How Does “One Big Beautiful Bill” Impact Employee Benefits?

Every benefit or perk your company offers is shaped in some way by law. So, when Congress rewrites the rules, the impact is immediate, especially for HR and benefits leaders trying to stay compliant and competitive.

That’s why news of Congress’s “One Big Beautiful Bill” being passed is particularly impactful for the working world. It changes how key benefits are taxed, who qualifies for them, and what employers need to offer.

In this article, we break down the most important changes, including new savings vehicles, expanded health plan eligibility, and enhanced tax advantages, so you can prepare your benefits strategy and processes for what’s coming up. 

What is the “One Big Beautiful Bill?”

The “One Big Beautiful Bill” (OBBB) is a sweeping piece of legislation passed by Congress and signed into law on July 4, 2025. The bill carries serious implications across a wide range of sectors, including energy, defense, taxation, and employee benefits.

Originally introduced in the House as a more ambitious package of health reforms, the final version of the bill is less expansive than its initial draft. Some early proposals, including broader changes to Individual Coverage Health Reimbursement Arrangements (ICHRAs) and Health Savings Accounts (HSAs), were ultimately removed or scaled back during Senate negotiations.

Even so, the OBBB represents the most significant update to benefits-related tax law in recent years. It introduces a new set of opportunities and responsibilities, meaning there’s plenty for HR leaders and benefits administrators to get their teeth stuck into. 

Which OBBB provisions impact employee benefits?

The One Big Beautiful Bill includes several key provisions that reshape how employers offer, administer, and fund employee benefits. Below, we break down the most relevant changes and what they mean for your organization.

Health savings accounts 

There are several significant updates to current HSA rules, expanding both how they’re used and who can access them. These changes make HSAs more flexible and accessible, which is a win for both employers and employees looking to save on healthcare costs in tax-advantaged ways.

Telehealth 

One of the most immediate and notable changes is the permanent reinstatement of first-dollar telehealth coverage under HSA-qualified High Deductible Health Plans (HDHPs). Originally introduced as a temporary provision under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, this flexibility had expired and been renewed several times. 

The OBBB finally makes it permanent, dating back to December 31, 2024. This means that for the entire 2025 plan year and beyond, HDHPs can cover telehealth services without requiring employees to meet their deductible first, and without jeopardizing HSA eligibility. 

Employers benefit too, giving them long-term certainty and the ability to design more inclusive, accessible health plans that reflect modern care delivery.

Expanded eligibility 

Beginning in 2026, the bill also expands who’s eligible to open and contribute to an HSA by redefining what qualifies as an HSA-compatible health plan. Specifically, ACA Bronze and Catastrophic plans will now be treated as eligible HDHPs. 

Under previous rules, many of these lower-premium marketplace plans didn’t meet the federal requirements for HDHP status, which excluded enrollees from HSA benefits. With this update, more employees can take advantage of the triple-tax benefits HSAs offer. It’s particularly advantageous for younger and lower-income individuals who typically choose Bronze or Catastrophic coverage. 

Direct primary care 

Direct primary care (DPC) is a growing model where patients pay a flat monthly fee for unlimited access to a primary care provider. Previously, DPC participation could disqualify someone from HSA eligibility because it was considered a “second health plan.” 

The OBBB changes that, allowing individuals to use DPC arrangements and still contribute to an HSA, as long as the monthly cost does not exceed $150 for individual coverage or $300 for family coverage. As a result, employers have new opportunities to support personalized, continuous care without creating tax conflicts for employees.

Flexible spending accounts 

A Dependent Care Flexible Spending Account (DCFSA) allows employees to contribute pre-tax dollars to cover the cost of care for dependents. Typically, this is for children under 13 or adult family members who need supervision. Expenses like daycare, preschool, after-school programs, and in-home eldercare are all eligible.

Since 1986, the contribution limit for DCFSA plans has held steady at $5,000 per household (or $2,500 if married filing separately)—an amount that hasn’t kept pace with the rising cost of care. The only exception came in 2021, when Congress temporarily increased the limit to $10,500 through pandemic relief legislation (the American Rescue Plan Act). That short-term boost was designed to help working parents manage heightened childcare costs during COVID-19, but the limit reverted back to the disappointing norm of $5,000 the following year.

OBBB revamps the benefit by raising the annual cap to $7,500 (or $3,750 for married couples filing separately), beginning in plan years starting on or after January 1, 2026. Is it a step forward? Sure. But it still falls short for many working families, with the average cost of providing center-based full-time infant care reaching $14,760. At the same time, the new cap, like the previous one, is not indexed for inflation, so its real value will decline over time unless future legislation raises the threshold again.

