On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the Act). The Act provides employers with a variety of tools to enhance their employee benefit offerings. In this article, we will focus on the most intriguing opportunities for change by employers.
Telehealth Is HSA-Safe
Health savings accounts (HSAs) have been surging in popularity. To be eligible to contribute to an HSA, an employee must be enrolled in a high-deductible health plan (HDHP) that meets a number of specific requirements. One of the HDHP requirements is that most services must be subject to the deductible. The services that the plan provides for free—the pre-deductible services—are generally limited to preventive care.
During the COVID epidemic, Congress expanded HDHP pre-deducible services to include telehealth. Unfortunately, the telehealth expansion expired at the end of 2024. Many argued for its reinstatement, pointing out that pre-deductible telehealth helped deliver care to rural areas and dramatically increased the availability of mental health services. The Act reinstated telehealth as a pre-deductible service, retroactive to January 1, 2025.
Employers should consider amending their HDHPs to include pre-deductible coverage for telehealth services.
Direct Primary Care Is HSA-Safe
The Act expanded HDHP pre-deductible services to include an entirely new feature: direct primary care arrangements. In a nutshell, these arrangements avoid the traditional fee-for-service medical care. Instead, patients pay a primary care provider a fixed monthly fee that covers a specific set of services. Not all primary providers will offer this option, of course, but where the option is available, an HDHP can pay the fixed monthly fee as a pre-deductible expense.
To qualify as a pre-deductible expense, the arrangement must meet certain requirements. First, the provider must be a physician whose primary specialty designation is family medicine, internal medicine, geriatric medicine, or pediatric medicine; or a nurse practitioner, clinical nurse specialist, or physician assistant. Second, the covered services must not include procedures that require anesthesia, prescription drugs (other than vaccines), or laboratory services not typically offered in an ambulatory primary care setting. Third, the fees must not exceed $150 per month for individual coverage or $300 per month for family coverage.
Employers should consider amending their HDHPs to include pre-deductible coverage for direct primary care arrangements, effective on or after January 1, 2026.
Dependent Care Assistance Programs Are Newly Expanded
The tax code gives employers two ways to provide nontaxable dependent care benefits for their employees. Employers can pay their employees’ dependent care expenses directly or alternatively, employers can arrange for dependent care flexible spending accounts (DCFSAs), funded by employee salary deductions. The maximum nontaxable dependent care benefit has long been fixed at $5,000 per year ($2,500 per year if the employee is married and filing separately). The Act increased the maximum benefit to $7,500 per year ($3,750 per year if married and filing separately).
Employers should consider amending their dependent care assistance programs to account for the higher benefit limit, effective January 1, 2026.
Educational Assistance Program Expansion Is Made Permanent
The tax code has long allowed an employer to pay up to $5,250 per year to an employee in tax-free educational assistance benefits. These benefits are separate from—and may be provided in addition to—tuition remission benefits, benefits for job-related education, and scholarships.
During the COVID epidemic, Congress expanded the scope of “educational assistance” so that employers could reimburse employees’ for their payments on student loans. The Act makes that expansion permanent. In addition, the Act indexes the dollar amount of the benefit, beginning in 2027, so that it adjusts for cost-of-living increases.
Employers should consider including student loan repayment in their overall educational benefit strategy.
Executive Compensation Deduction Is Limited
As a general rule, an employer can deduct employee compensation as an ordinary and necessary business expense. However, public companies can deduct only $1,000,000 of the compensation paid to certain executives. The Act limited this deduction even further. Beginning January 1, 2026, all entities in a controlled group must aggregate the compensation they paid to each “specified covered employee” when determining whether the $1,000,000 limit applies. In addition, the deduction must be allocated among the controlled group members. The “specified covered employees” are the CEO, CFO and three highest paid executive officers, and prior covered employees. As of January 1, 2027, the “specified covered employees” will also include the five highest paid employees.
Public companies should prepare to aggregate compensation of all specified covered employees, effective January 1, 2026, and should watch for further guidance from the Internal Revenue Service.
Trump Accounts Are Created
The Act creates new investment accounts for children under the age of 18 (called “Trump Accounts”) beginning on July 4, 2026. The Trump Account functions similarly to an IRA with an annual contribution limit of $5,000 (indexed for inflation) per child until age 18.
Employers may establish a Trump Account Contribution Program to provide nontaxable contributions up to $2,500 annually (indexed for inflation) to the Trump Accounts of employee’s dependent. The employers’ $2,500 nontaxable contribution counts towards the $5,000 annual contribution limit. Employees may make up the balance of the $5,000 annual limit with after-tax contributions. An employer-sponsored Trump Account Contribution Program will be subject to nondiscrimination rules that are similar to those for dependent care flexible spending account. An employer with a Trump Account Contribution Program must adopt a written document to receive favorable tax treatment.
The federal government will also make a one-time $1,000 contribution to the Trump Account of any child that is a United States citizen born between January 1, 2025, and December 31, 2028. The federal contribution does not count toward the $5,000 annual contribution limit.
Distributions are not permitted from Trump Accounts until age 18. Trump Accounts are subject to the same types of restrictions that apply to IRAs, including excise tax penalties for early distribution and excess contributions. Trump Accounts must be invested in a diversified index fund of U.S. stocks and must minimize fees and expenses.
Employers interested in contributing to Trump Accounts for their employees’ children beginning in July 2026 should monitor vendor options and await guidance from the Internal Revenue Service.
Juliana Reno is a partner at Venable LLP where she chairs the Employee Benefits and Executive Compensation Practice Group.
Lisa Tavares is a partner at Venable LLP where she co-chairs the firm’s Business Division.
Both are based in the firm’s Washington, D.C. office.