What the enactment of the OBBB means for employee benefits

The U.S. Congress enacted the One Big Beautiful Bill (OBBB), a significant tax and spending package signed into law by President Donald Trump on July 4, 2025. While the OBBB includes a number of provisions impacting employee benefits, the final version ultimately cut some of the ambitious modifications to Health Savings Accounts (HSAs) and Individual Coverage Health Reimbursement Arrangements (ICHRAs) that appeared in the original House bill. 

Nevertheless, employers should take note of the modest changes that will impact their benefits offerings. Here’s how the OBBB Act is poised to change HSAs, HDHPs, DCFSAs, qualified education assistance programs, student loan reimbursement, transportation benefits, and more.

Health Savings Accounts

The more dramatic draft HSA modifications were omitted from the final version of the bill, including HSA eligibility for Medicare recipients, distribution of Flexible Spending Arrangement (FSA) or Health Reimbursement Arrangement (HRA) funds into an HSA in certain circumstances, eligible HSA reimbursement for gym memberships, and increased contribution limits. The following are the HSA provisions included in the final version.

First-dollar telehealth coverage no longer prevents HSA eligibility

Retroactive to plan years starting January 1, 2025, the OBBB permanently allows employers to offer first-dollar telehealth and remote healthcare services without disqualifying employees from HSA eligibility. Temporary relief allowing the same has largely been in place since COVID-19, but expired at the end of 2024. 

The permanent change finally provides certainty to employers that first-dollar telehealth coverage will not negatively impact HSA eligibility, as these services continue to grow in popularity.

Bronze and catastrophic plans on ACA exchanges qualify as High Deductible Health Plans (HDHPs)

In order to make HSA contributions, an individual must be enrolled in a qualifying HDHP. Effective January 1, 2026, bronze and catastrophic plans offered on the individual Exchange will qualify as HDHPs, allowing individuals covered by those plans to make HSA contributions. 

At present, those plans do not qualify as HDHPs because of the terms of coverage. Bronze and catastrophic plans in the group market and individual market outside the Exchange will still not be considered HDHPs.

Direct Primary Care (DPC) no longer prevents HSA eligibility and is now an HSA-eligible expense

Effective January 1, 2026, DPC arrangements, which operate under a fee-for-membership healthcare model and provide coverage consisting solely of “primary care services” provided by primary care practitioners (PCPs), will no longer be HSA-disqualifying coverage as long as certain conditions are met. DCPs will be HSA-compatible as long as DPC fees do not exceed $150/month for an individual or $300/month for family coverage. In addition, primary care services cannot include procedures that require the use of general anesthesia, prescription drugs (other than vaccines), and/or laboratory services not typically administered in an ambulatory primary care setting. 

Individuals enrolled in such DPC programs may now make HSA contributions, assuming they are enrolled in a HDHP and otherwise eligible. In addition, DPC fees are now eligible for pre-tax reimbursement from an HSA.

Dependent Care Flexible Spending Arrangements (DCFSAs)

For 40 years, the DCFSA reimbursement limit has been frozen at $5,000 per year ($2,500 for married individuals filing taxes separately). For many years, stakeholders have been advocating for a limit increase to account for inflation and the present-day costs of child care, but have been unsuccessful (except for the one-year increase in 2021 due to COVID-19). 

Effective January 1, 2026, the OBBB finally increases the DCFSA limit to $7,500 ($3,750 for married individuals filing taxes separately). While employees and plan sponsors will surely welcome any increase, the change is modest and still falls well below the inflationary impacts since the $5,000 limit was originally set in 1986.

Qualified education assistance program and student loan reimbursement 

Under Section 127 of the tax code, employers are permitted to provide tax-free education assistance up to $5,250 per year as part of a qualified education assistance program. Until now, that amount remained fixed annually. As a result of the enactment of the OBBB, the limit will be indexed annually to adjust for cost-of-living changes starting in 2026.

In addition, the OBBB permanently allows qualified education assistance programs to reimburse student loan expenses. Initially, student loans were not eligible for pre-tax reimbursement under Section 127. However, temporary relief has been in place allowing for such eligibility, but that temporary relief was set to expire at the end of 2025. The OBBB provides help to employers hoping to continue reimbursing student loans beyond 2025 with the permanent change. As a result, employers can continue to reimburse student loans pre-tax along with other eligible education expenses up to the $5,250 (indexed) limit.

Transportation benefits

The OBBB permanently extends the exclusion of bicycle commuting expenses from eligibility for pre-tax reimbursement under a qualified transportation plan. This exclusion has been in place since 2018, and employers wanting to help employees with bicycle commuting expenses will need to continue to do so on a post-tax basis.

Trump Accounts

The OBBB created tax-favored “Trump Accounts,” which are individual investment accounts for children starting at birth, similar to Individual Retirement Accounts (IRAs) for adults. The accounts have a $5,000 contribution limit annually, and the government will seed the accounts with $1,000 for children born from 2025-2028. Employers will be able to contribute up to $2,500 annually on a pre-tax basis to the Trump Accounts of their employees or their dependents so long as the employer satisfies plan document and nondiscrimination requirements.

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Want to understand more about how the OBBB Act might affect your benefits programs and your employees? We’ve got you. <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Grab time with one of Forma’s benefits compliance experts</span> and we’d be happy to help you navigate this period of change.

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*This document is for informational purposes. Forma is not engaged in the practice of law. Nothing contained herein is intended as tax or legal advice nor to replace tax or legal advice from counsel. If you need tax or legal advice, please consult with counsel or a certified tax professional.