On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (the Act) into law. The Act covers a variety of topics such as health, tax, education and energy, including a retirement provision that allows an employer the ability to open, and contribute to, a retirement-style account (e.g., individual retirement account) on behalf of its employees’ children. A previous version of the bill that was passed by the House included additional HSA/ICHRA related provisions that were not signed into law. Therefore, the below only describes the provisions that were signed into law under the Act and their effective dates.

Permanent Extension of Telehealth Relief Related to HDHPs/HSAs

Background

As background, during the COVID-19 pandemic, the CARES Act amended the Internal Revenue Code provision governing HSAs to provide that, for plan years beginning prior to January 1, 2022:

1. A group health plan would not fail to qualify as a High Deductible Health Plan (HDHP) solely because it provided coverage for telehealth and/or other remote care services before the IRS minimum HDHP deductible was satisfied.
2. Coverage for telehealth and other remote care was disregarded for purposes of determining an individual’s HSA eligibility.

This meant that individuals could remain HSA-eligible even if they received telehealth or remote care benefits or services and paid less than fair market value for those services under the HDHP or a separate telehealth plan prior to the satisfaction of the IRS minimum HDHP deductible. The Consolidated Appropriations Act (CAA), 2022 and 2023, extended this relief to ultimately apply to plan years beginning before January 1, 2025.

Therefore, prior to the Act, for plan years beginning January 1, 2025, if a group health plan provided telehealth coverage below fair market value prior to an account holder satisfying their IRS minimum HDHP deductible, this benefit would have caused that individual to lose HSA eligibility.

One Big Beautiful Bill Act

As a result of the Act, individuals will not jeopardize their HSA eligibility by being covered under (1) an HDHP that provides benefits for non preventive telehealth or other remote care for less than fair market value (or at no cost) prior to that individual satisfying the IRS minimum HDHP deductible; or (2) a stand-alone telehealth plan that provides telehealth or other remote care services for a cost that is less than the fair market value of such services. The Act applies retroactively to plan years beginning after December 31, 2024 (i.e., plan years beginning on or after January 1, 2025), and makes permanent the temporary relief from the CARES Act and CAA (barring future legislative changes).

Employers that currently sponsor an HDHP that provides telehealth benefits or a stand-alone telehealth plan should review their plans to incorporate any benefits changes given the passage of this Act, and may make those changes retroactively to January 1, 2025.

Increase in Limit on Nontaxable Dependent Care Benefits

The Act increases the annual limit on the amount of dependent care benefits (provided by a DCAP or dependent care FSA (DCFSA)) that are excludable from income from $5,000/year to $7,500/year ($3,750/year for married couples filing separately). As a reminder, Congress had set the dependent care limit at $5,000/ year without indexing for inflation for many years. The increased limit applies for taxable years beginning on or after January 1, 2026.

Employers that choose to increase the limit applicable under their DCAP/DCFSA for taxable years beginning on or after January 1, 2026 should amend any communications and plan materials to reflect the updated limit.

Bronze and Catastrophic Exchange Plans and HSA Compatibility

The Act allows bronze and catastrophic plans in the individual market offered on the Marketplace/Exchange to be treated as HDHPs. Previously, these bronze or catastrophic plans would not have qualified as HDHPs. This means that for months beginning after December 31, 2025 (i.e., policies beginning on or after January 1, 2026), individuals enrolled in a bronze or catastrophic plan in the Marketplace/Exchange after that date will be considered HSA-eligible (assuming they are otherwise HSA eligible¹).

Direct Primary Care Arrangements and HSA Compatibility

As background, direct primary care arrangements (DCPAs) essentially function as a fee-for-service arrangement where patients pay a fee to a provider (often monthly or annually) that covers primary care services that are directly provided to them by that provider. Since these DPCAs often cover non-preventive care services, the arrangements are typically considered disqualifying coverage because they provide first-dollar coverage prior to an HSA account holder satisfying their IRS minimum HDHP deductible, causing that individual to become HSA ineligible.

Under the Act, so long as a DPCA participant is not required to pay more than $150/month in membership fees (indexed for inflation) for individual coverage or $300/month (indexed for inflation) for family coverage, then the DPCA will not be considered disqualifying coverage for HSA purposes. Therefore, if an individual is enrolled in an HDHP and a DPCA that meets these fee limits, the individual would remain eligible to contribute to an HSA (assuming they are otherwise HSA eligible).

In addition, the Act defines the fees an individual pays for the DPCA as qualified medical expenses, allowing an individual to pay these fees with an HSA on a tax-free basis.

These provisions apply for months beginning after December 31, 2025 (i.e., plan/policy years beginning on or after January 1, 2026).

Permanent Extension of Student Loan Repayment Through an Educational Assistance Program

Background

As background, employers may offer an educational assistance program under IRC §127 to pay for an employee’s educational expenses, including books, supplies, and tuition. In 2020, the CARES Act permitted employers to utilize an educational assistance program to either pay on behalf of, or reimburse, an employee’s qualified student loans on a tax-free basis up to $5,250, for the period of March 27, 2020 to December 31, 2020. The CAA then extended the ability of employers to reimburse/ pay for an employee’s student loans under an educational assistance program through December 31, 2025.

One Big Beautiful Bill Act

The Act permanently extends the ability of employers to reimburse/pay for an employee’s student loans on a tax-free basis through an educational assistance program (which was set to expire as of December 31, 2025). For taxable years beginning after 2026, the $5,250 per employee per year reimbursement/payment limit will be indexed for inflation.

Employer Impact and Considerations

The Act’s provisions related to employee health and welfare benefit plans largely impact employees’ ability to remain HSA eligible. Many employers have long-awaited guidance on whether the telehealth relief would be extended beyond the temporary relief provided under the CAA and may now want to consider aligning their telehealth benefits with the changes made under the Act. Employers should also be aware that employees enrolled in both an HDHP and a direct primary care arrangement (DPCA) are now considered eligible to contribute to an HSA (so long as the fees do not exceed certain thresholds) and may pay these associated fees with reimbursements from their HSA. Further, the increase in the amount of dependent care benefits that are excluded from income will be welcome news for many employees. If an employer chooses to increase the limit on benefits under their DCAP/DCFSA for future plan years, the employer should amend applicable plan materials and consider how the increased limit may impact nondiscrimination testing for the plan. Lastly, employers offering employees a student loan reimbursement/payment program should adopt a written plan document that specifically describes the terms of the student loan repayment/ educational assistance program, not allow employees the choice between educational assistance benefits and cash, and ensure these programs are reviewed for nondiscrimination testing purposes.

¹ To be HSA-eligible, an individual must meet the following requirements: (1) be enrolled in an HDHP; (2) not have other disqualifying coverage (e.g., non-HDHP coverage, Medicare, etc.); and (3) not be claimed as someone’s tax dependent

Regulatory and Legislative Strategy Group