the regulations governing health insurance subject to the ACA that will impact those seeking to obtain health coverage through state and federal insurance marketplaces (the “Marketplace”). In this regard, the Proposed Rule does the following
Allows insurers to deny coverage to individuals who have past-due premium from prior coverage, allowing insurers to consider past due premium amounts as owed as the initial premium for new coverage.
Excludes persons who are Deferred Action for Childhood Arrivals (“DACA”) from eligibility to enroll in a health insurance plans offered on the Marketplace or access premium tax credits and cost-sharing reductions.
Requires CMS to apply a “preponderance of the evidence” standard before terminating an agent for cause as to their agreement with CMS to solicit and sell Marketplace coverage.
Eliminates the ability of an individual to certify to their income when applying for premium tax credits and cost-sharing reductions, instead requiring income determinations be reconciled with tax filing or other information potentially creating coverage delays and administrative barriers. In addition, if an individual does not file a Federal income tax return for two years, the individual will not be eligible for premium tax credits and cost-sharing reductions.
Institutes income eligibility verifications for premium tax credits and cost-sharing reductions and charges people auto-reenrolled into zero-premium plans a small monthly payment until they confirm their eligibility information.
Adjusts the automatic enrollment hierarchy for individuals.
Shortens the annual open enrollment period from the current period, November 15 to January 15, reducing it by one month, to November 15 to December 15.
Removes the monthly special enrollment period (“SEP”) for qualified individuals who become eligible for premium tax credits and cost-sharing reductions because their projected household income falls to or below 150% of the federal poverty level, which means that these individuals will have to wait before they can access premium tax credits and cost sharing reductions.
Changes de minimis thresholds for the actuarial value for plans subject to essential health benefits (“EHB”) requirements and for income-based cost-sharing reduction plan variations.
Updates the annual premium adjustment percentage methodology to establish a premium growth measure that according to the Proposed Rule reflects premium growth in all affected markets, increasing the cost of coverage.
Prohibiting insurance companies subject to ACA requirements from providing coverage for services related to a sex-trait modification as an essential health benefit.
These changes will not take effect immediately, as the Proposed Rule now faces a public comment period that stays open until April 11, 2025. After receipt of public comments, CMS may revise the Proposed Rule before issuing it in final form. If instituted, these changes could have significant impacts on the approximately 24 million Americans who enrolled in coverage in the ACA Marketplace for 2025 and who plan to enroll in coming years. Most importantly, consumers will have less time to enroll and need to present additional documentation to demonstrate eligibility for premium tax credits and cost-sharing reductions creating administrative barriers to enrolling in coverage. In addition, automatically re-enrolled consumers will be charged a small monthly fee until they confirm their eligibility information. Significantly, individuals who are brought to the country from abroad as children and are DACA status will be prohibited in enrolling in Marketplace coverage. And finally, the Proposed Rule prohibit insurers from covering gender-affirming care as essential health benefits.
[1] Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability, CMS-9884-P, 90 Fed. Reg. 12942 et seq. (the “Proposed Rule”).
Missouri’s Paid Sick Leave and Minimum Wage Increase: Legislature, Court Challenges Continue
On Nov. 5, 2024, Missouri voters approved Proposition A, which included a new statewide paid sick leave law and an increase to the minimum wage. The paid sick leave requirement is set to go into effect on May 1, 2025, while the $13.75 per hour minimum wage took effect on Jan. 1, 2025.
On March 13, 2025, the Missouri House of Representatives passed a bill (HB 567) that, if enacted, would repeal the paid sick leave requirement and delay the minimum wage increase. However, if passed by the Senate and signed by the governor in its current form, the bill would not become effective until Aug. 28, 2025, after the paid sick leave requirement is set to take effect on May 1, 2025. The bill has now been read twice in the Senate, and a public hearing is set for March 26, 2025.
On March 12, 2025, the Missouri Supreme Court heard oral argument on the constitutionality of Proposition A.
Opponents of the law, mostly business groups, argue that:
The fiscal note summary to the ballot initiative did not include the costs to state and private businesses or some local governments
The summary statement failed to notify voters of certain elements of the paid sick leave law
It included two different subject matters (paid sick leave and a minimum wage increase) in violation of the Missouri Constitution.
Proponents of the law dispute that Proposition A was misleading or violated Missouri’s Constitution. They argue that overturning the law would be denying the will of the Missouri voters who voted to approve Proposition A.
