One Big Beautiful Bill Act (OBBBA) Refresher for 2026 Benefits Enrollment

With the 2026 benefits open enrollment season in full swing, now is a good opportunity for employers to refresh their knowledge of the potential benefit plan updates for 2026 as a result of the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.

For purposes of 2026 benefits plan decisions and enrollment, this article will focus on the (non-exhaustive) OBBBA updates highlighted below for employer benefit plan sponsors to be aware of and consider as they enter the new plan year.

Click here for a previous Risk Strategies article with more extensive details of the OBBBA impacts to employee benefits.

Permanent Extension of Health Savings Account (HSA) Safe Harbor for Telehealth Services

By way of background, to be eligible for Health Savings Account (HSA) contributions, an individual must:

• Be covered under a high-deductible health plan (HDHP),
• Not be covered by other health coverage that is not a HDHP (with certain exceptions),
• Not be enrolled in Medicare, and
• Not be claimed as a dependent on someone else’s tax return.^[1]

Notably, HSA-eligible individuals cannot be covered by a health plan that provides benefits, except preventive care benefits, before the minimum HDHP deductible is met for the year. Prior to the COVID-19 pandemic, individuals receiving telehealth/remote care services that provided free or reduced-cost benefits before the HDHP deductible was met were not eligible to make (or receive) HSA contributions.

In 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (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. This COVID-related HSA/telehealth safe harbor was extended two more times by Congress until it expired on December 31, 2024.

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 (and receive) HSA contributions.^[2]

As with the prior related legislation over the past several years, employers are once again permitted (but not required) to cover telehealth and other remote care services at no cost to HDHP enrollees. Employers sponsoring group health plans should take into account that plan participants continue to value telehealth and remote care services for convenience purposes.

Employer Plan Sponsor Considerations

Employers sponsoring HSA-compatible HDHPs will need to decide whether to reinstate (or first adopt) this permanent HSA/telehealth safe harbor relief for the 2026 plan year, in conjunction with their applicable carrier/third-party administrator.

Employer plan sponsors reinstating (or adopting) this optional safe harbor for 2026 are advised to:

• Clearly communicate this update to employees, and
• Reflect this change by updating the plan’s Summary Plan Description (SPD) and/or distributing a Summary of Material Modification (SMM) notice, within the required timeframes.

HSA Eligibility Expansion for Direct Primary Care (DPC) Arrangements

A direct primary care (DPC) arrangement is generally one in which an individual receives medical care consisting solely of primary care services provided by a primary care medical professional for a fixed annual or periodic fee without billing a third party (such as an insurance carrier).

Currently, the Internal Revenue Service (IRS) views DPC arrangements as a separate and additional form of health insurance coverage. As such, individuals cannot simultaneously contribute to an HSA (as a participant of an HDHP) and be enrolled in a DPC arrangement.

Effective January 1, 2026, the OBBBA expands HSA eligibility by permitting individuals with direct primary care (DPC) arrangements to make (and receive) HSA contributions as long as their monthly fees are $150 or less ($300 or less for family coverage). These dollar limits will be adjusted annually for inflation.

The OBBBA also treats DPC arrangement fees as medical care expenses that can be paid for/reimbursed using HSA funds. However, in the absence of official IRS guidance, DPC arrangement fees cannot be reimbursed using Health Care Flexible Spending Account (HC FSA) or Health Reimbursement Arrangements (HRA) funds.

Notably, DPC arrangements under the OBBBA are prohibited from providing the following services:

• Procedures requiring the use of general anesthesia,
• Prescription drugs other than vaccines, and
• Laboratory services not typically administered in an ambulatory primary care setting

Employer Plan Sponsor Considerations

Employers considering sponsoring DPC arrangements for their employees in 2026 are advised to:

• Consult with legal counsel to confirm whether the employer-sponsored DPC arrangement will be considered a group health plan under applicable laws (such as ERISA, PHSA, ACA, COBRA, and/or HIPAA) and any resulting reporting and disclosure requirements,
• Update plan materials to reflect that DPC fees are HSA-eligible expenses, and
• Clearly communicate this update to employees.

Dependent Care Flexible Spending Account Annual Maximum Limits Increase

Employers can offer their employees a dependent care benefit on a tax-free basis, subject to a maximum annual contribution limit. These programs are often referred to as Dependent Care Flexible Spending Accounts (DC FSAs). DC FSAs are typically structured under a Section 125 cafeteria plan to allow employees to make DC FSA contributions on a pre-tax basis.

Eligible expenses under DC FSAs generally include the following:

• Day care or preschool for a child under 13
• Before and after-school caregivers
• Summer day camps
• Elder care for dependent parents, including elder day care
• Care for a disabled spouse or a dependent incapable of self-care

Currently, DC FSA annual maximum contribution limits are^[3]:

• $5,000 for single individuals or married individuals filing jointly, or
• $2,500 for married individuals filing separately.

