The Big Beautiful Bill: What it is and how it impacts employee benefits

What is the One Big Beautiful Bill Act (OBBB)?

The One Big Beautiful Bill Act is a budget and tax reform package that bundles major spending, revenue, and program changes. Its scope is broad—the bill is nearly 1,000 pages long. And it touches everything from taxes to the military to Medicaid, with the goals of:

• Locking in Trump-era individual tax cuts and giving tax credits to families
• Reorganizing the social safety net and health spending framework
• Broadening tax incentives for employers

Among its hundreds of pages, there are OBBB provisions with immediate implications for employee benefits. For brokers, the most critical changes to track are related to:

• High-deductible health plans (HDHPs)
• Health savings accounts (HSAs)
• Dependent care flexible spending accounts (FSAs)
• Student loan repayment assistance
• Fringe benefits, like bicycle commuting and moving expenses
• Employer tax credits for child care and paid leave

Keeping a close eye on these obligations—now and as they evolve—will help you design compliant (and cost-efficient) benefits strategies.

OBBB updates brokers need to be ready to explain to clients

Below, we outline what has been revised and when new laws take effect, so you can anticipate client questions and answer them with confidence.

If you’re skimming, here’s a quick overview:

Note: You can find a full copy of The Big Beautiful Bill here.

First-dollar telehealth and remote care under HDHPs (Section 71306)

Old rule: Before, telehealth visits could only be covered by a high-deductible health plan (HDHP) after the deductible was met, limiting HSA eligibility.
New rule: Now, OBBB makes pandemic-era relief permanent. That means HDHPs can now cover telehealth and remote care services before the deductible is hit and not impact HSA eligibility.
Effective date: This provision is retroactive to plan years beginning after December 31, 2024.
Why it matters for brokers: Employers may choose to reimburse telehealth costs paid in 2025 or reclassify them—though doing so retroactively may require coordination with the carrier and vendor (something brokers could help with).

Direct Primary Care (DPC) arrangements (Section 71308)

Old rule: DPC fees were often treated as “other health coverage,” which disqualified employees from HSA contributions.
New rule: DPC arrangements are compatible with HSAs, so long as fees stay under $150/month per individual and $300/month per family, annually. Of note, some high-cost services remain outside this allowance, like:

• Anesthesia
• Prescription drugs (other than vaccines)
• Extensive lab work that’s not usually provided in an ambulatory setting

Effective date: January 1, 2026.
Why it matters for brokers: Employers can now pair lower premium HDHPs with a fixed fee primary care layer. You can help clients compare the predictability of DPC costs with utilization risks, and confirm whether third-party administrators (TPAs) or carriers will support DPC fee caps.

ACA plans (Section 71307)

Old rule: Before, the only HDHPs that qualified for HSAs had to meet minimum deductible and maximum out-of-pocket thresholds. That requirement left most Bronze and (virtually all) Catastrophic exchange plans ineligible.
New rule: All Bronze and Catastrophic Marketplace plans are HSA eligible, but they’re still bound by ACA out-of-pocket maximums.
Effective date: January 1, 2026.
Why it matters for brokers: This part of the law could shift enrollment dynamics for clients with populations enrolled in marketplace plans or that have a part-time workforce. They’ll need your help understanding how this broadens HSA eligibility and redesigning contribution strategies.

Flexible spending and dependent care (Section 70404)

The OBBB includes a significant increase to the tax-free limit for dependent care accounts. (As a refresher, these accounts help employees pay for dependent care expenses that allow them to work.)

Old rule: Annual exclusion for dependent care assistance was capped at $5,000; $2,500 if married filing separately.
New rule: The cap is now $7,500, or $3,750 if married filing separately. Moving forward, this rate will be indexed for inflation.
Effective date: January 1, 2026.
Why it matters for brokers: For employees, a higher cap makes dependent care FSAs a more attractive tax savings tool. On the flip side, there’s more overhead for clients:

1. Non-discrimination testing: Dependent care FSAs are subject to strict IRS testing, which requires that at least 55% of benefits go to non-highly compensated employees. If too many executives max out their elections at $7,500 and other employees don’t participate, the plan can fail. At that point, contributions made by highly compensated employees become taxable income.
2. Updates to plan documents: The Section 125 cafeteria plan must be updated in plan documents and payroll to reflect new limits.

Student loan repayment assistance (Section 70412)

Employer help with student loans has always been a popular benefit, and the OBBB cements it into law.

Old rule: Under Section 127, employers could contribute $5,250 toward student loans tax-free—but only through 2025.
New rule: Employers can continue to contribute $5,250 toward student loans on a tax-free basis, and the cap will be indexed to inflation after 2026.
Effective date: January 1, 2026.
Why it matters for brokers: Some clients may want to rethink their program to attract employees who have significant debt from undergraduate, graduate, or trade school programs.

Fringe benefits

Some fringe perks are being scaled back or shifted from tax-free to taxable.

Transportation (Section 70112)
Old rule: Employers could deduct the cost of qualified transportation fringe benefits (parking, transit) and reimburse employees tax-free for bicycle commuting expenses.
New rule: There is no more employer deduction for parking and transit benefits.
The employer deduction for bicycle commuting reimbursement was eliminated as well. Employers can still deduct the cost, but it’s now considered taxable compensation to employees.
Effective date: January 1, 2026.

