One Big Beautiful Bill Act of 2025: Key Changes to Employee Benefit Plans

Signed into Law: July 4, 2025, by President Trump

The One Big Beautiful Bill Act (OBBB) introduces several changes impacting employee benefit plans. Here are the key provisions:

HSA Changes

• Telehealth Services:
  • Permanently allows first-dollar coverage for telehealth services under High Deductible Health Plans (HDHPs) without affecting Health Savings Account (HSA) eligibility.
  • Retroactively reinstates the CARES Act telehealth provision that expired on December 31, 2024.
• Marketplace Plans Eligibility:
  • Starting January 1, 2026, all Bronze and Catastrophic plans available through the Marketplace will qualify as HDHPs for HSA purposes, expanding HSA access.
• Direct Primary Care:
  • Starting January 1, 2026, direct primary care services for a fixed fee up to $150 a month for individuals and $300 per month for a family will no longer be considered disqualifying coverage for HSA purposes.
  • These services must not include general anesthesia, extensive lab services, or prescription drugs.

Dykema View: These HSA changes ease the eligibility rules on individuals to make and receive HSA contributions while improving HDHP coverage by allowing first-dollar coverage for certain items and direct primary care options. Employers with telehealth services may decide to take advantage of this retroactive change for this year and even reimburse employees if they paid for telehealth services that can now be provided free of charge retroactively to January 1, 2025, without disqualifying the HSA.

Dependent Care Flexible Spending Accounts (FSAs)

• Annual contribution limits increased:
  • From $5,000 to $7,500 (or $3,750 for married individuals filing separately).
  • Effective January 1, 2026.

Dykema View: Employers should modify plan documents, including open enrollment materials, announcing the new limits for 2026. Plans that have struggled to meet the 55% average benefits nondiscrimination test for its DCFSA will continue to have that concern with the higher limit. Such Employers may want to take proactive steps in limiting the annual amount that highly compensated employees contribute to their DCFSA to ensure passing.

Trump Accounts

• New Individual Retirement Accounts for Children:
  • For qualifying children under 18.
  • Annual contribution limit: $5,000 (indexed for inflation).
  • Distributions generally restricted until age 18.
• Employer Contributions:
  • Employers can contribute up to $2,500 per employee on a nontaxable and nondiscriminatory basis.
• Government Contributions:
  • Children born between 2025 and 2028 will receive a $1,000 government credit into their accounts.

Dykema View: The Trump Account creates another tax-favored benefit to attract and retain employees. While an employer’s administrative obligations in making such contributions should be minimal due to the accounts being held by an IRA custodian, expect more guidance from the IRS on reporting and nondiscrimination requirements for employer contributions.

Student Loan Reimbursements

• Employers may permanently offer tax-free student loan reimbursements under Code Section 127 Tuition Reimbursement Programs.
• Annual limit of $5,250, indexed for inflation starting in 2026.

Dykema View: Employers should decide if they want to include this now permanent feature as part of their tuition reimbursement programs. It’s a great tool to attract and retain a younger workforce straddled with student loan debt.

Eliminated Tax-Free Fringe Benefits

• Effective January 1, 2026:
  • Bicycle commuter benefits and moving expense reimbursements are no longer tax-free and must be included in an employee’s income.
  • Certain exceptions apply for armed forces and intelligence personnel.

Dykema View: Employers that decide to continue reimbursing employees for moving expenses or providing bicycle commuter benefits may need payroll changes to include them in taxable income starting in 2026.

ACA Premium Tax Credit (PTC) Changes

• Effective January 1, 2026:
  • PTC ineligible during certain special enrollment periods.
  • Full repayment of excess PTC required (limit removed).
• Starting in 2028:
  • Annual verification of information required to maintain PTC eligibility.

Dykema View: Nothing for employers to do for these ACA changes.

Paid Family and Medical Leave Credit

• IRC Section 45S credit is made permanent.
• Employers must have a written policy and cannot offset mandated state/local paid leave.
• Tax credit to the employer offsets the employer costs for offering paid family/medical leave.

Dykema View: Employers who wish to take advantage of this credit should work with their outside counsel or other consultants to prepare a written paid family and medical leave policy that meets the other requirements added by the OBBB.

Executive Compensation (Section 4960)

• Expands excise tax provisions.
  • Now applies to all current and former employees of tax-exempt organizations.
  • No longer limited to top five highest-paid employees.
  • Effective for taxable years beginning after December 31, 2025.

Dykema View: Tax-exempt organizations should examine their executive compensation programs to determine whether they may have new or additional excise tax exposure under the new rule.

Executive Compensation (Section 162m)

• Applies new entity aggregation rules for purposes of both the $1 million deduction limitation and the allocation of the deduction.
  • Expanded to pick up all members of a company’s controlled group and affiliated service group under Code Section 414(b), (c), (m), and (o).
  • Amount of deductible compensation allocated to each member of the controlled group or affiliated service group based on pro-rata portion of total compensation paid by that member.
  • Effective for taxable years beginning after December 31, 2025.

Dykema View: Employers who are subject to the Code Section 162(m) deduction limitations and who are part of a controlled group or affiliated service group should examine how this new rule may affect their executive compensation programs.

If you have any questions about the information in this alert, please contact Amy Christen, Jillie Foerster, Tyler Hubert, or your Dykema relationship attorney.