Are you an employer or Human Resources professional looking to strengthen your recruitment and retention strategies? Employee benefits increasingly play a critical role in attracting and retaining valuable employees in a competitive job market. Employers seeking to expand employee benefits as part of overall employee compensation might consider tax-advantaged options available under the One Big, Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.
- Offer employees more flexible health plans. Employers offering high-deductible health plans (HDHPs) with health savings accounts (HSAs) may permanently provide telehealth and remote care services at no cost without threatening HSA eligibility. The OBBBA also creates a narrow exception for certain direct primary care service arrangements (DPCSAs).
- Provide paid family and medical leave more affordably. Employers may permanently utilize a tax credit for paid family and medical leave (PFML). State and locally mandated paid leave covered by an employer's written policy can be used to establish eligibility, but the tax credit applies to the additional amount the employer pays over the mandated amount.
- Help employees pay off student loans. Employers may permanently offer to pay up to $5,250 per year tax free toward employees' repayment of student loans. Previously, educational assistance programs could cover employer-provided coursework and employees' expenses while pursuing education (such as tuition, fees, and books), but not student loan repayment. The maximum employer contribution will be adjusted annually for inflation. Employers can deduct contributions as business expenses and employees can exclude them from income.
- Help employees save for their children's future. Employers may contribute up to $2,500 per year to tax-deferred Trump Accounts for dependents of employees and for employees under 18. Employers' contributions do not count as gross income and are not subject to employment taxes. Starting in 2027, the maximum employer contribution will be adjusted for inflation. As a bonus for new parents, all children born as U.S. citizens in 2025 through 2028 will automatically be enrolled and will receive one-time $1,000 deposits from the federal government.
- Help employees with dependent care expenses. Employers may increase pre-tax contributions they or their employees make for dependent care assistance programs (DCAPs), also known as dependent care flexible spending accounts (DCFSAs). The OBBBA extends the tax exclusion to $7,500 (if single or married filing jointly) or $3,750 (if filing separately) starting January 1, 2026. The exclusion will be indexed annually for inflation.
Employers should be aware that most of these provisions are subject to IRS non-discrimination testing. Generally, a benefit plan is discriminatory if highly compensated or key employees can get or actually use more benefits than other employees.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
