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.
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 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. The HHS Secretary is responsible for issuing additional regulations to define the scope of services that can be included by 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.
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 contribution maximum is $2,500 per year per employee (to be indexed beginning in 2028). To make contributions, employers must establish a separate written plan similar to a DCAP, including satisfying 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 extension and expansion 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 also 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. It also makes the 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.
Employers should be aware of these important updates impacting employee benefits, particularly as they review their benefits offerings for the upcoming plan year. Follow our biweekly Compliance Corner newsletter where we will report relevant updates in future editions.