On May 13, 2025, the House Ways and Means Committee introduced the One, Big, Beautiful Bill, delivering on the President’s campaign promise to extend the 2017 tax cuts. The Bill introduces several provisions impacting employee benefits. The Bill has since passed in the House and is currently in the Senate.
Go Deeper:
The Bill will go through additional iterations and specific details may change, but a first look at the bill reveals several benefit provisions which generally have bipartisan support:
ICHRA: Codifying Individual Coverage Health Reimbursement Arrangements (ICHRAs) into law, renaming them as Custom Health Option and Individual Care Expense ("CHOICE Arrangements") and making the following adjustments:
- 60-day advance notice instead of 90
- W-2 reporting
- Allows pre-tax payment for Exchange individual premiums (currently employers can only amend their cafeteria plan to allow pre-tax paycheck deductions for Medicare or off-Exchange individual premiums)
- A new two-year credit for an employer who is not an Applicable Large Employer (non-ALE) for a newly installed CHOICE Arrangement ($100 per enrolled employee per month the first year with intent to index, and half credit the second year)
Revised Tax Credits for Leaves and Child Care: Updating Paid Family and Medical Leave (PFML) tax credit and employer-provided child care credit.
Education Assistance: Indexing the education assistance plan’s $5,250 annual limit and permanently allowing student loan repayments to be reimbursable.
HSA and FSA: Making adjustments to Health Savings Accounts (HSA) and Flexible Spending Accounts (health FSA):
- Allows up to 60 days to establish a HSA after first enrolling in a QHDHP, and makes expenses reimbursable back to the date in which the QHDHP began
- Allows Medicare Part A, bronze or catastrophic Exchange plans, and limited on-site clinic access to be HSA-compatible
- Allows Direct Primary Care (DPC) to be HSA-compatible if it does not exceed $150/month (double for family, to be indexed for inflation) and does not include services requiring general anesthesia, Rx, or labs not typically administered in an ambulatory primary care setting
- Allows DPC fees to be a §213(d) medical expense reimbursable from health FSAs and HSAs
- Allows HSA reimbursement for qualified sports and fitness, including some gym memberships, up to $500/year ($1,000 for joint filers), to be indexed for inflation, divided up as an equal monthly allowance (unclear if these are §213(d) medical expenses also reimbursable from health FSAs)
- Allows both spouses enrolled in a family QHDHP to make catch-up contributions to the same HSA
- Allows employees to contribute an extra $4,300 single, $8,550 family (to be indexed for inflation) to their HSA, subject to income phase-outs starting at $75,000 ($150,000 for joint filers)
- Allows FSAs or HRAs to convert to newly established HSAs if not enrolled in a QHDHP for the last 4 years, up to the annual FSA salary reduction contribution cap (double for family coverage). If done mid-plan year, would treat the remainder of that plan year as not having health FSA or HRA disqualifying coverage.
- Allows an HSA-holder’s spouse to have an FSA without disqualifying the individual’s HSA
Potential Impact to Employers:
There are a number of enhancements to employee benefits in this bill. However, it is not yet law and is now with the Senate, with an unknown future, so changes will likely develop. However, this gives employers a view into provisions Congress may be considering for 2026 and beyond. We will keep a close eye on developments and final impacts on employee benefit plans.
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