The One Big Beautiful Bill Act’s Impact on Employee Benefits
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBB”), an extensive piece of legislation that introduces significant changes to employer-sponsored health and welfare benefits. The OBBB affects Health Savings Accounts (“HSAs”), Dependent Care Flexible Spending Accounts (“Dependent Care FSAs”), student loan repayment assistance programs, moving expense reimbursements, and creates new “Trump Accounts” for children. Below is a summary of the key employee benefits provisions and their implications.
HSA Expansions
1. Permanent Telehealth Relief for HDHPs
The OBBB permanently allows high deductible health plans (“HDHPs”) to provide first-dollar coverage for telehealth and other remote care services without jeopardizing an individual’s HSA eligibility. This change is effective retroactively for plan years beginning on or after January 1, 2025, resolving the uncertainty that followed the expiration of prior temporary COVID-19 pandemic-era relief.
2. Bronze and Catastrophic Affordable Care Act (“ACA”) Plans Treated as HDHPs
All Bronze and Catastrophic level plans that are available as individual coverage through an ACA Exchange are treated as HDHPs for HSA eligibility purposes regardless of the plan’s deductible or out-of-pocket amounts. This expansion, effective for months beginning after December 31, 2025, opens HSA access to individuals enrolled in these plans, provided that the individual is otherwise HSA eligible.
3. Direct Primary Care (“DPC”) Arrangements
Beginning in 2026, DPC arrangements are specifically excluded from being disqualifying coverage for HSA purposes if the monthly fees for the DPC do not exceed $150 for individual coverage and $300 for family coverage. Additionally, DPC fees are now considered qualified medical expenses and can be paid tax-free from an HSA (again, up to $150 for individual coverage and $300 for family coverage). DPC services, however, are limited to primary care, and do not include procedures requiring general anesthesia, prescription drugs (other than vaccines), or certain lab services.
Dependent Care FSAs
For plan years beginning on or after January 1, 2026, the OBBB increases the Dependent Care FSA maximum annual exclusion from $5,000 to $7,500 (or $3,750 for separate returns filed by a married individual). This is the first permanent increase since 1986. While this is good news, the OBBB does not provide that the $7,500 (or $3,750) amount will be automatically indexed for inflation. To take advantage of this new limitation, Section 125 cafeteria plans will likely need to be amended.
Student Loan Repayment Assistance
The OBBB makes permanent and automatically indexes for inflation the exclusion for certain employer payments of student loans under Section 127 educational assistance programs. Previously, the CARES Act temporarily allowed employers to provide $5,250 of tax-free reimbursement of the employee’s own student loan repayments under a Section 127 educational assistance program, but that relief was set to expire at the end of 2025. Thanks to the OBBB, the $5,250 exclusion is now permanent and automatically indexed for inflation starting in 2026.
Moving Expense Reimbursements
The OBBB permanently removes the deduction for moving expenses and the exclusion for employer-provided qualified moving expense reimbursements, except in the case of certain members of the Armed Forces and certain members of the intelligence community. Under the Tax Cuts and Jobs Act (“TCJA”), if employees received employer-provided moving expense reimbursements, employers temporarily were required to include the amounts in employees’ wages for tax years 2018 through 2025. The OBBB makes permanent the TCJA’s wage inclusion requirement with respect to moving expense reimbursements that were set to expire at the end of 2025.
“Trump Accounts”
The OBBB creates a new tax-advantaged account, a “Trump Account,” for children under age 18. These Trump Accounts are similar to individual retirement accounts (“IRAs”), only for children. All U.S. citizens born after 2024 and before 2029 will receive a one-time $1,000 contribution to their Trump Account. The Trump Accounts may receive up to $5,000 (indexed for inflation) in contributions per year, with up to $2,500 allowed as tax-free employer contributions. Except for employer contributions, all contributions to Trump Accounts must be made after-tax. Distributions are generally prohibited before an individual attains age 18.
Questions
If you have any questions about the employee benefits provisions in the One Big Beautiful Bill Act, please contact a member of the Miller Johnson Employee Benefits & Executive Compensation practice group. The members of the group are also available to assist you with establishing or modifying Dependent Care FSAs and Section 127 educational assistance programs.