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    4. The One Big, Beautiful Bill Act’s impact on employee benefits

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    The One Big, Beautiful Bill Act’s impact on employee benefits

    July 9, 2025

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    By Damian Myers, Mark Stember and Annie Zhang

    The OBBB Act permits pre-deductible telehealth coverage under HDHPs, increases the dependent care FSA limit, permits student loan repayments to educational assistance programs, allows for contributions to Trump Accounts, and more.

    Despite the inclusion of a number of benefits-related provisions in various drafts of the One Big, Beautiful Bill Act (OBBB Act), only a few provisions made it into the version signed into law on July 4, 2025. These changes are summarized below.

    Telehealth coverage under high-deductible health plans (HDHPs)

    In general, to maintain eligibility to contribute to a health savings account, non-preventive care cannot be covered by an HDHP until the statutory minimum deductible has been satisfied. However, due to the need for expanded telehealth access during the COVID era, the CARES Act (as extended by the Consolidated Appropriations Act) allowed HDHPs to cover telehealth at first-dollar or for less than the fair market value (FMV) before the minimum deductible has been met. This temporary relief expired on December 31, 2024. The OBBB Act permanently allows for pre-deductible coverage of telehealth, retroactive to December 31, 2024. Thus, plan sponsors may (but are not required to) cover telehealth under HDHPs at first-dollar or a cost lower than the FMV of the services.

    Employers wishing to take advantage of this permanent relief have flexibility in implementing the change. One option would be to make the change effective going forward (either mid-year or at the start of the next plan year). Another option would be to retroactively re-adjudicate claims processed on and after January 1, 2025 (subject to potential deductible accumulation and other cost-sharing implications). Once a design choice has been finalized, employers should amend plan documents, as needed, coordinate with their medical and HSA third-party administrators, and update participant communications. 

    Dependent care FSA limit

    For years, the maximum contribution limit under dependent care FSAs has been $5,000. The OBBB Act increases the maximum contribution to $7,500 effective January 1, 2026. Like the current maximum contribution limit, the new limit is not indexed for inflation. Employers wishing to increase the limit under their FSA programs should amend plan documents, as needed, coordinate with their dependent care FSA third-party administrator, and update participant communications. Note that dependent care FSAs are subject to nondiscrimination testing, and highly compensated employees are typically more likely to contribute higher amounts to the FSA. Therefore, before increasing the maximum contribution limit, employers should analyze whether the higher limit could create testing problems. Even if testing problems are not apparent at the start, mid-year testing check-ins are recommended so adjustments can be made for the dependent care FSA to remain compliant for tax advantage purposes. 

    Employer payments of student loans

    Previously, some employers did not want to add student loan repayments to their educational assistance programs because of the sunset date of 2026. The OBBB Act makes the student loan repayment option permanent, which will remove potential employer anxiety about that provision. In addition, the OBBB Act indexes the educational assistance program limit of $5,250 for inflation (for 2025). Employers wishing to implement this change should amend plan documents, as needed, coordinate with their educational assistance program third-party administrator, and update participant communications.

    Trump Accounts as an employee benefit

    Starting in 2026, individuals will be able to contribute up to $5,000 annually for each child to a Trump Account. Rules similar to IRAs apply to Trump Accounts, and investments grow tax-deferred. In addition, employers can contribute up to $2,500 annually to the Trump Accounts of their employees. Employer contributions are tax-free. Written plan document and nondiscrimination rules similar to a dependent care FSA apply.

    Miscellaneous provisions

    A number of OBBB Act provisions have a tangential impact on employee benefit programs. These include the permanent repeal of bicycle commuting reimbursements and a change in the index for how the inflation adjustment is performed for all qualified transportation fringe benefits. Employers should amend plan documents, as needed, and update administrative practices and participant communications to align with the changes.

    Nixon Peabody’s Employee Benefits & ERISA team is ready to guide you through these changes, ensuring your benefit programs remain compliant and optimized for your workforce. If you have any questions regarding these changes, please contact the authors of this article.

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    The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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