The Court’s questions focused on whether it has original jurisdiction to rule on the legal challenges or whether the trial courts were the proper venue to hear the matter. A decision should be forthcoming.
Barring extraordinary relief by the Missouri legislature or the Missouri Supreme Court, employers are required to provide written notice to their employees about the paid sick time by April 15. Employers should proceed as if the paid sick leave law will take effect on May 1, 2025, and they are able to provide the required notices by April 15.
Government Lease Terminations Under DOGE—Impacts, Rights, and Remedies
Go-To Guide:
The Trump administration and DOGE have terminated nearly 100 leases including 1.4 million square feet in Washington, D.C.
If it exercises its rights to terminate during “Soft Terms,” the GSA could save up to $1.87 billion annually by 2028.
Government Lease Reductions and Market Impact
The Department of Government Efficiency (DOGE) and the Trump administration have been working to reduce federal office space and are seeking to terminate a large percentage of the approximately 7,500 General Services Administration (GSA) leases throughout the United States to reduce excess office space and associated costs. As of March 5, 2025, DOGE’s website lists 748 lease terminations among all federal agencies.
GSA manages a significant portion of existing federal leases and currently oversees 149 million square feet of office space throughout the United States, paying approximately $5.2 billion annually in rent to private landlords. DOGE’s primary focus thus far is on leases falling under GSA’s responsibility, but other federal agencies such as the Department of Veterans Affairs (VA) also hold a considerable number of leases that may be subject to future scrutiny.
The National Capital Region (Washington, D.C., and the close-in Maryland and Northern Virginia suburbs) has been particularly impacted by these efforts, with 11 leases that total 1.4 million square feet already terminated. Despite improvements in the office leasing market, declines may be in store for other localities with a federal government presence.
Government Lease Termination Provisions
Government leases typically limit the government’s ability to terminate before the natural expiration of the lease term. Unlike most government contracts, government leases usually lack a Termination for Convenience clause and are frequently divided into two distinct terms, a beginning “Firm Term” and a subsequent “Soft Term” (e.g., 15 years “Firm” followed by five years “Soft”). During the Firm Term, the government is prohibited from unilaterally terminating a lease unless the lessor is in material default and will not or cannot cure. If the government unilaterally terminates a lease during the Firm Term, the boards of contract appeals and courts, under well-settled case law, routinely require the government to pay all the remaining rent due to the lessor for the balance of the Firm Term as damages for such termination.
During the subsequent Soft Term, however, the government has broader termination rights, provided proper notice is given. These rights are set forth in GSA’s standard lease provision (with similar provisions in other government agency leases like the VA’s):
The Government may terminate this Lease, in whole or in parts, at any time effective after the Firm Term of this Lease, by providing not less than XX days’ prior written notice to the Lessor. The effective date of the termination shall be the day following the expiration of the required notice period or the termination date set forth in the notice, whichever is later. No rental shall accrue after the effective date of termination.
As a result of this structure, Soft Term leases face a greater risk of imminent termination. This year, GSA has the right to terminate 21.2 million square feet of leased space across more than 1,000 properties. By 2028, this termination right will expand to encompass 53.1 million square feet, or 35.5% of its leased space, spanning 2,532 properties.
Termination generally means that all remaining rent obligations of the government are ended. However, if the lessor still has incurred but unpaid or not fully amortized costs such as for tenant improvement work, the lessor should be able to submit a termination settlement proposal to the government seeking those costs plus a reasonable profit. Moreover, a relatively rare form of GSA lease permits the government to terminate only the services portion or operating cost rent; even if the termination is for default, the lessor will continue to receive the “base rent” for the balance of the lease term. This is known as a “credit” lease and the terms will readily identify it as such.
How Lessors and Lessees Are Adjusting
In light of potential lease terminations under the DOGE mandate, lessors should closely examine their GSA and other government agency lease portfolios, particularly focusing on leases nearing expiration, those about to enter into a Soft Term, or those with early termination options under particular lease amendments or supplemental lease agreements. Lessors should work to avoid possible defaults in lease performance and other instances of non-compliance with lease terms and conditions that may enable GSA to pursue a termination for cause. Some lessors are exploring early termination agreements and ensuring government assets are removed on time to avoid issues related to holdovers or rent claims. Furthermore, lessors should be aware of provisions in their loan agreements that require notice to lenders or other actions required upon receipt of any notice of non-renewal or termination of a lease.
