The OBBBA: Benefits and Retirement Aspects of the Newly Enacted One Big Beautiful Bill Act

[0:00]
Welcome, everyone, to Benefits and Retirement Aspects of the Newly Enacted One Big Beautiful Bill Act.
Thank you all for joining us. The Benefits Compliance team will be answering the questions you send through the Q&A today. We’ll try our best to answer all of your questions, but if for whatever reason we are unable to get to your question today, please follow up with your adviser for further assistance.

[0:19]
Today’s presentation is being recorded. We’ll be sharing the recording in the follow-up email and on the NFP website. If there are any portions of this call that you missed, by Monday you’ll receive an email with a link to the full recording. The PowerPoint slides used during this presentation will be shared in the same email.

At this time, I’ll turn it over to Sarah Burns, Vice President and Senior Counsel of Benefits Compliance at NFP. Sarah, the floor is yours.

[0:42] Sarah Burns
Thanks, Amber, and welcome everyone to our discussion of the employee benefits aspects of the One Big Beautiful Bill Act — the OBBBA.

I’m here today with my colleagues Sharon Cohen and Molly Sled from NFP’s Benefits Compliance team, and Tom Baston from NFP Retirement. We’re also being supported by the rest of our national Benefits Compliance team, who are standing by to answer questions in the Q&A as we go along. Please post any questions there; we’ll try to answer them live if time permits.

I think we already got one question, which Amber just answered, but I’ll answer it again in case anyone missed it — yes, we will be sending a copy of the recording and the slides sometime next week to everyone who registered. Please look out for that.

[1:33] Disclaimer
Before we get started, a quick disclaimer:
Nothing we discuss today is intended to be tax or legal advice. This is for general guidance and educational purposes only. If you have specific questions on the application of this new law, they should be directed to your legal counsel or tax advisor.

Also, what we discuss today is based on what we know now. Even though the Act was passed several weeks ago, there are several aspects where we are hoping for guidance from the federal agencies tasked with interpreting the law — namely the IRS. The law is sparse on some of the employee benefit provisions, and any new guidance we receive will likely impact our interpretation or answer outstanding questions.

If we do get notable new guidance, we will report on it in our bi-weekly NFP Compliance Corner newsletter — so please keep an eye on that.

[2:37] Agenda
We’ll be referring to the OBBBA as the “Tax Act” because it’s easier to say — and that’s what it is.

Given that it’s summer (a popular time for travel), we’ve adopted a “trip planning” theme for today’s agenda:

1. Charting the Course – A brief overview of the legislative process: where the bill started and where we ended up.
2. Unpacking the Essentials – The essential employee benefit aspects of the Tax Act:
• Current rules
• Tax Act changes
• Plan impacts & takeaways
• Effective dates
  These include:
• HSA rule changes (most notable)
• Dependent Care Assistance Program (DCAP) changes
• Educational Assistance Programs (including student loan repayment assistance)
• New child savings account vehicle (“Trump Accounts”)
• Repeal of tax-free bicycle commuting reimbursements
3. Carry-On Items – Other employee benefit tax provisions in the bill.
4. Missed Flights – Proposed changes that were dropped from the final version.

[4:29] Charting the Course – Legislative Process
The first version of the bill was introduced in the House in May and included a number of provisions related to the HSA rules and also ICAs (Individual Coverage Arrangements).

This initial version is very different from the final version. The House version passed by the slimmest margin and then went to the Senate. The Senate introduced its own version of the bill, removing some employee benefit provisions and adding others — this process is called budget reconciliation.

The Senate passed its version on July 1 (again, by one vote). That version went back to the House, which approved it on July 3. The bill was signed into law on July 4.

[5:26] Unpacking the Essentials – HSA Eligibility & Telehealth
One notable employee benefits change — added at the last minute — relates to HSA eligibility and telehealth.

Molly Sled:
This is probably the change we’re getting the most questions about right now. It’s been subject to a lot of back-and-forth over the past several years. The issue is whether telehealth coverage impacts HSA eligibility for participants in a High Deductible Health Plan (HDHP).

Relief was first passed in 2020 as part of the pandemic response, allowing first-dollar telehealth coverage without impacting HSA eligibility. That relief expired, was reissued, expired again, and most recently ended in December 2024 without renewal.

Current Rule:
First-dollar or low-cost telehealth coverage is considered impermissible coverage, making an HDHP participant ineligible to contribute to or receive HSA contributions.

Tax Act Change:
Reverts to the earlier relief — telehealth coverage can be offered at low or no cost before meeting the statutory minimum deductible and still preserve HSA eligibility.

[7:50] Takeaways for Employers:

• This is optional — not automatic or mandatory.
• Review plan documents to see if you want to implement this.
• Consult carriers/TPAs/telehealth vendors about implementation.
• Consider timing — midyear implementation may be difficult; easiest to start at renewal.
• Ensure Summary of Benefits and Coverage (SBCs) are updated and reissued.

