# What OBBBA changed for employer health plans. HSAs, dependent care and fringe benefits.

Source: https://ethosbenefits.com/insights/obbba-employer-health-plans
Type: Insight
Topic: Compliance rules and deadlines
Author: Donovan Ryckis, Founder and CEO
Reviewed by: Patrick Ansara, Partner and Director of Client Operations
Publisher: Ethos Benefits
Published: 2025-07-10
Last updated: 2026-11-03
Cite as: "What OBBBA changed for employer health plans," Ethos Benefits, https://ethosbenefits.com/insights/obbba-employer-health-plans, updated 2026-11-03.

**Summary:** The One Big Beautiful Bill Act changed HSA rules, the dependent care FSA limit and other benefits. What took effect, when, and what IRS guidance says.

## Key takeaways

- The One Big Beautiful Bill Act (Public Law 119-21) was signed July 4, 2025. It made the HDHP telehealth safe harbor permanent for plan years beginning after December 31, 2024.
- Starting January 2026, Exchange bronze and catastrophic plans count as HDHPs, and direct primary care arrangements up to $150 a month ($300 for family) no longer block HSA contributions.
- The dependent care FSA limit rose to $7,500 ($3,750 married filing separately) for 2026 and is not indexed for inflation.
- IRS Notice 2026-5 (December 2025) limits how an employer HDHP can use direct primary care, and the final law makes no change to ICHRAs.

*Updated October 21, 2026. Since this post first ran in July 2025, the IRS issued Notice 2026-5 (December 2025) on the HSA changes and Rev. Proc. 2026-24 (May 2026) with the 2027 limits. The sections below reflect both.*

## What is the One Big Beautiful Bill Act?

The One Big Beautiful Bill Act (OBBBA), H.R. 1, is the budget reconciliation law signed on July 4, 2025, as Public Law 119-21, and it brought real changes for employers with HSA-qualified plans, dependent care FSAs or commuter benefits. It is mostly about taxes, but several sections change the rules for tax-favored employee benefits. Most of the changes took effect January 1, 2026. One, for telehealth, reached back to 2025.

| Change | Law section | Effective |
| --- | --- | --- |
| Telehealth safe harbor for HDHPs made permanent | 71306 | Plan years beginning after December 31, 2024 |
| Exchange bronze and catastrophic plans treated as HDHPs | 71307 | Months beginning after December 31, 2025 |
| Direct primary care compatible with HSAs | 71308 | Months beginning after December 31, 2025 |
| Dependent care FSA limit raised to $7,500 | 70404 | Taxable years beginning after December 31, 2025 |
| Student loan payments under educational assistance made permanent and indexed | 70412 | Payments made after December 31, 2025 |
| Bicycle commuting exclusion permanently repealed | 70112 | Taxable years beginning after December 31, 2025 |

## Can an HDHP cover telehealth before the deductible?

Yes, permanently. An employer's HDHP can cover telehealth and other remote care with no deductible, and members stay eligible to contribute to an HSA. This relief started under the CARES Act in 2020 and was extended several times on a temporary basis. Section 71306 made it permanent for plan years beginning after December 31, 2024, so it applied retroactively to 2025 plan years.

IRS Notice 2026-5 fills in the details. A service on the Medicare telehealth list that HHS publishes each year qualifies. In-person services, medical equipment and drugs furnished in connection with a telehealth visit do not, unless they qualify on their own, for example as preventive care. Employers offering a virtual-first or zero-cost telehealth benefit alongside an HDHP can keep it, but should check that the vendor contract does not bundle in-person care before the deductible.

## Can employees with direct primary care use an HSA?

Starting January 1, 2026, an employee enrolled in a direct primary care arrangement can still contribute to an HSA, as long as the arrangement meets the statute's terms:

- **Primary care only.** Care must come from primary care practitioners (family, internal, geriatric or pediatric medicine physicians, nurse practitioners, clinical nurse specialists or physician assistants).
- **Fixed periodic fee only.** The fee is the sole payment. An arrangement that bills insurance or the member separately for some services does not qualify.
- **Fee limit.** Aggregate fees cannot exceed $150 a month for one person or $300 a month for an arrangement covering more than one person. Rev. Proc. 2026-24 kept both amounts unchanged for 2027.
- **Excluded services.** Procedures requiring general anesthesia, prescription drugs other than vaccines, and lab services not typically done in an ambulatory primary care setting.

Employees can also pay direct primary care fees from their HSA as a qualified medical expense.

Notice 2026-5 narrowed how employers can use this. An HDHP cannot pay direct primary care membership fees before the deductible is met, because the law protects the employee's HSA eligibility but does not create a new pre-deductible benefit for the plan. Membership fees an employee pays do not count toward the HDHP deductible or out-of-pocket maximum. And when the employer pays the fees, including through a cafeteria plan salary reduction, the employee cannot also reimburse them from the HSA. An employer that wants to offer direct primary care with an HDHP should set it up as a separate arrangement and confirm the fee stays within the limit.

## Do bronze and catastrophic plans count as HDHPs?

From January 2026, a bronze or catastrophic plan available as individual coverage through an ACA Exchange is treated as an HDHP, even if its deductible or out-of-pocket maximum falls outside the usual HDHP limits. Before the change, many bronze plans and all catastrophic plans failed the HDHP test.

This matters mainly for employers that fund individual coverage through an individual coverage HRA (ICHRA) or a qualified small employer HRA. Notice 2026-5 confirms that using an ICHRA to buy the plan does not stop it from counting as an HDHP. An off-Exchange version of the same plan also qualifies. Two limits apply. Small-group SHOP coverage is not individual coverage, so it does not get this treatment. And the HRA itself generally must reimburse only premiums for the employee to stay HSA-eligible.