Moving (Section 70113)
Old rule: Before the Tax Cuts and Jobs Act (TCJA) of 2017, employees could deduct qualified moving expenses (or receive them tax-free via employer reimbursement) when relocating for a new job (if they met distance and time tests). TCJA suspended that deduction and exclusion for most taxpayers from 2018 through 2025.
New rule: Employers can no longer deduct for moving expenses. The only exceptions are active-duty members of the Armed Forces and members of the intelligence community.
Effective date: January 1, 2026.
Why this matters for brokers: Benefits that once felt “free” to employees are now taxable, which may mean they won’t get used as much. You can help clients decide whether to get rid of, top up, or pivot to alternative wellness-type benefits.

Employer tax credits and other incentives

The OBBB outlines new tax advantages employers can claim for offering certain benefits.

Child care tax credit (Section 70401)
Old rule: Employers could claim a credit equal to 25% of qualified child care expenses, capped at $150,000 annually.
New rule: Employers can now claim a 40% credit with annual caps of $500,000. These caps will be indexed for inflation starting in 2026.
Effective date: January 1, 2026.
Why it matters for brokers: If clients aren’t already offering child care, this expanded credit could make on-site day care or contracted services more financially feasible—attractive benefits to younger employees planning for a family.

Paid family and medical leave credit (Section 70304)
Old rule: Employers could recover part of the wages they paid employees under qualifying family or medical leave, but this was set to expire at the end of 2025.
New rule: Now the credit is permanent. Employers can calculate this credit as a percentage of wages paid or premiums paid for PFML insurance.
Effective date: January 1, 2026.
Why it matters for brokers: A permanent PFML credit gives employers a bit more predictability for their leave policies and can offset the cost of offering more generous (read: competitive) programs.

What these changes mean:

For plan design
Employers now have a little more room to mix and match their coverage. Starting in 2026, Direct Primary Care can be layered with HDHPs, creating new options for combining low premiums with predictable primary care costs. Higher DCAP limits also make dependent care programs more substantial, but they require updated plan documents and careful budgeting.

For employee communication
Some employers will be making a lot of changes in line with this bill, and employees will want clarity on what’s new and worth electing. Updates will need to be reflected in employee handbooks and any other HR materials.

For compliance
Unfortunately, every update comes with admin work:

• Higher DCAP limits mean rerunning nondiscrimination tests and rewriting Section 125 cafeteria plans.
• New DPC arrangements mean documenting compliance with fee caps.
• Fringe benefit changes mean updating payroll systems so reimbursements are taxed correctly.

For costs
Easier access to telehealth could reduce some long-term claims costs, which is great for clients. At the same time, richer DCAP elections and potential new student loan assistance programs will increase their spend. Brokers should prepare clients for this trade off by building it into upcoming budget discussions.

For getting ahead
Employers that act early—by offering permanent student loan repayment, expanding child care, and adding DPC options—can differentiate themselves in a tight labor market.

5 Steps brokers should take now

1. Review and map current benefit offerings
Start by comparing every client’s current plan against these new rules. Where are the programs out of sync? Where can new options fit?

From there, ask clients if the payoff of adding new benefits now (recruiting and retention) outweighs the budget pressure, or if it makes more sense to wait.

2. Engage with carriers and third-party administrators
Employers need to move quickly to stay in sync with the law, since there are only a few months left before 2026. Offer to:

• Review clients’ vendor contracts
• Confirm how carriers and TPAs are handling changes (and if they’re in line with what we’ve covered above)
• Push to get plan amendments underway so clients can hit the ground running in January.

3. Update employee communications and training
Employees will have questions, and employers may not have the bandwidth to answer them. Brokers can add value by rewriting plan summaries, drafting FAQs for internal wikis, and hosting open enrollment workshops so employees understand. Work with HR leaders to prioritize the updates that matter most to their workforce so you’re using your time wisely.

Something to keep in mind: Employees may hear about OBBB and expect every provision to be covered. Help employers position their benefits as competitive without overpromising—and potentially highlight new changes coming down the road.

4. Plan for financial impact
As soon as you have a sense of what employers might be looking to add or remove, start plotting out the financials. Don’t forget to revisit premiums, contribution strategies, and cost-sharing models so employers can make the best decisions for themselves and their employees without blowing their budgets.

5. Monitor upcoming regulations
Some of these rules are still fuzzy, and the IRS, DOL, and Treasury will continue to issue clarifying guidance. Keep tabs on this and let clients know as soon as they need to make changes (and how). They stay compliant, and they see you as an indispensable resource.

Use OBBB as a checkpoint

The OBBB is a compliance hurdle, but it’s also a chance for you to connect more deeply with your clients. Helping them stay aligned with regulations and make more informed decisions reinforces your role as a trusted advisor who can turn policy into action.

ThreeFlow is built to help you stay ahead. We track new legislation, distill what matters, and equip you with the tools you need to model plan options, manage compliance updates, and support client growth.

Skeptical? Sign up for a demo to see just how much time a centralized platform like ThreeFlow can save you and your team.