Improper terminations may lead to litigation under the Contract Disputes Act (CDA), which creates a remedial scheme for resolving contract-based claims against the government. The CDA also provides an avenue for lessors to protect their rights if the government relinquishes and exits leased property without a specific termination right.
Meanwhile, government leasing agencies are evaluating their current and future office space needs in light of the changing requirements. Relocation planning and exploring alternative office spaces could play a key role in minimizing operational disruptions. Given the DOGE mandate, the agencies may also explore adjustments to lease terms or buyouts as options to maintain flexibility and manage potential costs.
Additional Author: Olivia Bellini
New Executive Order Rescinds the $17.75 Per Hour Federal Contractor Minimum Wage
On March 14, 2025, President Trump issued an Executive Order rescinding eighteen (18) prior executive orders and actions, including Executive Order 14026’s substantial increase to the minimum wage for federal government contractors and subcontractors. The March 14 Executive Order puts to rest continuing legal uncertainty about the status of the increased minimum wage under Executive Order 14026, which had been invalidated by the U.S. Court of Appeals for the Ninth Circuit but upheld by the Fifth and Tenth Circuits.
Executive Order 14026, issued in 2021, set forth a $15.00 per hour minimum wage, which has since increased to $17.75 per hour with adjustments for inflation. The $17.75 minimum wage is higher than the minimum wage applicable under any state’s law and is more than double the general federal minimum wage of $7.25 per hour. Executive Order 14026 built upon the prior Executive Order 13658, issued in 2014, which provided for a $10.10 per hour minimum wage that subsequently increased to $11.25 per hour for inflation.
Importantly, the March 14 Executive Order did not rescind Executive Order 13658. Accordingly, the lower minimum wage set forth in the 2014 order, as adjusted, presumably remains in effect. In addition, the Department of Labor’s regulations implementing Executive Order 14026 (which have not yet been rescinded) were issued separately and in addition to those implementing Executive Order 13658. Therefore, the Department of Labor could rescind the newer regulations (14026) while leaving the prior version (13658) in place.
Until further regulatory action is taken, the rescission of Executive Order 14026 leaves another area of uncertainty about contractors’ obligations. Contracts subject to Executive Order 14026 may include the implementing FAR clause requiring payment of the increased minimum wage. It is unclear how or when agencies will take action to modify contracts incorporating Executive Order 14026’s minimum wage, or whether they will implement substitute language referencing the Executive Order 13658 minimum wage.
Contractors should closely review the applicable terms in any federal contracts with legal counsel in order to assess how their obligations may be affected by the new executive order. In addition, contractors seeking to change wages in response to Executive Order 14026’s rescission will need to review collective bargaining and state wage law requirements to avoid missteps in doing so.
Layoffs at the Dept. of Education May Impact Office for Civil Rights Enforcement
On the evening of March 11, 2025, civil servants at the U.S. Department of Education’s offices in Washington, D.C. and throughout the country began receiving reduction in force notices. The Department announced that affected staff are expected to be put on administrative leave starting March 21, 2025 and their last day will be June 9, 2025.
While the Department has reiterated the importance of colleges and universities complying with federal antidiscrimination laws, including Title VI, through recent Dear Colleague Letters, Q&As, and enforcement actions in recent weeks – one of the offices most heavily impacted by Tuesday’s workforce reduction was the Department’s Office for Civil Rights (OCR).
OCR is tasked with enforcing the following federal civil rights laws at colleges and universities that receive federal financial assistance (as well as public elementary and secondary schools):
Title VI of the Civil Rights Act of 1964, which prohibits discrimination based on race, color, and national origin;
Title IX of the Education Amendments of 1972, which prohibits discrimination based on sex;
Section 504 of Rehabilitation Act of 1973, which prohibits discrimination based on disability;
Title II of the Americans with Disabilities Act, which prohibits discrimination based on disability by public entities; and
The Age Discrimination Act of 1975, which prohibits age discrimination.
OCR enforces these laws through directed investigations and compliance reviews, but mostly by responding to and investigating complaints of discrimination filed by anyone who believes that a college or university has discriminated against someone based on race, color, national origin, sex, disability, or age.
