A new federal law—formerly known as the “One Big Beautiful Bill”—has introduced significant changes to employee benefits. These updates impact everything from dependent care, health savings accounts to Transportation benefits. Here’s a breakdown of the most important changes employers should prepare for.
Dependent Care Benefits Expanded
- DCAP Limit Increased: Starting in 2026, the maximum tax-free amount employees can receive through a Dependent Care Assistance Program (DCAP) increases from $5,000 to $7,500 (or from $2,500 to $3,750 for married individuals filing separately).
- Employer Childcare Credit Enhanced: Employers offering childcare services will benefit from a more generous tax credit, encouraging workplace-supported childcare solutions.
Health Savings Accounts (HSAs) Strengthened
- Telehealth Coverage Made Permanent: High-deductible health plans (HDHPs) can now permanently cover telehealth services before the deductible is met, without affecting HSA eligibility.
- New HSA-Compatible Plans: Starting in 2026, bronze and catastrophic Exchange plans will qualify as HDHPs.
- Direct Primary Care Allowed: These arrangements will not disqualify HSA eligibility if they meet specific criteria. Fees for such services are now considered qualified medical expenses.
Transportation Benefits Updated
- Bicycle Commuting Reimbursements Eliminated: Starting in tax years after 2025, reimbursements for bicycle commuting expenses will no longer qualify as tax-free transportation fringe benefits. This change makes permanent the suspension that has been in place since 2018.
- Inflation Adjustments Modified: Minor updates have been made to how exclusion limits for other qualified transportation benefits—such as transit passes and parking—are adjusted for inflation.
The new federal legislation significantly enhances several core employee benefits including HSAs and DCAPs. These updates not only expand eligibility and contribution limits but also provide permanent tax advantages for both employers and employees. By aligning benefit strategies with these changes, organizations can strengthen their offerings, improve employee satisfaction, and ensure compliance with growing federal standards.
Source: Thomson Reuters