Known as the One Big Beautiful Bill, the tax and spending bill signed into law July 4 by President Trump was stripped in its final version of some House-approved enhancements to Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). However, the bill retained some provisions that employers and employees may find beneficial.
HSAs
An HSA must be paired with a high-deductible health plan to preserve its tax-savings benefits. Traditionally, any first-dollar health care costs must be paid out of pocket by the HSA member until the deductible is met. Preventive care expenses have been excluded from the first-dollar limitation for more than a decade, and the list of allowed HSA-eligible services continues to expand.
Telehealth services, temporarily deemed HSA-compatible as part of the country’s COVID-19 response, are now permanently allowed and excluded from the first-dollar restriction. This change is effective retroactively to plan years beginning after December 31, 2024.
Direct primary care services, where members pay a direct monthly fee for care traditionally provided as part of an office visit, are also allowed HSA-qualified expenses beginning January 1, 2026. One restriction is the membership fee cannot exceed $150 per month for individual or $300 per month per family. While direct primary care arrangements are not as widespread as traditional health insurance, this model of care may become more popular among plan sponsors given the favorable HSA treatment.
Dependent Care FSA
The annual $5,000 dependent care FSA limit, set in 1986, will increase effective 2026 to $7,500 (or $3,500 for married couples filing separately). This permanent increase will no doubt be welcomed by working families.
Trump Accounts
Employers can make up to $2,500 in nontaxable contributions per employee to fund new tax-favored accounts for children under the age of 18 in 2026. The accounts, with annual contribution limits of $5,000, indexed annually, will operate like an Individual Retirement Account (IRA). Investments grow on a tax-deferred basis. For U.S. citizens born in 2025 through 2028, the government will contribute a one-time credit of $1,000 as part of a pilot program. Contributions to Trump Accounts will be accepted starting July 4, 2026.
Permanent Student Loan Repayment Assistance
The employer-sponsored student loan repayment assistance program was set to expire December 31, 2025. The new spending bill allows employers to permanently make a tax-free contribution up to $5,250 annually per participant to pay the principal or interest on an employee’s qualified student loan. Additionally, the limit will be indexed annually for inflation beginning January 2026.
Paid Family and Medical Leave Credit
A tax credit, equal to a percentage of wages paid to qualifying employees while on paid family and medical leave, was permanently extended as part of the new tax and spending bill. The credits, set to expire at the end of 2025, also can be used starting in 2026, for a portion of the premiums paid for paid family leave insurance.
For more information on the One Big Beautiful Bill Act’s impact on your benefit plan considerations, contact your Bukaty benefits consultant.