**On ICHRA:** The enacted law does not change individual coverage HRAs. ICHRAs still operate under the existing 2019 regulations.

## What is the dependent care FSA limit?

The dependent care FSA limit is $7,500 for 2026. The limit on tax-free dependent care assistance rose from $5,000 to $7,500 a year, or from $2,500 to $3,750 for a married person filing separately, for taxable years beginning after December 31, 2025. It is the first increase in decades. The new amount is not indexed, so it stays at $7,500 until Congress changes it.

The higher limit is optional for employers. A plan whose document states a $5,000 limit needs an amendment, payroll changes and notice to employees before anyone can elect more. Highly compensated employees may still be held below $7,500 if the plan fails the dependent care nondiscrimination tests. Ethos Benefits runs those tests as part of its [nondiscrimination testing service](https://ethosbenefits.com/services/nondiscrimination-testing).

## What changed for student loans and commuter benefits?

Student loan repayment became permanently tax-free, and the bicycle commuting exclusion was permanently repealed.

**Student loan repayment.** Employers can keep paying up to $5,250 a year toward an employee's student loans tax-free through a section 127 educational assistance program. The CARES Act provision was set to end with payments made before January 1, 2026. OBBBA made it permanent, and the $5,250 limit is indexed for inflation for taxable years beginning after 2026.

**Bicycle commuting.** The tax-free bicycle commuting reimbursement, suspended since 2018, is now permanently repealed. The law also changed the base year for inflation adjustments to the parking and transit limits, and kept the rule that employers cannot deduct the cost of qualified transportation benefits.

## What should employers do now?

Employers should review HDHP telehealth terms, keep direct primary care outside the HDHP and update plan documents for the new limits.

1. **Review HDHP telehealth terms** against Notice 2026-5, especially any vendor bundle that includes in-person care, labs or drugs before the deductible.
2. **Keep direct primary care outside the HDHP.** If you offer it, confirm the fixed fee stays at or under $150 or $300 a month and that no services are billed separately.
3. **Check the dependent care limit** in your cafeteria plan document, payroll and open enrollment materials, and run the [nondiscrimination tests](https://ethosbenefits.com/benefits-101/section-105h-nondiscrimination-testing).
4. **Update your educational assistance plan** if you pay student loans, and plan for indexed limits after 2026.
5. **Revisit ICHRA contribution modeling** if you offer one, now that bronze and catastrophic plans can pair with an HSA.

Plan document and SPD changes may be needed for each of these. See the [summary plan description](https://ethosbenefits.com/benefits-101/summary-plan-description) explainer for timing rules.

## Frequently asked questions

### What did the One Big Beautiful Bill Act change for HSAs?

It made three HSA changes. An employer's HDHP can permanently cover telehealth before the deductible, Exchange bronze and catastrophic plans count as HDHPs from January 2026, and direct primary care arrangements with fees of up to $150 a month ($300 for family) no longer block HSA contributions. IRS Notice 2026-5 explains how each rule works.

### When did the One Big Beautiful Bill Act take effect for benefits?

Most of the benefit changes took effect January 1, 2026. The law was signed July 4, 2025, as Public Law 119-21, and the telehealth safe harbor reached back to plan years beginning after December 31, 2024, so it covered 2025 plan years too. The dependent care and student loan changes apply to taxable years or payments after December 31, 2025.

### Can an employer HDHP pay for direct primary care before the deductible?

No. IRS Notice 2026-5 says the law lets an HSA-eligible person hold a direct primary care membership, but it does not let an HDHP pay membership fees before the deductible is met. An employer can pay the fees outside the HDHP, but those employer-paid fees cannot also be reimbursed from the employee's HSA.

### Do employers have to offer the $7,500 dependent care FSA limit?

No. The higher limit is optional. An employer whose cafeteria plan document states a $5,000 limit has to amend the plan, update payroll and notify employees before anyone can elect more. Highly compensated employees can still be held below $7,500 if the plan fails the dependent care nondiscrimination tests under Section 129.

### Did the One Big Beautiful Bill Act change ICHRAs?

No. The enacted law does not change individual coverage HRAs, which still run under the 2019 regulations. It does affect them indirectly, because Exchange bronze and catastrophic plans now count as HDHPs, and Notice 2026-5 confirms that buying one with an ICHRA does not change that. The HRA generally must reimburse only premiums for the employee to stay HSA-eligible.

### Is employer student loan repayment still tax-free?

Yes. The One Big Beautiful Bill Act made it permanent, so employers can keep paying up to $5,250 a year toward an employee's student loans tax-free through a section 127 educational assistance program. The provision had been set to end with payments made before January 1, 2026, and the $5,250 limit is indexed for inflation for taxable years beginning after 2026.

## Sources

1. [Public Law 119-21 (H.R. 1), sections 70112, 70404, 70412, 71306, 71307 and 71308](https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm), U.S. Government Publishing Office
2. [Public Law 119-21 details page](https://www.govinfo.gov/app/details/PLAW-119publ21), U.S. Government Publishing Office
3. [Notice 2026-5: Expanded Availability of Health Savings Accounts under the One, Big, Beautiful Bill Act](https://www.irs.gov/pub/irs-drop/n-26-05.pdf), Internal Revenue Service
4. [Internal Revenue Bulletin 2026-2](https://www.irs.gov/irb/2026-02_IRB), Internal Revenue Service
5. [Rev. Proc. 2026-24: 2027 inflation adjusted amounts for health savings accounts](https://www.irs.gov/pub/irs-drop/rp-26-24.pdf), Internal Revenue Service