The One Big Beautiful Bill (OBBB), introduced as H.R. 1 in the 119th Congress and advanced through the budget reconciliation process pursuant to House Concurrent Resolution 14, was originally crafted as a sweeping legislative package encompassing tax, health, and social policy reforms. However, following review by the Senate Parliamentarian under the Byrd Rule, several proposed health savings account (HSA) provisions (and other provisions) were deemed extraneous to the federal budget and were thus removed from the reconciliation-eligible text. The resulting legislation, enacted on July 4, 2025, retained core tax and fiscal provisions but excluded several HSA-related reforms that had gained substantial interest among employers and benefits professionals. The bill’s legislative trajectory and ultimate enactment carry implications for employers, plan sponsors, and third-party administrators navigating the evolving benefits landscape
Sec. 70112. Extension and Modification of Qualified Transportation Fringe Benefits
Section 70112 permanently eliminates the $20/month qualified bicycle commuting reimbursement. This Section also modifies the inflation adjustment provision under IRS Sec.132(f) by changing the base year from 1998 to 1997. This change effectively increases the inflation-adjusted cap by one additional year’s worth of CPI growth, which will result in slightly higher monthly exclusion limits for transit and parking benefits starting in 2026.
- Why is this good for employers? “This” meaning the base year adjustment, higher monthly exclusions means employers save can save additional payroll taxes (e.g., FICA).
- Why is this good for employees? Employees can set aside more pre-tax income for commuting expenses, reducing taxable wages.
- Why Navia likes it? Because it enhances the value of the benefit without increasing administrative complexity.
Sec. 71306. Permanent extension of safe harbor for absence of deductible for telehealth services.
Section 71306 of H.R. 1 makes permanent the telehealth safe harbor, allowing HSA-qualified High Deductible Health Plans (HDHPs) to cover telehealth and other remote care services before the deductible without disrupting HSA eligibility.
- Why is this good for employers? Allowing pre or no deductible telehealth coverage without disrupting HSA eligibility simplifies plan design by enabling employers to offer telehealth services and HSA-compatible HDHPs as part of a single, integrated benefits strategy.
- Why is this good for employees? Obviously preserving HSA eligibility is beneficial to employees but telehealth can have fewer logistical barriers (no travel time) and can reduce ER or urgent care visits for non-emergent issues.
- Why does Navia like it? Anything that reduces compliance risks and benefit friction (by reducing the risk of disqualifying individuals from HSA eligibility) is positive change.
Sec. 71307. Allowance of bronze and catastrophic plans in connection with health savings accounts.
Section 71307 deems any Bronze or Catastrophic plan offered as individual coverage through an ACA Exchange to be a high-deductible health plan (HDHP) for HSA eligibility purposes, even if the plan does not meet the deductible or out-of-pocket requirements under IRC § 223(c)(2)(A). This change is effective for months beginning after December 31, 2025.
- Why is this good for employers? Small employers that offer ICHRAs can now recommend Bronze or Catastrophic ACA plans without sacrificing HSA eligibility.
- Why is this good for employees? This expands access to HSAs and makes it easier to choose an HSA-compatible plan.
- Why does Navia like it? This simplifies compliance, thus simplifies training. Navia can better support our ICHRA clients by streamlining guidance regarding HSA compatible plans.
Sec. 71308. Treatment of direct primary care service arrangements.
Section 71308 confirms that individuals enrolled in direct primary care (DPC) arrangements are not disqualified from HSA eligibility. Furthermore, DPC fees are treated as qualified medical expenses provided the monthly fee does not exceed $150 for individuals or $300 for families, adjusted for inflation. Note DPC fees aren’t exactly the same as boutique or concierge fees. DPC fees are flat monthly payments made directly to the provider in exchange for access to basic, routine primary care services, without insurance billing. In contrast, concierge fees often include access-based retainers or non-medical services, which typically do not qualify as reimbursable medical expenses under IRS rules (unless a medical service is properly documented).
- Why is this good for employers? This increases benefit offering flexibility and reduces compliance friction.
- Why is this good for employees? Clarifies that the fees are reimbursable from an HSA up to an amount. And, DPC coverage no longer disrupts HSA eligibility.
- Why does Navia like it? We see the appeal of this provision: expanding the list of eligible expenses for HSAs, FSAs, and HRAs is a win for both employers and employees. Greater flexibility means more value for participants and more tools for employers to offer meaningful health benefits. However, administering caps on specific expense types adds a layer of complexity for plan design, administration, and substantiation. As much as we support broader reimbursable categories, any provision that introduces item-specific limits creates operational burdens and complexity for us, employers, and participants.
Sec. 70404. Enhancement of the Dependent Care Assistance Program.
Section 70404 increase the maximum amount excludable from an employee’s gross income under a dependent care assistance program. Specifically, the annual exclusion limit is increased from $5,000 to $7,500 for most taxpayers, and from $2,500 to $3,750 for married individuals filing separately. The amendment applies to taxable years beginning after December 31, 2025.
- Why is this good for employers? This increases tax savings without increased complexity.
