On July 3, 2025, the United States House of Representatives narrowly passed sweeping tax and spending legislation, titled the “One Big Beautiful Bill Act” (OBBBA), to implement President Trump’s domestic policy goals within the budget reconciliation process. The OBBBA, which also narrowly passed by the Senate on July 1, 2025, permanently extends the individual tax cuts included in the 2017 Tax Cuts and Jobs Act (TCJA), among other tax and spending-related provisions. President Trump signed OBBBA into law on July 4, 2025.
This article will focus on the employee benefit-related provisions included in the OBBBA. For broader context, click here for a prior Risk Strategies article detailing the initial employee benefit plan changes in the May 22 version of the OBBBA that passed the House, a significant portion of which provided flexibility and enhancements to certain rules around HSAs and ICHRAs (Individual Health Reimbursement Arrangements). Most of these HSA/ICHRA rule changes did not survive the Congressional negotiation process to make it into the final version of the OBBBA.
The table below captures the noteworthy changes, which made it into the final version of the OBBBA, directly impacting employee benefit plans and programs for employers to be aware of now that the legislation has been signed into law.
Certain more contentious provisions in the OBBBA related to Medicaid funding cuts and efforts to decrease enrollment in Affordable Care Act (ACA) Marketplace Exchange plans could potentially affect, in a more indirect way, the employer-sponsored health insurance coverage market by effectively driving up the number of employees enrolling in their employers’ plans. Notably, the OBBBA did not change the current tax exclusion treatment of employer-sponsored health insurance coverage.[1]
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Employee Benefits Provision
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Current Law/Rule
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One Big Beautiful Bill Act Change
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Section of OBBBA
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Change Effective Date
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Permanent extension of safe harbor for absence of deductible for telehealth services
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Telehealth and remote care services relief for health savings account (HSA)-compatible high deductible health plans (HDHP) expired on December 31, 2024.
This safe harbor relief provision permitted HSA-compatible HDHPs to cover telehealth and remote care services on a first-dollar basis, or prior to members satisfying their HDHP deductible in accordance with Internal Revenue Code Section (IRC) 223(c)(2)(E).
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Permanently extends telehealth and remote care services relief for HSA-compatible HDHPs.
This provision is retroactive to the beginning of 2025. Refer to the section below for more details and employer group health plan sponsor considerations in light of this permanent extension.
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Enhancing Choice For Patients (Sec. 71306)
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Plan years beginning after December 31, 2024
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Treatment of direct primary care service arrangements
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Currently, the Internal Revenue Service (IRS) views certain direct primary care (DPC) arrangements[2] as a separate and additional form of health insurance coverage. As such, individuals cannot simultaneously contribute to an HSA (as an enrollee of a HDHP) and pay DPC arrangement fees.
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Permits individuals with HDHPs to also enroll in DPC arrangements and still maintain their HSA eligibility. It also allows HSA funds to be used to pay for DPC services. HSA distributions for DPC arrangement services cannot exceed $150 per month for individuals or $300 per month for family arrangements, adjusted annually for inflation.
The OBBBA defines DPC arrangement as one in which an individual is provided medical care[3] consisting solely of primary care services provided by a primary care practitioner[4] if the sole compensation for such care is a fixed periodic fee.
Notably, DPC arrangements under this new provision are prohibited from providing the following services:
- Procedures requiring the use of general anesthesia
- Prescription drugs other than vaccines
- Laboratory services not typically administered in an ambulatory primary care setting
NOTE: Federal regulations and/or guidance are anticipated to be issued with respect to this new DPC/HSA relief provision.
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Enhancing Choice For Patients (Sec. 71308)
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Months beginning after December 31, 2025
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Allowance of bronze and catastrophic plans in connection with health savings accounts
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Certain bronze and all catastrophic health insurance plans offered through the Exchange Marketplace have maximum out-of-pocket costs that exceed IRS-defined maximum out-of-pocket limits for HDHPs, resulting in disqualifying HSA compatibility.
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Permits all bronze and catastrophic health insurance plans offered through the Exchange to be eligible plans for the purpose of making HSA contributions. This provision may be of interest to small employers participating in the Exchange in that it permits employees of those employers to contribute to an HSA.
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Enhancing Choice For Patients (Sec. 71307)
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Months beginning after December 31, 2025
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Enhancement of the dependent care assistance program
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Currently, dependent care assistance programs (DCAP), in accordance with IRC Section 129(a)(2)(A), maximum contribution limits are:
- $5,000 for single individuals or married individuals filing jointly, or
- $2,500 for married individuals filing separately.
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Amends IRC Section 129(a)(2)(A)[5] to permit the following DCAP maximum contribution limits of:
- $7,500 for single individuals or married individuals filing jointly, or
- $3,750 for married individuals filing separately,
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Permanent Investments in Families And Children (Sec. 70404)
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Taxable years beginning after December 31, 2025
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Extension and modification of qualified transportation fringe benefits
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The 2017 TCJA suspended the exclusion of qualified bicycle commuting reimbursement ($20 per month) from an employee's income for tax years beginning after 2017 and before 2026. Employees who receive payment for qualified bicycle commuting expenses are not eligible for the tax exclusion during this time period.
