The ever-evolving landscape of employee benefits has seen significant changes with the recently enacted "One Big Beautiful Bill" (BBB). This transformative legislation introduces new opportunities and adjustments for employers and employees, especially in navigating health savings accounts (HSAs), dependent care FSAs, student loan repayment assistance, and other benefits. For individuals, families, small business owners, and employers in Illinois seeking affordable and personalized health insurance solutions, the implications of this bill are both broad and impactful. Here’s what you need to know.
Understanding the Big Changes Introduced by the BBB
The "One Big Beautiful Bill" covers a wide array of benefit enhancements, addressing long-standing limitations while introducing contemporary solutions to meet the needs of a modern workforce. Below, we break down the key provisions and their implications.
1. Permanent Expansion of Health Savings Account (HSA) Eligibility
One of the standout headlines in the BBB is the permanent expansion of HSA eligibility related to telehealth services. During the COVID-19 pandemic, temporary relief allowed individuals to use telehealth services without jeopardizing their HSA eligibility. This relief officially expired at the start of 2025 but has now been reinstated retroactively and made permanent under the BBB.
What This Means:
- Employees covered by high-deductible health plans (HDHPs) can now access telehealth services before meeting their deductible, without losing the ability to contribute to their HSA.
- Employers no longer need to worry about telehealth arrangements disqualifying employees from HSA contributions.
Potential Pitfalls: While telehealth benefits are now permitted, the IRS has not yet clarified the exact scope of eligible telehealth services. This might evolve as additional guidance is released.
2. Broader Access to Direct Primary Care (DPC) Without HSA Penalties
Direct primary care (DPC) arrangements, which provide comprehensive primary care services in exchange for a fixed, periodic fee, previously disqualified individuals from contributing to HSAs unless limited to preventive care. The BBB changes this by allowing DPCs to coexist with HSAs, provided certain requirements are met.
Key Requirements for HSA-Compatible DPCs:
- Fees for DPCs are capped at $150 per individual or $300 for family coverage per month.
- The arrangement must provide only primary care services by qualified practitioners (e.g., physicians, nurse practitioners, and pediatricians).
- Excluded services include general anesthesia procedures, non-preventive prescription drugs, and advanced lab services.
Employers should note that employees can now use HSAs to pay for DPC fees tax-free, creating a more flexible and tax-advantaged healthcare arrangement.
3. New Limits for Dependent Care FSAs
For years, the contribution limit for dependent care flexible spending accounts (FSAs) remained fixed at $5,000. Starting in 2026, the BBB increases this cap to $7,500 for single or married filing jointly taxpayers, with inflation adjustments in subsequent years.
Employer Considerations:
- Employers must amend their Section 125 cafeteria plans to reflect this higher limit if they choose to offer it. This change is optional, not mandatory.
- Testing for compliance with the 55% average benefits rule becomes critical. Employers must monitor whether highly compensated employees disproportionately benefit from increased limits compared to rank-and-file employees.
4. Student Loan Repayment Assistance Becomes Permanent
Previously, employers could temporarily include student loan repayment assistance as part of their educational assistance programs under a $5,250 annual tax-free exclusion. The BBB makes this provision permanent, with the annual limit now adjusted for inflation.
How It Works:
- Employers can offer employees reimbursement for student loan payments up to $5,250 annually without it being considered taxable income.
- Employees need to ensure that their loans qualify (e.g., loans used strictly for tuition, books, or room and board).
Employers interested in this benefit will need to maintain a written educational assistance plan and may want to include a compliance process to verify loan qualifications.
5. Introduction of "Trump Accounts" for Children
The BBB introduces a unique savings tool called "Trump Accounts", designed to provide financial security for children. These accounts resemble a hybrid of individual retirement accounts (IRAs) and 529 educational savings plans.
Key Details:
- Contributions: Employees can contribute up to $5,000 annually (after-tax), while employers can contribute up to $2,500 tax-free.
- Government Incentive: A one-time $1,000 contribution is available for children born between 2025 and 2028.
- Withdrawals: Distributions are restricted until the beneficiary turns 18, barring emergencies, and are subject to specific tax penalties if taken early.
- Investment Rules: Funds must be invested in eligible index funds, such as those tracking the S&P 500.
Employers are not required to set up these accounts but may facilitate payroll deductions if employees opt to participate.
6. Permanent Removal of Certain Tax-Free Fringe Benefits
Two tax-free benefits that were temporarily suspended under the Tax Cuts and Jobs Act are now permanently eliminated:
- Moving Expense Reimbursements: Employers must include all moving expense reimbursements in employees’ taxable wages, except for military or intelligence personnel.
- Bicycle Commuting Benefits: Reimbursements for bike commuting are no longer tax-free, limiting their appeal to urban employers and employees.
sbb-itb-a729c26
Key Takeaways
- Telehealth Access Expanded: Employees can now use telehealth services without losing HSA eligibility, permanently.
- DPC Compatibility: Direct primary care arrangements no longer disqualify HSA contributions, provided they meet fee and service limitations.
- Higher FSA Limits: Dependent care FSAs now allow contributions of up to $7,500, but employers need to update plans and test for compliance.
- Student Loan Assistance: Employers can permanently offer tax-free student loan repayment benefits under educational assistance programs.
- New Savings Tool for Kids: Trump Accounts offer a new way to save for children, with tax-free employer contributions and government incentives for newborns.
- Fringe Benefits Removed: Moving expense and bicycle commuting reimbursements are now permanently taxable.
What Employers Should Do Next
- Review Plan Documents: Employers offering HSAs, FSAs, or educational assistance programs need to ensure compliance with the new provisions. Amendments may be required.
- Educate Employees: Many of these changes, such as Trump Accounts and the expanded DPC rules, require employee awareness to maximize their benefits.
- Test for Discrimination: Ensuring highly compensated employees don’t disproportionately benefit from FSAs or student loan repayment programs is critical.
- Evaluate Payroll Systems: Payroll teams should prepare for potential deductions or contributions to Trump Accounts and ensure tax reporting reflects the new rules.
The "One Big Beautiful Bill" represents a monumental shift in how employee benefits are structured and delivered. By staying informed and proactive, Illinois employers and employees can seize the opportunities these changes offer, ensuring more flexible, cost-effective, and personalized benefits for all.
Source: "Key Employee Benefit Changes Under the One Big Beautiful Bill Act" – Miller Johnson, YouTube, Aug 21, 2025 – https://www.youtube.com/watch?v=L1MIzD9mDxg
Use: Embedded for reference. Brief quotes used for commentary/review.
Recent Comments