Unpacking the benefits of the One Big Beautiful Bill Act

Many of the headlines written since the passage of the One Big Beautiful Bill Act (OBBBA or Act) in early July focus on the Act’s sweeping tax and spending measures. This is justifiable considering the Act’s economic impact could escalate to upwards of $5 trillion. Sitting below the surface, however, are a number of key provisions that impact the health and welfare benefits many companies offer their employees.

Many of the OBBBA’s health and welfare benefit changes should be positively received by employers and employees. In total they enhance current provisions while making others permanent or serving to break down some historic tax law complications that compromised enrollment in modern benefit programs. Unless specifically identified differently below, these changes go into effect on Jan. 1, 2026. The key provisions include:

• Dependent care flexible spending account (FSA) limit increases: This benefit had long been capped at $5,000 annually, a maximum that was outpaced by expenses like day care some time ago. The new annual maximum is $7,500. For married individuals filing separately, the annual limit increases from $2,500 to $3,750.
• Telehealth safe harbor for health savings accounts (HSAs) made permanent: The OBBBA retroactively makes permanent the pandemic-era safe harbor that allows high deductible health plans (HDHPs) to provide coverage using telehealth, without disqualifying eligibility of contributions to a HSA. It also clarifies that direct primary care service arrangement fees are treated as medical expenses.
• Bronze and catastrophic plans are now considered HDHPs: These types of plans are made available through Affordable Care Act (ACA) exchanges, the most prominent of which is the Health Insurance Marketplace (healthcare.gov). This change reclassifies these types of plans as HSA-compatible HDHPs.
• Employer payments of student loans: The OBBBA permanently extends the tax exclusion for income of up to $5,250 per year for employer contributions made to support student loan repayment and assistance programs. This maximum will be indexed annually for inflation and for tax years after 2026.
• Bicycle commuting reimbursement removal: Introduced in 2018, this qualified fringe transportation benefit enabled employees to be reimbursed tax-free for work-related bicycle commuting expenses. The OBBBA permanently eliminates this as a qualified transportation fringe benefit, thus making it taxable to employees and non-deductible for employers.