Special Note: Employers who already continued first-dollar telehealth coverage after the 2024 expiration are now in compliance because the Tax Act retroactively permits it.

Strategic Impact:

• Enhances access for participants
• Potentially increases engagement and cost savings
• Relief is permanent — no more waiting on temporary extensions

Effective Date: Plan years beginning on or after January 1, 2025 — retroactive but still requires employer action.

[12:57] Continuing with HSA Compatibility – Marketplace Plans

Molly Sled:
The next change doesn’t have a huge employer impact but does affect HSA compatibility.

Current Rule:
Only individuals enrolled in a qualified High Deductible Health Plan (HDHP) — meeting statutory minimum deductible amounts and maximum out-of-pocket limits — and without other disqualifying coverage are eligible to contribute to or receive contributions in an HSA.

Tax Act Change:
Expands what qualifies as an HDHP to include:

• Bronze-level marketplace plans
• Catastrophic marketplace individual plans

These plans will now be treated as HDHPs even if they don’t meet the statutory minimum deductible or out-of-pocket limits (many catastrophic plans exceed the IRS maximum).

Impact:
Employers may be able to contribute to HSAs for employees enrolled in bronze or catastrophic marketplace plans — especially relevant for employers offering ICHRAs (Individual Coverage HRAs).

Effective Date: January 1, 2026.

[15:20] Direct Primary Care Service Arrangements (DPCSA)

Sharon Cohen:
Let’s start with some background.

In June 2020, the IRS and Treasury issued proposed regulations defining Direct Primary Care Arrangements (DPCAs) under Section 213 (medical expenses). These were prompted by an executive order to improve affordable care access.

Proposed 2020 Rules:

• Defined a DPCA as a contract between an individual and one or more primary care physicians for a fixed periodic fee without third-party billing.
• Fees could be considered medical expenses or medical insurance, depending on the arrangement.
• Individuals with a DPCA were generally ineligible to contribute to an HSA unless fees were solely for preventive or other permitted coverage.

Tax Act Change:
Creates a statutory category: Direct Primary Care Service Agreement (DPCSA).

• Periodic fee for primary care services only, delivered by a licensed practitioner.
• Excludes services beyond routine outpatient care.
• Agencies will issue guidance defining “primary care.”

Distinction from Concierge Medicine:

• DPCSA: Capped monthly fee ($150 individual / $300 family, indexed annually), for actual care, no insurance billing.
• Concierge Medicine: Higher “access” fee (often $1,500+ annually), covers enhanced access and coordination, bills insurance for services. Fees typically not HSA-reimbursable.

Takeaway:

• DPCSA fees that meet the definition do not block HSA eligibility and are HSA-reimbursable.
• Primarily impacts individuals; employers aren’t responsible for policing employees’ HSA compliance but can educate them.
• Effective January 1, 2026.
• Watch for guidance from IRS/Treasury and direction from HSA vendors.

[22:14] Dependent Care Assistance Programs (DCAPs)

Molly Sled:
Another hot topic — dependent care FSAs (DCAPs).

Current Rule:

• $5,000 annual max (single or married filing jointly)
• $2,500 annual max (married filing separately)
• Limits unchanged since 1986 — $5,000 then ≈ $15,000 today (inflation-adjusted).

Tax Act Change:

• Increases annual exclusion to $7,500 (single/married jointly) and $3,750 (married separately).
• Still not indexed for inflation — will require future legislation to change again.

Takeaway for Employers:

• Optional, not automatic — must decide whether to adopt.
• Coordinate with FSA vendor, payroll, and plan documents.
• Communicate clearly during open enrollment to increase awareness.
• Review non-discrimination testing under IRC §129 — higher limits may increase likelihood of failure, particularly the 55% Average Benefits Test.
• If failed, highly compensated employees’ benefit may become taxable, or elections must be reduced.

Effective Date: January 1, 2026.

[24:00] Educational Assistance Programs

Sharon Cohen:
Let’s talk about Educational Assistance Programs — a tax-advantaged benefit that allows employers to provide up to $5,250 per calendar year in educational assistance to employees without including it in the employee’s gross income.

Qualifying Expenses:

• Tuition
• School fees
• Books

Temporary Provision (pre-Tax Act):
Also included student loan repayment assistance, but this was set to expire in 2025.

Tax Act Changes:

1. Indexes the $5,250 annual limit for inflation — will now increase over time.
2. Makes student loan repayment assistance permanent — no more sunset dates.

Important Notes:

• Programs must be employer-funded — no salary reduction contributions.
• Employers can incorporate student loan repayment as part of their educational benefits strategy.
• Can enhance recruitment and retention, especially for younger workers with student debt.

Effective Date: January 1, 2026.

[29:13] New Child Savings Accounts (“Trump Accounts”)

Tom Baston:
A new child savings account has been enacted, commonly referred to in the media as “Trump Accounts.”