Commuter benefits 

While the One Big Beautiful Bill introduces several enhancements to employee benefits, it also permanently eliminates one tax-free perk: bicycle commuting reimbursements.

Previously, employers could offer up to $20 per month in tax-free reimbursements to employees who biked to work. Although relatively modest, this benefit served as practical support for eco-conscious commuting, particularly in urban areas.

The OBBB permanently repeals the tax-free treatment of employer-provided bicycle commuting reimbursements. This repeal, originally introduced under the 2017 Tax Cuts and Jobs Act, had been temporarily suspended but was set to return without further legislative action. Now, the OBBB makes that suspension permanent, meaning any employer-provided bike commuting support will be treated as taxable income going forward. 

For employers, this change may not have a broad operational impact, as bicycle commuting benefits have historically been underused. However, it could affect companies with green transportation programs or sustainability-focused perks.  Employers wishing to provide some form of bicycle commuting assistance can still do so on a taxable basis.

Student loan repayment assistance 

The ability for employers to offer tax-free student loan repayment assistance is made permanent by OBBB. Originally introduced as a temporary measure under the CARES Act and extended through 2025 by later legislation, this provision allows employers to contribute up to $5,250 per year toward an employee’s student loan payments. Under a section 127 qualified educational assistance program, any amount within the limit won’t be treated as taxable income. The OBBB removes the sunset clause, making this tax advantage permanent.

In addition, beginning in 2027, this $5,250 annual limit will be indexed to inflation, meaning the cap will rise over time to reflect cost-of-living adjustments. It’s a welcome update for both employees carrying long-term debt and employers looking to keep benefits competitive.

Trump Accounts 

Trump Accounts, previously referred to as Invest America Accounts, are the new kid on the benefits block. Introduced as a new tax-advantaged savings vehicle, these accounts are designed to encourage long-term savings starting at birth. They’re structured as a tax-advantaged investment account for children with distinctive features and direct employer involvement.

Beginning July 4, 2026, every child born in the U.S. between 2025 and 2028 will be eligible to receive a $1,000 federal seed contribution into a newly established Trump Account. The account is intended to grow over time, and savers can use it in adulthood for any purpose after reaching age 18 such as education, home buying, starting a business, or retirement.

Alongside the government contribution, the OBBB allows employers to make optional, tax-free contributions to employees’ Trump Accounts, specifically, to the accounts of their employees’ children. Employers can contribute up to $2,500 per child per year. These contributions fall outside the employee’s taxable income.

This provision opens up a new category of benefits aimed at intergenerational financial wellbeing, especially valuable for working parents and caregivers. While implementation details will continue to develop, the policy signals a growing focus on family-oriented savings incentives in the employer benefits landscape.

Paid family and medical leave (PFML) 

Although OBBB doesn’t establish a national paid family and medical leave program, it does include the permanent expansion of the federal tax credit for employers who voluntarily offer PFML.

Originally introduced under the 2017 Tax Cuts and Jobs Act, the PFML tax credit was set to expire but had been extended multiple times. The OBBB makes this credit permanent, giving employers more certainty when budgeting for paid leave offerings. Under the permanent version, employers can claim a general business tax credit of 12.5% to 25% of wages paid to employees on qualifying leave, depending on how much wage replacement they provide.

The OBBB also expands the credit in two key ways:

• Employers can now claim a credit on wages paid during leave, and also on a portion of insurance premiums paid for employees on PFML.
• The credit is now available to employers in states with mandated PFML programs, as long as the employer provides more than the state-required benefit. Previously, employers in those states were excluded.

To be eligible for the credit, employers must have a written policy offering at least two weeks of paid family and medical leave annually at a minimum of 50% wage replacement, and covering all qualifying employees. Employers must also align their policies with IRS rules and coordinate properly with unpaid leave entitlements under the Family and Medical Leave Act (FMLA). 

Which proposals were omitted from the final OBBB?

The One Big Beautiful Bill has been talked about, tweaked, and debated across countless drafts and political cycles. But like any new piece of legislation, not everything proposed made it across the finish line. Many early provisions were either pared back or cut entirely during negotiations. In case you had your eye on a specific change, here are a few of the most talked-about proposals that were left on the cutting room floor.

ICHRA

One of the most anticipated elements of the One Big Beautiful Bill was a proposal to modernize and rebrand Individual Coverage Health Reimbursement Arrangements (ICHRAs). 