By Wednesday, March 12, 2025, it was reported and confirmed by the Department of Education that the Department’s reduction in force materially impacted seven of OCR’s 12 regional offices. As a result, OCR regional offices in Boston, New York, Philadelphia, Chicago, Cleveland, Dallas, and San Francisco may be closed. These regions investigate complaints against colleges and universities (and public elementary and secondary schools) in 25 states and 2 U.S. territories.
The impact is already being felt. Staff in the affected regional offices can receive emails, but can no longer respond to emails, make phone calls, or conduct video conference. Staff are expected to start administrative leave on or around March 21, 2025, and are supposed to have transferred their case loads to other career civil servants or political appointees by then.
On Thursday, March 13, 2025, Attorneys General from 20 states and the District of Columbia filed a lawsuit in federal court challenging the staff terminations at the Department of Education and requesting injunctive relief. In State of New York, et al. v. McMahon, et al., 1:25-cv-10601 (D. Mass), among other claims, the states allege that the reduction in force will hobble the Department’s ability to perform it statutorily-mandated functions, including enforcing federal civil rights laws.
Given that OCR announced one day before the reduction in force the importance of its Title VI antisemitism enforcement actions against 60 colleges and universities, key questions for colleges and universities in the affected regions are:
Who do we contact about pending cases?
Will scheduled meetings, interview, and on-site investigations go on as planned?
Where do we send in the college’s data response, if one is due?
Will a pending case still be processed by OCR and what process will OCR use?
The last question is one that higher education and civil rights attorneys have been watching carefully. Colleges and universities are used to relying on OCR’s Case Processing Manual (last updated February 19, 2025) to understand their rights and resolution options at the Office for Civil Rights. But what if OCR or the Department of Education is closed? Will responsibilities be transferred to the Department of Justice? Will individual states pick up oversight if one of their state laws apply? Or will complainants take their concerns not to a federal or state agency, but to a court?
California Leaders Move to Support Energy Storage
Our previous post[1] covered the introduction of A.B. 303 (Addis), the “Battery Energy Safety and Accountability Act”, following a catastrophic fire at one of the world’s largest battery energy storage facilities located in Moss Landing, California, starting on January 16, 2025. As we explained, that bill, proposed as an urgency statute, would significantly curtail the authority of both local agencies and the California Energy Commission (CEC) to site new energy storage facilities and would likely result in significant adverse consequences for meeting California’s clean energy goals.
At the time A.B. 303 was introduced, several clean energy media outlets and industry groups including the California Energy Storage Alliance (CESA), expressed concerns with the bill as proposed, especially its failure to distinguish between the older technology and safety standards in place at the time the Moss Landing facility was developed in 2019 and those applicable to battery facilities currently under development, which use newer and safer technology and are also subject to State law requirements to prepare an Emergency Response Plan under Senate Bill (S.B.) 38 (Laird), adopted in 2023. To date, A.B. 303 has not yet received a hearing or a vote.
In the immediate aftermath of the Moss Landing fire, Governor Newsom called for an investigation into the incident, which the California Public Utilities Commission (CPUC) Safety and Enforcement Division (SED) subsequently initiated.[2] The California Department of Toxic Substances Control (DTSC) and several other agencies, including the Monterey County Health Department’s Environmental Health Bureau and the UC Cooperative Extension all conducted testing for water and soils contamination and found no significant impacts.[3] Meanwhile, the CPUC continued its effort to update General Order 167 to include standards for the maintenance and operation of storage facilities in accordance with S.B. 1383 (Hueso), adopted in 2022. These changes were adopted on March 13, 2025.
While these efforts were ongoing, little was said by the Governor or his Office of Business and Economic Development (GO-Biz), which has a dedicated Energy and Climate Unit, about the future of energy storage development in the state. Now, two months after the fire and over the course of just days, both Governor Newsom and Senator John Laird, author of SB 38 and a prominent member of the Senate and former California Secretary for Natural Resources, have made moves demonstrating their continued support for battery storage development in California.
First, on March 19, the Governor certified the first hybrid solar generation and storage facility, the Cornucopia Hybrid Project, as an Environmental Leadership Development Project (ELDP) subject to judicial streamlining pursuant to the “Jobs and Economic Improvement Through Environmental Leadership Act”, A.B. 900 (2011).[4] The Act was amended in 2023 by the adoption of S.B. 149 to expand the scope of projects eligible for certification to include wind, solar and battery energy storage projects as well as other transmission, water and transportation infrastructure projects.
