Understanding the One Big Beautiful Bill Act: What Employers Need to Know
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces significant changes to employee benefit plans and tax provisions that employers should begin preparing for now. The bill has a substantial impact on healthcare benefits, savings accounts, and employer tax credits.
To help employers navigate these changes, Scott Insurance hosted a webinar featuring Devon Travis, Director of Compliance & Legislative Affairs at Scott Insurance. She offered expert insights into upcoming changes and strategic responses for organizations.
Key Healthcare Provisions Affecting Employers
One of the most notable updates is the permanent reinstatement of telehealth services for High Deductible Health Plans (HDHPs). This means employers can offer pre-deductible telehealth services without affecting employees’ eligibility for Health Savings Accounts (HSAs).
Employers have flexibility in how they implement this change, whether retroactively, mid-year, or at the next renewal. Travis recommends evaluating the administrative feasibility of making adjustments, especially if considering retroactive changes that may require reprocessing claims.
Expanding HSA Eligibility and Direct Primary Care
The OBBBA expands HSA eligibility to include bronze and catastrophic exchange plans, a move that primarily affects individuals purchasing coverage on the marketplace. While this change does not directly impact group plans, employers offering Individual Coverage HRAs (ICHRAs) may want to inform employees about this development.
Additionally, the Act makes Direct Primary Care (DPC) arrangements compatible with HSAs. This opens up opportunities for employers to offer DPC options to HDHP enrollees, allowing employees to use HSA funds for qualifying primary care services.
Employers considering DPC offerings should ensure arrangements meet the IRS definition of “primary care services” and stay within the monthly fee caps of $150 for individuals and $300 for families.
“HSA-eligible individuals enrolled in DPC arrangements can make or receive HSA contributions and use the funds to pay for certain fees.” — Devon Travis
DCAP Limit Increase: A Long-Awaited Adjustment
For the first time in 40 years, the Dependent Care Assistance Plan (DCAP) salary reduction limit will increase from $5,000 to $7,500, effective January 1, 2026. While this is a positive change for working parents, it also introduces compliance considerations.
Employers should prepare for non-discrimination testing challenges, particularly if highly compensated employees disproportionately elect the increased limit. Travis advises mid-year testing to identify and correct potential issues before year-end.
New Savings Accounts for Children: Trump Accounts
The Act introduces Trump Accounts, a new tax-advantaged savings vehicle for children under 18. These accounts function similarly to IRAs, allowing tax-deferred growth and contributions from parents and employers.
Children born between 2025 and 2028 may receive a $1,000 seed contribution from the federal government, and employers can contribute up to $2,500 annually per child.
While implementation details are still emerging, employers interested in offering Trump Accounts should consider evaluating plan documentation and compliance requirements.
Tax Credit Updates: PFML and Childcare
Two existing employer tax credits have been permanently extended and expanded:
- The Paid Family Medical Leave (PFML) Tax Credit now includes part-time workers and lowers the tenure requirement to six months.
- The Employer-Provided Childcare Credit increases to 40% of qualified expenses, with a new cap of $500,000 annually (or $600,000 for small businesses).
Travis emphasizes that while these credits offer financial incentives, employers should consult their tax advisors to understand eligibility and implementation.
What Employers Should Do Now
With most provisions taking effect on January 1, 2026, employers have limited time to prepare. Key action items include:
- Reviewing HDHP designs and telehealth coverage options.
- Evaluating the feasibility of offering DPC arrangements.
- Planning for the increase in DCAP limits and compliance testing.
- Exploring Trump Account offerings and documentation.
- Consulting tax professionals about PFML and childcare credits.
Need Help Navigating the OBBBA?
Scott Insurance is here to help employers understand the implications of the One Big Beautiful Bill Act and make informed decisions about their benefit strategies. Contact your Scott Risk Advisor or Benefits Consultant with any questions or Contact Us today for resources and personalized guidance.