INSIGHT

Transforming your benefits strategy: How the OBBBA creates new opportunities

Monica Frame • October 13, 2025

The employee benefits landscape just experienced its most significant transformation in decades. The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduces sweeping changes that will fundamentally reshape how you approach dependent care support, health savings accounts, and educational assistance programs.

If you’re an HR leader or benefits administrator, these changes represent both compelling opportunities and complex implementation challenges that demand your immediate attention. The Act’s benefits provisions go far beyond simple contribution limit increases. They create new pathways for employee financial wellness, expand access to tax-advantaged healthcare options, and establish permanent programs that can become powerful tools in your recruitment and retention arsenal.

Understanding these changes and implementing them strategically will separate forward-thinking organizations from those playing catch-up.

The dependent care revolution: First increase in nearly four decades

After 40 years of stagnation, dependent care flexible spending accounts (FSAs) are finally getting the attention they deserve. Effective January 1, 2026, the annual contribution limit for dependent care FSAs increases from $5,000 to $7,500 ($3,750 for married individuals filing separately)—representing a 50% increase that provides meaningful financial relief for working families struggling with rising childcare costs.

This change carries particular significance given the broader economic context. Childcare costs have continued to escalate, making this benefit increasingly valuable to employees while creating new strategic opportunities for employers. The timing couldn’t be better for organizations looking to differentiate themselves in competitive talent markets.

Strategic implications for recruitment and retention

The dependent care FSA increase creates immediate opportunities for positioning your organization as family-forward and financially supportive. Consider how this enhancement impacts your value proposition:

Recruitment differentiator: With childcare costs consuming significant portions of family budgets, the additional $2,500 in pre-tax savings provides tangible financial relief that translates to real take-home pay improvement
Employee communication opportunities: Use benefits enrollment periods to highlight this enhancement as evidence of your commitment to supporting working families
Competitive positioning: Emphasize how your benefits package now offers superior dependent care support compared to organizations that haven’t optimized their programs

Navigating the nondiscrimination challenge

The increased contribution limits bring renewed focus to one of the most challenging aspects of dependent care FSAs: the notorious 55% Average Benefits Test. This nondiscrimination test may become even more challenging with the higher limit, as highly compensated employees are likely to maximize their contributions while lower-paid employees may not have the financial flexibility to do so.

Your strategy should include:

Early testing protocols: Work with your third-party administrator to run preliminary nondiscrimination tests before year-end to avoid surprises
Communication strategies: Develop targeted messaging to encourage broader participation across all employee groups
Plan design considerations: Evaluate whether contribution matching or employer subsidies could help improve test results while enhancing the overall benefit

Employers should work with their third party administrators and consider the impact of any amendment on passing the notoriously difficult to pass 55% Average Benefits Test, making early planning essential for successful implementation.

Health savings account enhancements: Expanding access and utility

The Act includes several HSA improvements that significantly expand both eligibility and utility for employees. Most notably, the Act permanently extends telehealth relief allowing HDHPs to provide first-dollar coverage of telehealth without impacting HSA eligibility, effective retroactively for plan years beginning on or after Jan. 1, 2025.

Telehealth integration opportunities

This permanent telehealth relief removes a significant barrier that previously complicated benefits design. Many employers avoided offering pre-deductible telehealth coverage because it interfered with HSA eligibility. That constraint is now eliminated permanently, creating new opportunities for:

Enhanced preventive care: Offer comprehensive telehealth services without worrying about HSA disqualification
Employee convenience: Provide immediate access to healthcare services that improve both health outcomes and employee satisfaction
Cost management: Leverage telehealth to reduce overall healthcare costs while maintaining HSA program integrity

Many employers avoided offering pre-deductible telehealth in the past because it interfered with HSA eligibility. With the new law, that’s no longer an issue, opening new possibilities for innovative benefits design.

Expanded HSA eligibility

The Act also broadens HSA access by making all bronze and catastrophic ACA plans HSA-qualified starting January 1, 2026. This change opens HSA eligibility to employees who previously couldn’t access these tax-advantaged accounts due to their health plan design.

Additionally, direct primary care arrangements will not be considered disqualifying coverage for purposes of HSA eligibility, as long as the membership fee does not exceed $150 per month for an individual or $300 per month for a family. This creates new opportunities for innovative healthcare delivery models that combine HSA benefits with direct primary care relationships.

