The One Big Beautiful Bill Act (OBBBA), signed into law by President Trump on July 4, 2025, made some of the most significant changes to health and welfare benefits in recent years. Although not as comprehensive as prior laws like the SECURE Act or the SECURE 2.0 Act, OBBBA changes will provide favorable tax benefits to millions of American individuals and businesses.
Health Savings Accounts
As a general rule, contributions to an HSA are tax-free, earnings grow tax-free, and distributions for medical expenses are tax-free. A person must be enrolled in a certain kind of health plan – known as a high-deductible health plan (HDHP) – to be eligible to make contributions to an HSA, with no other disqualifying health coverage paying benefits before the health plan deductible is met.
In the wake of COVID, Congress temporarily allowed telehealth visits to be covered by a HDHP before meeting the annual deductible. Although set to expire at the end of 2024, the exception proved so popular that Congress extended it permanently in the OBBBA.
Similarly, before OBBBA changes, an individual’s coverage under a direct primary care arrangement, where a person pays a monthly fee for unlimited primary care services, would disqualify the person from HSA contributions. The OBBBA changed this rule, allowing enrollment in a direct primary care arrangement before the HDHP deductible is met. Fees for the direct primary care arrangement cannot exceed $150 (or $300 if the arrangement covers more than one individual), indexed yearly. Furthermore, the direct primary care arrangement cannot provide (a) procedures that require the use of general anesthesia, (b) prescription drugs (other than vaccines), or (c) laboratory services not typically administered in an ambulatory primary care setting.
Dependent Care Assistance
Effective January 1, 2026, the annual contribution limit for employer-sponsored dependent care assistant programs (DCAPs) rises to $7,500 per household. The prior $5,000 limit was in place since 1986. Neither the old or new limits are indexed for inflation.
Employers are required to have a cafeteria plan document to offer DCAP benefits, and plan documents likely must be amended to implement the higher $7,500 limit.
In addition to employee reimbursements under a DCAP, the tax code also provides employers a tax credit for certain costs of providing child care assistance to employees. Beginning in 2026, the credit may be taken on 40% of “qualified child care expenses” (50% for eligible small businesses and up from 25%), capped at $500,000 ($600,000 for eligible small businesses and up from $150,000), adjusted for inflation for tax years beginning after 2026. Qualifying expenditures include amounts to acquire or construct property, and operating costs for the facility. This includes both onsite and near-site facilities.
Miscellaneous
Finally, other miscellaneous changes include a permanent extension of tax-free employer student loan repayment assistance through a written educational assistance program; employer tax credits for voluntary paid family and medical leave; and designating bronze and catastrophic policies offered through an ACA exchange as HSA-compatible.
This article appeared in the January 5, 2026, issue of The Journal Record. It is reproduced with permission from the publisher.