In his certification order,[5] Governor Newsom found that the project would “invest in the California economy, create living wage jobs and help achieve California’s renewable energy generation goals.” The certification (not to be confused with certification under the CEC’s Opt-In Certification Program pursuant to A.B. 205 (2022)) affords the project streamlined judicial review by requiring state courts to resolve any CEQA challenge (including appeals) within 270 days after filing of the certified administrative record, to the extent feasible. Since the Act’s adoption in 2011, only 24 projects have received ELDP certification,[6] yet there are indications that the program works to streamline judicial review. Last year, the Yolo County Superior Court issued its order rejecting a CEQA challenge to the Sites Reservoir project, a certified ELDP, within just 148 days.[7]
In his press release announcing the certification, the Governor reconfirmed his commitment to clean energy development as well as grid reliability, stating: “In California, we’re in the ‘how’ business – we’re moving fast to achieve our world-leading clean energy goals. By fast-tracking critical projects like this one in Fresno, we’re creating good-paying jobs, cutting pollution, and building a cleaner, more reliable energy grid to serve Californians for generations.”[8]
Two days later, on March 21, Senator Laird issued his proposed battery energy storage safety bill, S.B. 283. Intended to ensure “future BESS facilities adhere to the highest fire safety standards, protecting first responders, local communities, and the integrity of our renewable energy transition”, S.B. 283 would require that National Fire Protection Association (NFPA) standards for energy storage systems (NFPA 855[9]) apply to any facility certified by the CEC pursuant to its Opt-In Certification Program, and that the state Building Codes Standards Commission and the State Fire Marshall review and consider the most recently published edition of NFPA 855 for incorporation into the state Fire Code in the next update adopted after July 1, 2026. The bill also requires that energy storage developers consult with local fire authorities to address facility design, assess potential risks and integrate emergency response plans, and that safety inspections be conducted by local fire officials or the State Fire Marshal, at the developer’s cost, after construction and prior to operation of a storage facility. In his press release, Senator Laird also stated that “As the bill moves forward, SB 283 will be amended to prohibit the development of BESS in indoor combustible buildings.”
Meanwhile, continuing the State’s theme of progressing BESS development post-Moss Landing, on March 26, GO-Biz plans to hold a webinar to “discuss challenges and best practices in permitting BESS project” and to develop a “toolkit of resources for local jurisdictions to use when permitting renewable energy projects across the State.”[10]
While battery storage is likely to continue to remain controversial in the near term, these actions demonstrate State leadership’s commitment to continued progress towards clean energy transition goals, including battery storage. With prudent legislative action to ensure projects are designed to meet (and actually do meet) the highest safety standards available, California can continue to move towards a safer and cleaner future.
FOOTNOTES
[1] Understanding AB 303: Potential Impacts for California BESS Project Development | Real Estate, Land Use & Environmental Law Blog.
[2] California investigating Moss Landing fire; proposes more battery plant safety
[3] As reported by the California Certified Organic Farmers Moss Landing Update – CCOF.org.
[4] Now codified at Public Resources Code section 21178 et seq.
[5] https://www.gov.ca.gov/wp-content/uploads/2025/03/Fresno-Cornucopia-certification.pdf.
[6] Judicial Streamlining – Office of Land Use and Climate Innovation.
[7] Sites Reservoir project clears hurdle thanks to streamlining law | Governor of California.
[8] Governor Newsom cuts red tape to accelerate Fresno clean energy project | Governor of California.
[9] NFPA 855 is the second edition (2023) of the Standard for the Installation of Stationary Energy Storage Systems.
[10] Join the GO-Biz Energy Unit for a webinar on March 26th, bringing together… | California Governor’s Office of Business and Economic Development (GO-Biz)
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Potential Rollback of Biden’s Climate Policies Targets Billions in Clean Energy Projects
According to media reports, Energy Department officials are compiling a list of clean energy projects, awarded billions of dollars, that could be overturned by the Trump administration in what may become the most significant rollback of the Biden administration’s climate policies to date.
The list, requested by Trump administration officials and expected to be completed any day, includes projects funded through the Inflation Reduction Act, bipartisan infrastructure law, and regular appropriations, according to the Politico report. Projects or programs that have spent less than 45 percent of their allocated or awarded funding reportedly are subject to review.