- Why is this good for employees? This increases the ability to reduce taxable income and better reflects modern dependent care expense amounts.
- Why does Navia like it? The benefits industry has long advocated for an increase to the DCAP limit, this change presents both opportunities and challenges. While the higher cap enhances participant value, the absence of inflation indexing limits long-term upside. This change will likely require plan amendments and creates a natural opportunity for employers to review and update summary plan descriptions that have not been restated within the last five years, in accordance with ERISA requirements. We will provide further guidance and resources as the effective date approaches. What would be nice is transition relief, such as mid-year election change flexibility like that issued during the COVID-19 pandemic such that those off calendar year plans can adopt the maximum and clearly permit election changes. We will be monitoring!
Sec. 70412. Exclusion for employer payments of student loans.
The OBBB makes permanent the CARES Act amendment to IRC §127, allowing employers to provide up to $5,250 per year in tax-free student loan repayment assistance. The OBBB also indexes Section 127 benefits for inflation starting with taxable years after December 31, 2026.
- Why is this good for employers? Student loan assistance is an attractive recruitment tool, especially for young mid-career employees. It is tax-deductible to the employer.
- Why is this good for employees? It is tax free to employees (state tax treatment may vary).
- Why does Navia like it? The law allows the continuation of a valuable benefit already adopted by many employers. These plans are relatively easy to administer.
Sec. 70401 Enhancement of employer-provided childcare credit
Section 70401 enhances the employer-provided childcare tax credit under IRC §45F, effective for amounts paid or incurred after December 31, 2025. The provision increases the credit from 25% to 40% of qualified childcare expenses, and to 50% for eligible small businesses. It also establishes a new annual maximum credit of $500,000 per employer (or $600,000 for eligible small businesses), with both limits indexed for inflation beginning in 2027.
- Why is this good for employers? This provision increases the tax and financial incentive to invest in onsite or subsidized childcare programs.
- Why is this good for employees? This encourages investment in childcare support when access and affordability are major challenges for working families.
- Why does Navia like it? Being an employee benefit administrator means we understand tax-favored benefits. Tax-favored benefits don’t just reduce costs—they shape behavior. Well-designed incentives, like the enhanced childcare tax credit, encourage meaningful employer involvement in easing the childcare burden, enabling more working families to fully participate in the workforce.
Sec. 70204. Trump Accounts and Contribution Pilot Program.
Trump Accounts are a new type of custodial savings account for children under age 18 that offer tax-deferred investment growth. While individuals can contribute up to $5,000 annually (adjusted for inflation), those contributions are made post-tax and are not deductible. However, if the employer offers a compliant Trump Account Contribution Program, employers may contribute up to $2,500 per year on a pretax basis, with those amounts excluded from employee income (deductible as a business expense for employers and excluded from gross income for employees). Eligible children born between 2025 and 2028 may also receive a one-time $1,000 Treasury-funded deposit. Accounts may be opened by a parent, legal guardian, or automatically by the IRS if eligibility is met.
- Why is this good for employers? This expands pretax benefits for employers and employees
- Why is this good for employees? No income tax on employer contributions. Eligible children may receive a $1000 deposit
- Why does Navia like this? Tracking, compliance, monitoring, and reporting are all within our core service offering.
What The Big Beautiful Bill Means for Your Retirement Plan
The legislation signed into effect on July 4, 2025, does not include any negative changes to employer-provided retirement plans. OBBBA does not significantly alter rules for 401(k), IRA, 403(b), SEP, or SIMPLE plans. Tax deferral for retirement savings remains intact, and 401(k)s continue functioning as usual. Based on this bill alone, there is no immediate need for a review of design or compliance reforms.
Here’s what retirement plan sponsors and advisors need to know:
- Permanent Student Loan Tax Exclusion
The option to use educational assistance programs for student loans was set to expire on December 31, 2025. The employer tax-favored exclusion for student-loan repayment benefits (IRC §127) is now permanent and will not expire. Employers can create programs to provide employees with undergraduate or graduate-level educational assistance. These programs can cover expenses such as books, equipment, supplies, tuition, and other fees. They can also pay the principal and interest on employees’ student loans. After 2026, the OBBB Act annually adjusts the $5,250 limit for inflation.
Client Tip:
Encourage employers to offer or continue student‑loan matching or repayment assistance, as it’s a long-term, tax‑efficient benefit to employees.
- Temporary “Senior Deduction” – No RMD Shift
Seniors (65+) get a temporary $6,000 deduction ($12,000 for joint filers), phasing out with an AGI above $75,000 for single filers and $150,000 for joint return filers. Importantly, Social Security benefits remain taxable, and RMD rules remain unchanged, i.e., no new starts or distributions from Roth IRAs. The senior deduction is allowed for tax years 2025 through 2028.
Client Tip:
Although this deduction is tax‑beneficial, it does not alter the mechanics of retirement plan distributions. Clients and participants should continue to follow their regular RMD schedules.
We will continue to monitor Treasury and IRS guidance and relay information as it becomes available.