Eligibility:

• Any U.S. citizen under age 18 with a Social Security Number.
• Account must be opened through a qualified financial institution (definition pending — likely a bank or brokerage).

Contribution Rules:

• Up to $5,000 per year after tax from parents, guardians, and employers combined.
• Parent/guardian contributions are not tax-exempt.
• Indexed for inflation beginning in 2028.

Government Pilot Program:

• Applies to children born in 2025, 2026, 2027, and 2028.
• $1,000 one-time deposit funded by the government.
• Automatic enrollment — but a parent/guardian must activate the account.
• Government deposits won’t begin until July 2026 (pending guidance and infrastructure).

Account Features:

• Operates like an IRA — tax-free growth until withdrawal.
• Withdrawals taxed as ordinary income + 10% penalty if under 59½ (unless for qualified purposes per IRA rules).

[31:41] Withdrawal Concerns

House Version vs. Final Tax Act:

• House Version: More restrictions — 50% available at age 18, 100% at age 25, penalty-free if used for qualified purposes (education, first home, small business loan). Age 30 — unrestricted.
• Final Tax Act: No such restrictions — at 18, the child gets full control. Non-qualified withdrawals trigger 10% penalty + tax.

Employer Contribution Program:

• Employers may contribute up to $2,500 per child (counts toward $5,000 annual limit).
• Indexed for inflation starting 2027.
• Unclear: Is $2,500 annual or one-time? Awaiting IRS guidance.
• Requires a separate written plan — requirements yet to be defined.
• Employer contributions excluded from employee income and exempt from federal payroll taxes.
• Subject to non-discrimination rules (similar to DCAPs) — details pending.

[35:22] Employer Considerations:

• How will contributions be transferred — separate account setup vs. direct deposit?
• Will the program be annual or one-time?
• How to handle funds for multiple children?
• Will you as the employer fund this directly, or provide a general allowance employees allocate?

Comparison to 529 Plans:

• 529 plans have higher contribution limits (varies by state) and more parental control.
• Can be rolled to an IRA or refunded (with tax implications) if unused.
• May be more appealing until Trump Account rules are clarified.

[36:31] What Got Tossed Out – Bicycle Commuting Reimbursement

Sharon Cohen:
Under prior law, employers could reimburse employees for bicycle commuting expenses — such as bike maintenance, storage, and certain gear — on a tax-free basis up to an annual limit.

This was part of the broader qualified transportation fringe benefit exclusion from gross income.

Tax Act Change:

• Permanently repeals the tax-free provision.
• Employers may still offer the benefit, but reimbursements will now be treated as taxable compensation.

Effective Date: January 1, 2026.

[38:49] Carry-On Items – Provisions That Remain in the Final Bill

1. PFML (Paid Family and Medical Leave) Tax Credit
• Originally set to expire in 2025 — now permanent.
• Expanded eligibility, including PFML insurance premiums.
• Higher credit percentage when paid leave is provided to lower-paid workers — valuable in industries like retail, hospitality, and healthcare.
• Could help offset paid leave costs as part of a total rewards strategy.
• Employers should consult tax advisors.
2. Employer-Paid Moving Expenses
• Temporary exclusion has been permanently repealed except for certain members of the armed forces and intelligence community.
• Starting in 2026, employer-paid moving expenses must be included in employees’ taxable income.
• Employers should ensure correct W-2 reporting and update policies with payroll and legal teams.

[41:07] Missed Flights – Proposals Dropped from the Final Bill

Sarah Burns:
Earlier versions of the bill included additional employee benefit changes that didn’t make it into the final law.

HSA Flexibility Proposals (Dropped):

• Higher annual contribution caps beyond inflation indexing.
• Rollovers of unused FSA/HRA funds into an HSA when switching to an HDHP.
• Treating fitness/gym costs as qualified medical expenses.
• HSA eligibility despite disqualifying coverage (e.g., spouse’s general-purpose FSA, Medicare Part A enrollment, use of on-site medical clinic).

ICHRAs (Individual Coverage HRAs) – Choice Arrangement Proposals (Dropped):

• Would have allowed small employers more flexibility in offering ICHRAs alongside traditional plans.
• Would have allowed employees to pay for individual coverage premiums on a pre-tax basis.

Other Dropped Provisions:

• PBM (Pharmacy Benefit Manager) transparency requirements — removed during reconciliation.

[43:51] Questions & Closing Remarks

Sarah Burns:
We’re at the end of our time. Thank you to our panelists and to everyone who joined today.

Common Question:
Will slides and recording be distributed? — Yes, they will be sent next week to all registrants.

[44:20] Host
Thank you to our speakers for sharing your time and expertise today.

Reminders:

• Today’s presentation was recorded — you’ll receive the recording and slides via email and on the NFP website.
• After this call, a brief survey will appear in a new window. Please take a moment to complete it — your feedback helps us keep our education program current and relevant.

That concludes today’s webinar. Thank you for joining us, and have a great day.