According to the published report, the initial list of projects recommended for elimination includes:
$8 billion for hydrogen hubs;
$7 billion for carbon capture hubs;
$6.3 billion for industrial demonstrations;
$500 million for long-duration energy storage;
$133 million for the Liftoff program for accelerating new technology development; and $50 million for distributed energy programs.
While we are watching the situation closely, the Trump Administration has yet to comment on the Politico report or the specifics of such a list of targeted projects. However, the administration and Congressional Republicans already have targeted Environmental Protection Agency (EPA) grants and funding allocated by the Biden Administration. Days ago, a Congressional committee asked interim EPA Administrator Lee Zeldin for a briefing on grants and funding awarded by the agency under the Biden Administration.
If you are a private company, nonprofit or university that has received a guaranteed loan, grant, or contract that has been identified for elimination:
FIRST – Look to the four corners of the agreement with the Federal government to understand the terms that define available remedies.
SECOND – Take administrative action as directed by the agreement or other legal provisions (the Code of Federal Regulations, Federal Acquisition Regulations).
THIRD – Consider challenging it in court, while weighing the political considerations against business realities.
FOURTH – Maintain detailed documentation of the cost and time impacts associated with any modifications or terminations of agreements.
FIFTH – Communicate with your subcontractors and suppliers about potential impacts.
Additionally, it may be prudent to consider direct advocacy before Congress and the Administration, leveraging memberships in trade associations or directly engaging with elected officials.
PFAS Bans Go into Effect; Manufacturers Attempt to Push Back on Regulations
Many states have enacted or plan to enact new regulations regarding the manufacturing of products containing per- and polyfluoroalkyl substances (“PFAS”), also known as “forever chemicals,” because they do not easily break down in the environment and human body. For example, on January 1, 2025, both New York[1] and California[2] banned the sale of any new, not previously used, apparel and certain other products containing added PFAS, while Minnesota[3] banned broad categories of products containing PFAS. More specifically, the Minnesota statute, titled Amara’s Law, prohibits the sale or distribution of the following products if the product contains intentionally added PFAS: (1) carpets or rugs; (2) cleaning products; (3) cookware; (4) cosmetics; (5) dental floss; (6) fabric treatments; (7) juvenile products; (8) menstruation products; (9) textile furnishings; (10) ski wax; and (11) upholstered furniture. The law makes no exceptions for products in these categories, provides no extensions, even if no PFAS alternatives are available, and allows expansion to include additional products if the products contain intentionally added PFAS that are likely to harm Minnesota’s environment and natural resources. Violations of the statute can result in fines, civil penalties, or criminal prosecution. Other states have similar bans set to take effect over the next several years.[4]
Like many similar regulations, Amara’s Law is currently being challenged. The Cookware Sustainability Alliance (“CSA”), a national conglomerate of members who manufacture, offer, and sell cookware containing PFAS, recently filed a complaint in the United States District Court for the District of Minnesota.[5] CSA alleges that Amara’s Law violates the Constitution’s commerce clause and dormant commerce clause, imposes an undue burden on interstate commerce, and that its disclosure requirement (which goes into effect in 2026 and requires reporting PFAS products to the Minnesota Pollution Control Agency) violates the First Amendment in addition to being preempted by federal trade secret law. CSA filed a motion seeking a preliminary injunction to enjoin the enforcement of Amara’s Law, which was denied February 26, 2025. CSA has until March 28, 2025, to appeal the Judgment.
Thousands of lawsuits have already been filed across the country focused on the alleged harm caused by PFAS exposure, while state regulators, such as those noted above, attempt to limit their use. Some have called the proliferation of PFAS litigation the “next asbestos,” with significant potential liability to insurers and their corporate policyholders. With similar PFAS bans set to take effect in other states in the coming years, mounting litigation surrounding the use of PFAS, and an insurance landscape that is seeing a spike in PFAS-related claims leading to new PFAS-specific exclusions in policies, all eyes will surely be tracking these hot-button topics in 2025 and beyond.
[1] NY ECL §§ 37-0121, 71-3703.
[2] CA HLTH & S §§ 108970, 108971.
[3] Minn. Stat. § 116.943.
[4] See, e.g., Colo Rev Stat §§ 25-15-601 to 25-15-605, Me Rev Stat T. 38 § 1614, RI Gen Laws § 23-18.18-1, et seq.
