On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. While the final bill omitted several of the benefit provisions included in the initial House legislation, it includes some noteworthy changes for employers as group health and welfare plan sponsors. (We previously provided our initial insights on the OBBBA in an article on July 8, 2025, which is included here with some additional commentary.)
Extended Telehealth Provisions Relating to HSA Eligibility
First, the new law permanently extends the telehealth relief provisions, which allow telehealth services to be offered to HDHP participants before the HDHP statutory deductible is met without impacting their HSA eligibility. This optional relief is available for plan years beginning in 2025. (As explained in our January 14, 2025, article, the prior telehealth relief, which began during the COVID-19 pandemic, was no longer available for plan years beginning in 2025.) Plan sponsors considering taking advantage of this optional relief should consult with their carrier (for a fully insured plan) or ASO or TPA (for a self-insured plan) regarding the implementation process.
Direct Primary Care Arrangements and HSA Eligibility
Second, the OBBBA provides that direct primary care (DPC) arrangements with aggregate monthly fees of $150 or less (for an individual) or $300 or less (for a family, meaning covering more than one individual) are not disqualifying insurance coverage for HSA eligibility purposes. Additionally, the fees for such direct primary care arrangements are considered qualified medical expenses that can be paid for or reimbursed from an HSA. This provision is effective after December 31, 2025.
As background, a DPC arrangement is a healthcare model where individuals (or sometimes employers) pay a flat, recurring membership fee directly to a primary care provider in exchange for certain medical care. A DPC can cover services, such as urgent care and chronic disease management, that an HDHP can only cover once the deductible is met. Under OBBBA, direct primary care services will not include 1) procedures that require general anesthesia, 2) prescription drugs (other than vaccines), and 3) lab services not typically administered in an ambulatory primary care setting. The HHS Secretary is expected to issue additional regulations to define the scope of services that can be included in direct primary care arrangements.
Increased DCAP Tax Exclusion
Third, with respect to dependent care assistance programs (DCAPs — also sometimes referred to as dependent care FSAs), the final version of the bill increases the maximum annual exclusion to $7,500 for single individuals or those married filing jointly or $3,750 for married individuals filing separately. This increase is effective for tax years beginning after December 31, 2025.
Employers will need to work with their dependent care FSA vendors to amend their cafeteria plan documents (and other materials, such as summary benefit materials) to offer the higher limit. Also, employers considering whether to adopt the new $7,500 limit should confirm that they can still satisfy the nondiscrimination testing requirements under Section 129 of the Internal Revenue Code, which are designed to ensure that DCAPs do not favor higher-paid employees.
Employer-Provided Student Loan Repayment Assistance Programs
Fourth, the OBBBA allows employers to continue to provide tax-free student loan repayment assistance through a qualified educational assistance program (QEAP). This provision was originally introduced in the 2020 CARES Act but was set to expire on December 31, 2025. Relatedly, the overall QEAP limit will now be indexed for inflation (currently set at $5,250).
Employer-Provided Tax-Advantaged Accounts for Children
Fifth, the OBBBA allows employers to provide employees or their dependents tax-free contributions to new tax-advantaged accounts for children referred to as “Trump Accounts.” The accounts can be established for children under the age of 18 with contributions of up to $5,000 per year. $2,500 is the maximum employer contribution that an employee may exclude from gross income. These contribution amounts are to be indexed for inflation beginning in 2028. Distributions are generally prohibited until the child turns 18. The accounts are subject to numerous requirements, including investment restrictions.
To make contributions, employers must establish a separate written plan similar to a DCAP, and satisfy nondiscrimination rules against favoring highly compensated employees.
Tax-Free Bicycle Commuter Reimbursement Permanently Repealed
Sixth, the OBBBA permanently repeals the tax-free bicycle commuting employer reimbursement provision, which had been temporarily suspended since 2018. Employers may still reimburse their employees for bicycle commuting expenses, but only on a taxable basis.
Extension and Expansion of PFML Employer Tax Credit
Seventh, the OBBBA includes an expansion and permanent extension of the paid family and medical leave (PFML) employer tax credit. Under Internal Revenue Code Section 45S, employers may qualify for a tax credit if they provide at least two weeks of PFML to all eligible employees annually, have a written policy in effect, and pay at least 50% of normal wages to employees during their leave. The credit was originally effective for wages paid in taxable years beginning after December 31, 2017, and before January 1, 2026.
The new provision modifies the credit to allow it to be claimed for an applicable percentage of premiums paid or incurred by an employer during a taxable year for insurance policies that provide PFML for qualifying employees. The OBBBA also expanded the definition of “qualifying employees” from those who have been employed for at least a year to include employees who have been employed for at least six months and at least 20 hours per week. The OBBBA includes additional revisions to the aggregation rule defining a “single employer” for purposes of receiving the tax credit, and provides an exemption to the requirement to have a written leave policy in order to claim the tax credit. The new law also makes the tax credit available in all states, including those with PFML leave mandates.
No Change to Employer-Provided Health Coverage Tax Exclusions
Finally, and of particular significance for all group health plan sponsors, the OBBBA retains the current income tax exclusions and deductions for employer-provided health coverage. The exclusion of employer-paid premiums for health insurance from federal income and payroll taxes is the single largest tax expenditure, and concerns arose during the budget negotiations that Congress would seek to limit or eliminate the tax exclusion. For further details, please see our March 25, 2025, article.
Medicaid and ACA Market Reforms
The final version of the OBBBA included sweeping changes to Medicaid funding and eligibility, as well as ACA marketplace reforms. Specifically, the bill did not extend the enhanced ACA tax credits established under the American Rescue Plan Act of 2021, which will be expiring at the end of 2025. The bill also included new Medicaid eligibility and enrollment conditions, administrative requirements, and limits to retroactive coverage. The changes are expected to have a considerable effect on the individual markets and the healthcare sector, and may result in a loss of coverage by certain individuals. It’s unclear at this time if and to what extent these reforms may increase enrollment in employer-sponsored coverage, and this will be a development to monitor.
We will continue to monitor developments and guidance related to the OBBBA and report updates in Compliance Corner.