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Permanently eliminates the qualified bicycle commuting reimbursement exclusion.
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Providing Permanent Tax Relief For Middle-Class Families And Workers (Sec. 70112)
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Taxable years beginning after December 31, 2025
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Extension and enhancement of paid family and medical leave credit
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The 2017 TCJA created the paid family and medical leave (PFML) tax credit, providing businesses with a nonrefundable tax credit ranging from 12.5 to 25% of the wages paid to employees on leave.
Employers claiming the credit are required to:
- 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.
Employers can claim up to 12 weeks of paid leave benefits.
An eligible employee is a full- or part-time employee who has:
- worked for the employer for at least one year and
- earns no more than 60% of the “highly compensated employee” limit ($96,000 in 2025).
This PFML tax credit is set to expire after December 31, 2025.
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Permanently extends the PFML tax credit with three enhancements outlined below:
- Expands the credit allowing employers to claim the credit for a portion of paid family leave (PFL)[6] insurance premiums,
- Makes the credit available in all states, and
- Lowers the minimum employee work requirement from one year to six months (at the employer’s election).
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Establishing Certainty And Competitiveness For American Job Creators (Sec. 70304)
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Taxable years beginning after December 31, 2025
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Enhancement of employer-provided child care credit
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The employer-provided child care credit (IRC Section 45F) provides businesses a nonrefundable tax credit of up to $150,000 per year on up to 25% of qualified child care expenses provided to employees.[7]
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Permanently increases the employer-provided child care credit, creates a separate credit amount for qualified small businesses, and indexes the maximum credit amounts for inflation.
Specifically, this provision increases the maximum credit from $150,000 to $500,000 and the percentage of qualified child care expenses covered from 25% to 40%[8]. Additionally, section 45F is further strengthened for small businesses by increasing the maximum credit to $600,000 and the percent of qualified child care expenses covered to 50%[9].
Additionally, this new provision permits small businesses to pool their resources to provide child care to their employees and for businesses to use a third-party intermediary to facilitate child care services on their behalf.
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Investing In American Families, Communities, And Small Businesses (Sec. 70401)
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Amounts paid or incurred after December 31, 2025.
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Exclusion for employer payments of student loans
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Currently, the first $5,250 of employer-provided educational assistance is excluded from an employee’s gross income. Employer-provided education assistance includes the payment, by an employer, of an employee’s educational expenses (including, but not limited to, tuition, fees, and similar payments, books, supplies, and equipment). This also includes an employee’s qualified student loan payments in the case of payments made before January 1, 2026. Click here and here for previous Risk Strategies articles detailing the COVID-related student loan assistance tax savings through 2025.
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Permanently extends the exclusion from gross income for qualified education loan payments under IRC Section 127(c)(1)(B), and also indexes for inflation the maximum exclusion from gross income for educational assistance programs under IRC Section 127(a)(2).
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Investing In American Families, Communities, And Small Businesses (Sec. 70412)
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Payments made after December 31, 2025
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Employer contributions to Trump Accounts
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Not applicable.
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Tax-free treatment of employer contributions to “Trump Accounts” for employees or any employee dependents, up to $2,500, adjusted for inflation.
“Trump Accounts” are new government-funded investment accounts for eligible babies born between January 1, 2025, and December 31, 2028. To be eligible, the baby must be a U.S.-born citizen, and the baby and parents are all required to have Social Security numbers.
A “Trump account contribution program” is a separate written plan of an employer for the exclusive benefit of their employees to provide contributions to the Trump accounts of such employees or dependents of such employees.
Employers are advised to confer with their own counsel and/or tax advisors for more information regarding Trump account contribution programs.
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Delivering On Presidential Priorities To Provide New Middle-Class Tax Relief (Sec. 70204)
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Taxable years beginning after December 31, 2025.
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OBBBA Telehealth Relief for HSA-compatible HDHPs
Recent COVID-Related Telehealth Relief History
CARES Act
In response to the COVID-19 pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act in 2020 (CARES Act), which created a safe harbor relief provision permitting HSA-compatible HDHPs to cover telehealth and remote care services on a first-dollar basis, or prior to members satisfying their HDHP deductible.[10]
This safe harbor relief allowed HDHPs to offer telehealth and other remote care services without violating IRS “first-dollar rules,” which require HSA participants to satisfy their deductible before receiving most non-preventive services coverage. This telehealth safe harbor relief under the CARES Act expired on December 31, 2021.