Modeled after the CHOICE Arrangement Act, passed by the House in 2023, these proposed changes aimed to expand the use and appeal of ICHRAs by codifying existing regulatory guidance into law and introducing several employer- and employee-friendly updates. The legislation would have rebranded ICHRAs as “Custom Health Option and Individual Care Expense (CHOICE) Arrangements” in a push to improve awareness and adoption, especially among small to midsize employers.

Under the CHOICE proposal, ICHRA rules would have been formally written into the tax code with some key enhancements, including:

• A requirement for employers to report ICHRA contributions on employees’ Form W-2, improving transparency and standardization
• The ability for employees to use Section 125 cafeteria plans to pay their share of premiums pre-tax, even when purchasing individual policies through ACA marketplaces
• A new employer tax credit for offering an ICHRA, aimed at incentivizing broader uptake among businesses not currently offering group coverage

Despite strong support from some lawmakers and employer groups, none of these provisions made it into the final version of the OBBB. As a result, ICHRAs remain governed by preexisting IRS and Department of Labor guidance, and the limitations around pre-tax premium payments and affordability determinations still apply.

HSAs

OBBB includes several impactful updates to HSA eligibility and use, such as expanded HDHP compatibility and support for direct primary care. But many of the more ambitious HSA reforms were ultimately left out of the final legislation.

In the initial version passed by the House, lawmakers proposed sweeping changes to modernize HSAs. One major idea was to allow individuals enrolled in Medicare Part A to remain eligible to contribute to an HSA. The proposal would have removed a long-standing restriction that currently disqualifies even actively working older adults.

The House version also would have eased eligibility conflicts with other types of coverage, such as:

• Allowing access to on-site medical clinics offering limited services (e.g., flu shots, first aid) without disqualifying HSA eligibility
• Permitting HSA contributions for individuals whose spouse is enrolled in a general-purpose health FSA

The House bill also focused on making HSAs more flexible and generous:

• Allowing HSA funds to be used for gym memberships or physical activity expenses, up to $500/year
• Letting both spouses make catch-up contributions into a single HSA account
• Creating a special rollover window for employees newly enrolled in HDHPs to transfer funds from an FSA or HRA, capped at twice the FSA limit
• Covering expenses incurred within the first 60 days of HDHP enrollment, even if the HSA was opened later in that period

Finally, the House bill proposed significantly increasing contribution limits by an additional $4,300 for individuals and $8,550 for families—phased out for high earners starting at $75,000 for individuals or $150,000 for couples.

None of these proposals made it into the final bill.

How can employers respond to OBBB?

OBBB covers a lot of ground, so we’re not surprised if you’re scratching your head trying to figure out what it means for your benefits strategy. With new rules, timelines, and tax implications to consider, naturally, you’ll want to understand how best to support your workforce while remaining compliant with the new red tape. 

Here’s a simple checklist to keep you on the right side of the rules: 

• Audit your existing benefits to identify what’s impacted by the OBBB, including HSAs, student loan repayment, paid leave, and emerging savings options.‍
• Review contribution limits and eligibility rules that take effect in 2025 and 2026 to ensure compliance and employee access.‍
• Educate your HR and payroll teams on the legislative updates so they can administer programs accurately and confidently.‍
• Communicate clearly with employees about what’s changing, what new benefits they may be eligible for, and how they can expect them to impact their pay packets. ‍
• Collect employee feedback to understand which new offerings (e.g., student loan assistance, expanded HSA access) matter most to them.‍
• Consider versatile benefits platforms like Benepass that can quickly adapt to regulatory changes and support new account types. 

Offer compliant benefits with Benepass

Navigating the changes introduced by OBBB is entirely possible with the right benefits administration platform. Benepass offers a comprehensive suite of pre- and post-tax benefits to support every employee’s needs and compliance requirements. Here’s what’s available: 

• Health savings accounts: Support expanded eligibility, telehealth coverage, and streamlined contributions with fully compliant HSA setup.
• Flexible spending accounts: Manage updated limits, eligible expenses, and rollover options for healthcare and dependent care FSAs with ease. 
• Health reimbursement accounts: Configure traditional or individual HRAs with built-in IRS compliance and flexible employer funding.
• Commuter benefits: Administer transit and parking benefits effortlessly.
• Education assistance programs: Enable tax-free student loan repayment and qualified tuition benefits under Section 127, with built-in compliance and customizable eligibility rules.
• Lifestyle spending accounts: Offer flexible, post-tax benefits for wellness, family care, and more, with full customization available. 

Ready to modernize your benefits for the OBBB era? Book a free demo to explore our Benepass platform or email sales@getbenepass.com to connect with a benefits specialist and learn more about the latest legislative updates.