Student loan repayment assistance: A permanent competitive advantage

One of the most significant long-term benefits of the Act is the permanent extension of employer student loan repayment assistance programs. The OBBBA makes permanent a provision that allows employers to make student loan repayments (up to $5,250) for employees on a tax-favored basis under qualified educational assistance programs, with the amount indexed for inflation annually after 2025.

Building a strategic student loan assistance program

This permanent tax treatment creates unprecedented opportunities for employers to address one of the most pressing financial challenges facing their workforce. Student loan debt affects employees across age groups and income levels, making this benefit broadly appealing and strategically valuable.

Consider these implementation strategies:

Recruitment tool: Position student loan assistance as a key differentiator in competitive talent markets, particularly for younger professionals and graduate degree holders
Retention mechanism: Structure the benefit to encourage long-term employment through vesting schedules or service requirements
Performance incentive: Link student loan assistance to performance metrics or professional development goals

The inflation indexing provision means this benefit will maintain its value over time, making it a sustainable long-term investment in employee financial wellness.

Integration with existing benefits

Student loan assistance programs work particularly well when integrated with broader financial wellness initiatives. Consider how this benefit complements:

Retirement savings programs: Help employees balance student loan payments with 401(k) contributions
HSA contributions: Support employees in managing both debt and healthcare savings goals
Professional development: Link student loan assistance to continuing education or certification programs

The tax-favored treatment applies to both employer payments made directly to loan servicers and to employees for qualified student loan payments, providing flexibility in program design and administration.

Implementation timeline and action steps

The staggered effective dates of these provisions require careful planning and coordination across multiple systems and stakeholders. Here’s your implementation roadmap:

Immediate actions (2025)

HSA program review: Evaluate current telehealth offerings and consider expanding pre-deductible coverage
Vendor coordination: Begin discussions with FSA administrators about dependent care limit increases
Communication planning: Develop messaging strategies for the 2026 benefits enrollment period

2026 implementation priorities

Plan document amendments: Update FSA plan documents to reflect new contribution limits
System updates: Work with payroll and benefits administration vendors to accommodate new limits and reporting requirements
Nondiscrimination testing: Implement enhanced monitoring for dependent care FSA compliance
HSA expansion: Leverage new eligibility rules for bronze and catastrophic plan participants

Long-term strategic considerations

Student loan program development: Design and implement comprehensive student loan assistance programs
Benefits integration: Evaluate how these enhancements fit within your broader benefits strategy
Competitive analysis: Assess how competitors are leveraging these new opportunities

The nondiscrimination testing reality

While the dependent care FSA increase is welcome news, it brings renewed attention to compliance challenges. The OBBBA also does not address the notoriously difficult-to-pass 55% Average Benefits Test, which may become even more challenging with the higher limit.

Organizations that have historically struggled with nondiscrimination testing should prepare for continued challenges. The test measures whether benefits are provided in a manner that doesn’t discriminate in favor of highly compensated employees. With higher contribution limits, the disparity between high and low earners’ participation may become more pronounced.

Strategies for compliance success

Enhanced communication: Develop targeted outreach to encourage broader participation across all employee groups
Financial wellness programs: Provide education about the value and mechanics of dependent care FSAs
Alternative plan designs: Consider employer contributions or matching programs to improve test results
Regular monitoring: Implement quarterly testing to identify and address issues early

Trump accounts: A new savings opportunity

The Act introduces a novel savings vehicle called “Trump Accounts” for children under 18. Employers may contribute up to $2,500 per year (indexed for inflation) on a tax-free basis to a Trump Account of an employee or an employee’s dependent.

This creates an entirely new category of employee benefits that organizations can leverage for recruitment and retention. The program requires written plan documents and must meet nondiscrimination requirements similar to dependent care FSAs, but offers unique opportunities for supporting employee families’ long-term financial goals.

Navigate the new benefits landscape with BPM

The One Big Beautiful Bill Act’s employee benefits provisions create unprecedented opportunities for organizations ready to act strategically. From the first dependent care FSA increase in nearly four decades to permanent student loan assistance programs, these changes can become powerful tools for recruitment, retention, and employee satisfaction.

At BPM, our benefits advisory team combines deep technical knowledge with strategic insights to help you maximize these new opportunities while managing compliance complexities. Whether you’re designing comprehensive student loan assistance programs, optimizing HSA strategies, or navigating dependent care FSA nondiscrimination testing, we’re here to help you turn these legislative changes into competitive advantages.

Ready to transform your benefits strategy? Contact BPM today to schedule a consultation with our employee benefits specialists. Together, we can develop a comprehensive approach that leverages the One Big Beautiful Bill Act’s provisions to support your employees and strengthen your organization.