The One Big Beautiful Bill Act (OBBBA), finalized and signed into law by President Trump on July 4, 2025, makes several key changes that impact employers, benefit plan sponsors and plan administrators.
Below is a short overview of the key changes made by the OBBBA.
- Student Loan Repayment: Employers’ ability to pay up to $5,250 a year tax free towards employees’ student loans has been made permanent. The $5,250 limit will be indexed and adjusted for inflation annually.
- Health Savings Accounts: Participation in Direct Primary Care (DPC) arrangements will no longer disqualify an individual from contributing to an HSA if monthly fees are within specified limits ($150 for individuals, $300 for families, adjusted for inflation). These fees within the limits will be considered qualified medical expenses reimbursable from an HSA. DPC arrangements are fixed fee health care arrangements where individuals pay a fixed periodic fee to their primary care physician in exchange for a defined set of primary care services.
- Bicycle Benefits: Previously, employer reimbursements for bicycle commuting were tax free. Under the OBBBA, starting with the 2026 tax year, these reimbursements will be included in employees’ normal wages and be subject to tax. If an employer offers such reimbursements, the deduction for the employer still applies.
- Moving Expense Benefits: Previously, employer reimbursements for employee moving expenses were tax free and deductible by the employer. Under the OBBBA, these reimbursements will be included in employees’ normal wages and be subject to tax starting in 2026. The deduction for employers is also removed.
- Transportation Fringe Benefits: The OBBBA removes employer deductions for qualified transportation fringe benefits, such as free parking, transit passes, and parking reimbursements.
- Dependent Care FSA Cap: The household contribution limit into a Dependent Care FSA will be raised to $7,500 beginning in 2026.
- 401(k) Cap: The OBBBA did not make any changes to the contribution limits for 401(k) plans. Required amendments related to the SECURE Act and SECURE 2.0 are still scheduled to be due by December 31, 2026.
- TRUMP IRAs: These custodial IRA accounts will allow contributions on behalf of children under the age of 18 of up to $5,000 per year into the IRA. The US government will also establish and contribute $1,000 to a TRUMP IRA for any child born between 2025 and 2028.
- Employer Childcare Credit. The employer childcare credit available under Code Section 45F was increased from $150,000 to $500,000 starting with the 2025 tax year. This credit amount will also be indexed and adjusted for inflation yearly.
Employers should review their benefit plans to ensure they remain compliant with these changing regulations.