CAA 2022
The Consolidated Appropriations Act of 2022 (CAA 2022) reinstated the telehealth safe harbor relief for 2022 from April 1, 2022, to December 31, 2022. The CAA 2022 reinstatement meant that non-preventive telehealth services received from January 1, 2022, to March 31, 2022, were still required to satisfy the HDHP deductible to preserve HSA eligibility.
CAA 2023
Subsequently, the Consolidated Appropriations Act of 2023 (CAA 2023) extended the telehealth safe harbor relief for HSA-compatible HDHPs from January 1, 2023, until December 31, 2024.
REMINDER: CAA 2023 Non-Calendar Year Gap
The language in CAA 2023 created a gap in telehealth relief for non-calendar plan years from January 2023 until the month in which the 2023 plan year begins, where non-preventive telehealth services was subject to the plan’s deductible.
Example: A non-calendar year plan that started on April 1, 2022, and ended on March 31, 2023, had a gap in the telehealth safe harbor relief, in which the HDHP deductible for non-preventive telehealth services applied from January 1, 2023, to March 31, 2023.
Click here, here, and here for previous Risk Strategies articles with more details.
OBBBA
The OBBBA provides permanent safe harbor relief allowing HSA-compatible HDHPs to cover telehealth and other remote care services on a pre-deductible basis without jeopardizing an individual’s ability to make or receive HSA contributions.
As with the prior related legislation over the past several years, employers are permitted (but not required) to cover telehealth services at no cost to HDHP enrollees. Moreover, employers with HSA-compatible HDHPs can decide whether to adopt (or reinstate) this telehealth safe harbor relief for the 2025 plan year since the OBBBA permits a retroactive effective date starting with the 2025 plan year, considering the potential cost impact to the plan.
Employers sponsoring group health plans should take into account that plan participants continue to value telehealth and remote care coverage for convenience purposes. As such, reinstating this telehealth safe harbor relief in 2025 will likely be a welcome development for those HSA-compatible HDHP participants, particularly since it expired at the end of 2024.
Employer Group Health Plan Sponsor Considerations
Employer group health plan sponsors who imposed cost-sharing on telehealth and remote care services for their HSA-compatible HDHPs in 2025 will now have the option to reinstate (or offer) those services at no cost prospectively (or even retroactively) for the 2025 plan year. Consult with your applicable insurance carrier or third-party administrator (TPA) to evaluate the operational logistics of reinstating this relief, either on a prospective or retroactive basis. Be sure to consider the potential operational challenges, including re-adjudicating telehealth claims, of retroactively reinstating this relief back to January 1, 2025, in conjunction with your applicable carrier/TPA.
- Employer Decisions:
- Employers sponsoring fully-insured HSA-compatible HDHPs will need to consult with their plan carrier to determine if the carrier will permit reinstatement of telehealth/HSA relief for the 2025 plan year and going forward.
- Employers sponsoring self-funded HSA-compatible HDHPs will need to coordinate with their plan’s third-party administrators (TPA) to decide if they will reinstate this relief for 2025 and going forward. When making this decision, self-funded plan sponsor employers should consider not only the cost impact to the plan, but also the employee relations angle of reinstating this popular plan design feature that continues to be valued by many plan participants.
- Communications/Plan Documents:
Any changes to telehealth coverage, whether or not an employer group health plan sponsor decides to take advantage of this permanent telehealth/HSA relief, should be:
- Clearly communicated to employees, and
- Reflected in updates to the plan’s Summary Plan Description (SPD) or a Summary of Material Modification (SMM) notice, within the required timeframes.
Risk Strategies will continue to closely track further employee benefit-related developments in connection with the OBBBA, including publication of relevant implementing regulations and guidance, and provide updates as available. In the meantime, contact your Risk Strategies account team with any questions or contact us directly here.
[1] Click here for a Risk Strategies article with more details on this tax policy topic.
[2] A DPC arrangement is defined in 2020 proposed IRS regulations as a contract between an individual and one or more primary care physicians (as further defined in the proposal) to provide medical care (as defined in section 213(d)(1)(A)) for a fixed annual or periodic fee without billing a third party.
[3] As defined in IRC Section 213(d)
[4] As defined in Section 1833(x)(2)(A) of the Social Security Act without regard to clause (ii) thereof.
[5] This amendment to the IRC required Congressional action (such as the OBBBA), which is why the current DCAP maximum contribution limits have not changed in many years.
[6] PFL insurance is a newer offering that is primarily utilized by smaller businesses to offer paid leave benefits to their employees and is available in a growing number of states.
[7] Currently, an employer must spend at least $600,000 on child care-related expenses to receive the full credit, and the credit has not changed since its creation in 1986.
[8] With this new provision, a business must spend at least $1.25 million on child care-related expenses to receive the full credit.
[9] With this new provision, a small business must spend at least $1.2 million on child care-related expenses to receive the full credit. An eligible small business is one that meets the gross receipts test under Internal Revenue Code section 448(c) for a five-year period.
[10] Internal Revenue Code Section 223(c)(2)(E).