[5] Cookware Sustainability Alliance v. Kessler, Civ. No. 0:25-cv-41, ECF No. 1.
CTA 2.0 – FinCEN Limits CTA’s Reporting Requirements to Certain Non-U.S. Entities and Non-U.S. Individuals
The Financial Crimes Enforcement Network (FinCEN) issued an interim final rule on March 21, 2025, that eliminates the Corporate Transparency Act (CTA) reporting requirements for U.S. entities and U.S. individuals. The rule is effective upon its publication in the federal register; however, the interim final rule may be updated following a sixty-day comment period.
FinCEN’s press release provided the following summary of the impact of the interim final rule:
“Thus, through this interim final rule, all entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN. Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, detailed below. These foreign entities, however, will not be required to report any U.S. persons as beneficial owners and U.S. persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner.”
Non-U.S. entities that meet the definition of “reporting company” are generally (1) formed in a non-U.S. jurisdiction and (2) registered with a U.S. jurisdiction to do business in such jurisdiction. These non-U.S. entities will have thirty days from the later of (i) the date of publication of the interim final rule in the federal register and (ii) the date of becoming registered to do business in a U.S. jurisdiction.
Removing the reporting obligations of U.S. entities and U.S. individuals substantially limits the number of required filings. By FinCEN’s own estimate in the interim final rule, it anticipates roughly 12,000 filings annually (over each of the first three years). In the final reporting rule in effect prior to the interim final rule, FinCEN estimated roughly 10,510,000 filings annually (over each of the first five years).
EU CSDDD Under US Pressure: Some Insights on the PROTECT USA Act
The European Commission’s (EC) recent announcement of the Omnibus Simplification Proposals signals that it has heard the challenges and objections raised by companies affected by the new requirements of the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). But in the US, Senator Bill Hagerty (R-TN), a member of the Senate Banking Committee, has introduced legislation that could impose substantial challenges to CSDDD compliance for US companies.
As a reminder, the EC proposed amendments for the implementation and transposition deadlines of the CSRD and CSDDD, as well as amending the scope and requirements of the CSRD and CSDDD. But the Prevent Regulatory Overreach from Turning Essential Companies into Targets Act of 2025 (PROTECT USA Act)[1] proposed by Senator Hagerty targets “foreign sustainability due diligence regulation” such as the CSDDD, and would prohibit US companies from being forced to comply with the CSDDD. If enacted as currently drafted, US companies will be faced with a significant conflict in complying with the PROTECT USA Act and the CSDDD.
Further, the PROTECT USA Act intends to protect US companies from any enforcement action by the EU or its member states for non-compliance with the CSDDD. Section 5(a) of the PROTECT USA Act states: “No person may take any adverse action towards an entity integral to the national interests of the United States for action or inaction related to a foreign sustainability due diligence regulation.”[2] And § 5(b) prevents U.S. federal or state courts from enforcing any judgment by a foreign court relating to any foreign sustainability due diligence regulation “unless otherwise provided by an Act of Congress.”[3]
The PROTECT USA Act could apply to a significant number of US companies, defining “an entity integral to the national interest of the United States” as “any partnership, corporation, limited liability company, or other business entity that does business with any part of the Federal Government, including Federal contract awards or leases.”[4] It also includes entities:
[O]rganized under the laws of any State or territory within the United States, or of the District of Columbia, or under any Act of Congress or a foreign subsidiary of any such entity that—
(i) derives not less than 25 percent of its revenue from activities related to the extraction or production of raw materials from the earth, including—
(I) cultivating biomass (whether or not for human consumption);
(II) exploring or producing fossil fuels;
(III) mining; and
(IV) processing any material de-rived from an activity described in subclause (I), (II), or (III) for human use or benefit;
(ii) has a primary North American Industry Classification System code or foreign equivalent associated with the manufacturing sector; or
(iii) derives not less than 25 percent of its revenue from activities related to the mechanical, physical, or chemical transformation of materials, substances, or components into new products;
(iv) is engaged in—
(I) the production of arms or other products integral to the national defense of the United States; or
(II) the production, mining, or processing of any critical mineral.[4]
And the PROTECT USA Act has a catch-all that will apply to any entity “the President otherwise identifies as integral to the national interests of the United States.”[5]
The PROTECT USA Act builds on opposition to the CSDDD raised during the Biden Administration and, given the Republican majorities in both the US House and Senate, advances the argument that the CSDDD challenges US sovereignty. In a February 26, 2025 bicameral letter to Scott Bessent, the Secretary of the US Department of the Treasury and Kevin Hassett, the Director of the White House National Economic Council, legislators described the CSDDD as “a serious and unwarranted regulatory overreach, imposing significant economic and legal burdens on U.S. companies.”[6] Thus, the PROTECT USA Act may serve as an incentive to further limit the scope of the CSDDD.
