On July 4, 2025, the One Big Beautiful Bill Act (OBBB) was signed into Law by President Trump. The initial legislation, first passed in the House, included numerous provisions that intended to expand pre-tax benefits for employees and employer options for offering healthcare plans to employees. In the end, the House approved a pared down Senate version of the Bill, just in time for the President’s self-imposed deadline. While the bill includes many changes to ACA premium tax credits and their availability to individuals in the Marketplace, the below focuses on the provisions that will impact employers and their benefit plan offerings.

Health Savings Accounts (HSAs) Eligibility

High-Deductible Health Plans (HDHPs) and Telehealth Services

The final version of the bill makes permanent the COVID-era safe harbor that allows HDHP coverage of telehealth services at low or no cost prior to satisfying the plan deductible in order to preserve HSA eligibility for plan participants. For more information on prior telehealth relief, see our article, Telehealth Relief Extension Expires for Plans Starting on or after January 1, 2025.

This provision is effective retroactive for plan years beginning on or after 12/31/24, therefore making telehealth services available with low or no cost-sharing prior to meeting the deductible for existing plan members of an HDHP without eliminating their eligibility to contribute to an HSA going forward.

Direct Primacy Care Service Arrangements (DPC)

Effective beginning 1/1/2026, DPC arrangements will not be treated as disqualifying coverage impacting HSA eligibility. The provision in the bill is limited to DPC arrangements wherein primary care services are provided by primary care practitioners for a fixed periodic fee that does not exceed a monthly cost of $150 per individual or $300 for plans that include spouses and dependents. In addition, the bill clarifies that DPC fees are a qualified medical expense under IRC Section 213(d), and as such, they are eligible to be paid tax-free from an HSA.

As background, a DPC arrangement is a healthcare model where individuals (or sometimes employers) pay a flat, recurring membership fee directly to a primary care provider in exchange for certain medical care. A DPC arrangement can cover services (e.g., urgent care, chronic disease management) that an HDHP can only cover once the deductible is met. Before this guidance, it was not entirely clear how DPC coverage affected HSA eligibility—but it was often considered disqualifying coverage due to the offering of first-dollar coverage.

Marketplace Bronze and Catastrophic Plans

All Bronze and Catastrophic level plans (offered in the individual market) beginning on or after December 31, 2025, will now be permitted as HSA-compatible HDHPs, even though these plans provide first dollar coverage for some benefits. This expands the availability for employees enrolled in these plans (who are otherwise HSA eligible) to now contribute to an HSA that they have not been eligible to contribute to in the past. Note to be HSA eligible, an individual must be covered by a qualifying HDHP, have no disqualifying coverage, not be enrolled in Medicare, and not able to be claimed as a dependent on another person’s tax return.

HSA Provisions that were not Included in the Final Bill

Several notable provisions relating to HSAs originally presented in the House Bill were left out of the final legislation. As such, these provisions were not enacted into law:

  • Medicare Part A: Individuals enrolled in Part A would remain HSA-eligible.
  • On-Site Clinics: Access to limited on-site clinic services that would not disqualify HSA eligibility.
  • Fitness Expenses: Up to $500/year for gym memberships and similar activities.
  • Catch-Up Contributions: Both spouses could have made the $1,000 catch-up to the same HSA.
  • Spousal FSA: HSA eligibility would remain even if a spouse had a general-purpose FSA.

Dependent Care Flexible Spending Accounts (DCFSA) & Fringe Benefits

Starting January 1, 2026, the contribution limit for DCFSAs will increase from $5,000 to $7,500 ($3,750 for married couples filing separately). This limit, initially set almost 40 years ago, is not indexed for inflation. While this is likely to be welcomed by employees, this increase could make it more difficult for plans to pass the already challenging 55% Average Benefits Non-Discrimination Test that must be performed each plan year. This is because the 55% Average Benefits test is based on utilization and highly compensated employees tend to utilize these accounts more heavily.

Employer Tax Credits

In addition, several provisions within the bill will extend permanent tax credits for employers offering specific benefits from previous legislation that were set to expire in the coming months. These tax credits include but are not limited to:

  • Employer reimbursements for student loans, which allows employers to provide up to $5,250 per year (indexed for inflation after 2026) in tax-free student loan repayment assistance through an educational assistance program. To qualify, the program must be established under a written plan, and employers must reasonably notify all eligible employees of its availability and terms.
  • New tax-favored accounts (“Trump Accounts”) for children under age 18, effective for tax years beginning January 1, 2026 and beyond. These accounts allow up to $5,000 per year in pre-tax contributions (indexed for inflation), with employers permitted to contribute up to $2,500 tax-free annually. Modeled after IRAs, investments in these accounts grow tax-deferred, and distributions are generally restricted until the child turns 18.
  • Paid Family and Medical Leave (PFML) credit (which makes the paid family and medical leave credit permanent and allows it to be claimed for an applicable percentage of premiums paid towards PFML insurance policies.)
  • Employer-provided childcare credit (which increases the employer-provided child tax credit up to $500,000 on up to 40% of the employers qualified childcare expenses and indexes the amount of the credit for inflation.)

Finally, we note that the qualified bicycle commuting reimbursement was eliminated (though employers may still offer a bicycle reimbursement on a post-tax basis).

Employers should work with a qualified tax adviser to understand how they may take advantage of the above-named tax credits.

Employer Action Items

Many of the bill’s provisions will not go into effect until after December 31, 2025. The retroactive provision related to HSAs and telehealth services will not negatively impact benefits, nor will it require any action from employees.

  • Telehealth. Employers who wish to provide telehealth coverage without cost sharing should work with their carrier/vendor of third-party administrator to make any plan design changes and update plan documents (if changes are made).
  • DCFSAs. Employers planning to adopt the increased Dependent Care FSA contribution limit should work with their FSA vendor to update Section 125 (cafeteria plan) documents, revise summary plan description documents, and ensure open enrollment communications and/or employee communications for the 2026 plan year reflect any changes.
    • Employers who consistently have issues passing the 55% Average Benefits Non-Discrimination Test should be mindful when deciding whether to increase the plan limit (which is a matter of plan design and not a required change). Employers may want to discuss this option further with their non-discrimination testing vendor before adopting plan changes.

Additional Resources

Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources. 

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog. © 2025 Sequoia Consulting Group. All Rights Reserved.

Séamus McGuire — Séamus is a Compliance Specialist for Sequoia, where he works with our clients to optimize and streamline benefits compliance. In his free time, Séamus enjoys riding rollercoasters, attending Broadway shows and traveling with his husband.