Effective January 1, 2026, the OBBBA increases the DC FSA annual maximum contribution limit to:

• $7,500 for single individuals or married individuals filing jointly, or
• $3,750 for married individuals filing separately.

Employer Plan Sponsor Considerations

Employer DC FSA plan sponsors adopting the increased DC FSA annual maximum contribution limit for the 2026 plan year are advised to:

• Update plan materials and employee communications,
• Coordinate with their DC FSA administration vendor and benefits administration vendor to reflect new limits in 2026, and
• Be mindful of the Internal Revenue Code (IRC) Section 129 nondiscrimination testing requirements that must be conducted on an annual basis for DC FSAs.

As a practical matter, this DC FSA annual maximum contribution increase will likely not help a DC FSA plan to pass nondiscrimination testing. This is particularly true for DC FSA plans that continually fail the 55% average benefits test, a notoriously difficult Section 129 nondiscrimination test to pass.

If a DC FSA plan sponsor is concerned about failing Section 129 nondiscrimination testing, they may consider limiting DC FSA contribution elections for highly compensated employees (HCEs) and/or provide an employer match for those non-HCEs who elect to contribute to the DC FSA.

Student Loans Reimbursements under Educational Assistance Programs

IRC Section 127 allows employers to establish tax-preferred educational assistance programs of up to $5,250 per year toward tuition, fees, books, supplies, and equipment. Section 127 educational assistance benefits provide tax advantages for both employees and employers and can also bolster employers’ employee recruitment and retention efforts.

Prior to COVID, Section 127 programs excluded reimbursement of previously incurred student loans. Federal legislation passed during the COVID pandemic included a temporary provision permitting employers to provide tax-free payments of up to $5,250 toward employees' student loans, and was scheduled to expire on December 31, 2025.

However, the OBBBA permanently extends tax-free student loan repayments under Section 127 educational assistance programs, effective January 1, 2026.

Employer Plan Sponsor Considerations

As a result of this permanent extension under the OBBBA, employers may continue to use Section 127 educational assistance programs to pay principal and interest on an employee’s qualified education loans in 2026 (and beyond). Employers are advised to update plan materials and employee communications accordingly.

Allowance of Marketplace/ Exchange Bronze and Catastrophic Plans with HSAs

Currently, most bronze and catastrophic health insurance plans offered through the Affordable Care Act (ACA) Marketplace/Exchange have maximum out-of-pocket costs that exceed IRS-defined maximum out-of-pocket limits for HDHPs, resulting in disqualifying HSA compatibility.

Effective January 1, 2026, the OBBBA reclassifies all bronze and catastrophic health insurance plans offered through the Affordable Care Act Marketplace/Exchange as qualifying HDHPs, enabling eligible enrollees to contribute to HSAs.

Employer Plan Sponsor Considerations

This particular OBBBA HSA expansion provision does not directly impact employer plan sponsors. However, employers might have employees enrolled in an ACA Marketplace/Exchange bronze or catastrophic plan expressing interest in contributing to the employer-sponsored HSA for 2026.

IRS guidance^[4] provides that employers are only responsible for determining the following with respect to an employee's HSA eligibility and maximum annual contribution limit:

1. Whether the employee is covered under an HDHP sponsored by that employer,
2. Whether the employee is covered under a non-HDHP, including Health Care FSAs and Health Reimbursement Arrangements (HRAs), sponsored by that employer, and
3. The employee's age (for catch-up contributions), and the employer may rely on the employee's representation as to their date of birth.

On a practical level, employers should check with their HSA administration vendors to confirm whether employees enrolled in ACA Marketplace bronze or catastrophic plans will be able to make pre-tax HSA contributions through a Section 125 cafeteria plan in 2026, and update plan communications accordingly.

As a final reminder here, coverage offered through an ACA Marketplace/Exchange cannot be reimbursed or paid for under a Section 125 cafeteria plan on a pre-tax basis, except for certain smaller Exchange-eligible employers.^[5]

Open enrollment season is always a busy time for employers, so be sure to take time now to review the potential OBBBA updates for 2026 benefit plans detailed above.

Contact your Risk Strategies account team with any questions, or contact us directly here.

[1] https://www.irs.gov/pub/irs-pdf/p969.pdf

[2] The effective date for the HSA/telehealth safe harbor under the OBBBA is retroactive to December 31, 2024, which is the date the prior COVID relief expired.

[3] Current DC FSA maximum contribution limits have not changed in nearly 40 years, except for one temporary increase during the COVID-19 pandemic in 2021.

[4] IRS Notice 2004-50, Q/A 81.

[5] IRC Section 125(f)(3).