We recently reviewed how companies should address CSRD requirements while the EC works through the Omnibus Simplification Proposals.[7] The PROTECT USA Act adds an additional layer of complexity for US companies in navigating the uncertainty of the EC’s legislative process along with the significant limits the PROTECT USA Act might present. SPB’s policy experts in the US and EU can support companies in making prudent business decisions in a rapidly changing legislative environment.
[1] https://www.hagerty.senate.gov/wp-content/uploads/2025/03/HLA25119.pdf
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] https://www.banking.senate.gov/imo/media/doc/csddd_letter_to_treasury-nec_draft_22525_zg.pdf.pdf
[7] https://natlawreview.com/article/what-should-companies-do-csrd-while-they-wait-eu-make-its-mind
EEOC Enforcement Activities Take Shape Under Second Trump Administration
The Equal Employment Opportunity Commission (EEOC) has been a regular topic of the flurry of executive orders issued by President Trump since his inauguration. Even before his return to the Oval Office, there was speculation about how the EEOC’s enforcement activities and priorities might change during a second Trump administration, as well as how the composition of the EEOC’s leadership would likely transform. In the weeks following the inauguration, the EEOC’s goals began to take shape, with its leadership seeing significant rearrangement. Manufacturers should stay current on these modifications as they signal substantial changes in the agency’s policies and anticipated future enforcement priorities and initiatives.
On January 24, 2025, President Trump dismissed two of the EEOC’s Democratic Commissioners and appointed Andrea Lucas as Acting Chair, leaving one Democratic Commissioner and one vacancy. The EEOC’s current leadership composition means it lacks a quorum and cannot issue regulations or guidance, or rescind or replace regulations or guidance issued by the previous administration. Importantly, these changes do not affect the EEOC’s ability to engage in enforcement activities.
Prior to President Trump’s second term, it was anticipated that the EEOC was preparing to scale back protections for LGBTQ+ workers. This shift came to fruition beginning in February, when the EEOC moved to voluntarily dismiss six lawsuits that it had filed during the Biden administration on behalf of aggrieved plaintiffs, alleging discrimination based on transgender status in violation of Title VII of the Civil Rights Act of 1964. In withdrawing from its representation, the EEOC noted in filings that continued litigation is untenable “in light of recent [a]dministration policy changes.” The EEOC’s voluntary dismissal of the lawsuits represents a major departure from its prior interpretation of the protections afforded under Title VII and its guidance issued during the Biden administration, in which the EEOC took the position that the intentional misuse of an employee’s preferred pronouns constituted discrimination and harassment.
Although the EEOC has chosen to step back from its representation of the plaintiffs in these lawsuits, the same federal law that authorizes the EEOC to sue on their behalf also provides the plaintiffs with a right to intervene in and pursue the litigation on their own behalf.
In light of these developments, manufacturers should remain aware of the following when making decisions related to the recruitment, hiring, and termination, as well as other terms and conditions of employment:
Although the EEOC may change its enforcement priorities, an executive order cannot override federal laws and constitutional rights. This includes the federal law authorizing individuals to intervene in litigation brought by the EEOC and pursue litigation on their own behalf as well as the Supreme Court’s holding in Bostock v. Clayton County, 590 U.S. 644 (2020), that discrimination based on sexual orientation or gender identity constitutes “sex discrimination” in violation of Title VII.
The federal government’s labor and employment law enforcement activities and policies are separate from those of state and local governments, which may continue or even increase their efforts in reaction to changes at the federal level.
It is possible that the EEOC’s enforcement activities will continue to change, so it is crucial for manufacturers to stay current on executive orders, guidance, and enforcement initiatives at the federal level.
Manufacturers should consult competent employment counsel for assistance with regard to the EEOC’s enforcement initiatives, guidance, and other communications.