What the “One Big Beautiful Bill” Means for FSAs and HSAs

The law originally titled the One Big Beautiful Bill Act just brought some meaningful updates to two key tax-advantaged accounts: dependent care flexible spending accounts (FSAs) and health savings accounts (HSAs). Here’s a quick overview of what’s changed, why it matters, and what steps employers should consider next.

Dependent Care FSA: Higher Limits, Same Testing Rules

What changed?

Effective January 1, 2026, the annual contribution limit for dependent care FSAs has increased from $5,000 to $7,500 (or from $2,500 to $3,750 for married individuals filing separately).

Why it matters:

This change allows families to set aside more pre-tax dollars for childcare and other dependent care expenses. However, nondiscrimination testing rules remain unchanged, which could limit the benefit for highly compensated employees if the plan doesn’t pass testing.

Also important: The new law enhanced the child and dependent care tax credit which may be more beneficial for some employees, so participation decisions may vary.

HSA Eligibility: Expanded Access

What changed?

The law broadens HSA eligibility. Individuals can now contribute to an HSA even if they:

• Are covered under a “direct primary care service arrangement” (see definition below) – effective January 1, 2026
• Receive telehealth and other remote care services before meeting the deductible – retroactively effective to plan years beginning on or after January 1, 2025
• Are enrolled in a bronze or catastrophic health plan offered in the individual insurance market through the Marketplace – effective January 1, 2026

A “direct primary care service arrangement” is a health care model where individuals receive primary care services in exchange for a fixed periodic fee. Under the new law, this fee must not exceed $150 per month for individual coverage or $300 per month for arrangements that cover more than one person. These limits will be adjusted annually for inflation. It's important to note that primary care services under this arrangement do not include general anesthesia, prescription drugs (except vaccines), or lab services not usually performed in the primary care setting. The Department of Health and Human Services has the authority to issue further rules and guidance, so additional details may be released in the future.

The law also allows HSA accountholders to use their HSAs to pay for periodic fees charged by direct primary care service arrangements.

Why it matters:
This expansion means more people may now qualify to open and contribute to HSAs—offering greater flexibility and potential tax savings.

Action Items for Employers

1. Watch for updates from your TPA about the new dependent care FSA limit. Your FSA administrator will likely provide guidance on how they will implement this change for their clients. EBC will be reaching out to clients directly with details – no need to contact us just yet.
2. Review how the new limit could affect nondiscrimination testing. Higher contribution limits may impact your plan’s ability to pass required nondiscrimination tests. Consider whether you want to run one or more early tests to avoid surprises at year-end. EBC will provide guidance to our clients on testing options and strategies.
3. If you have an HSA program, now’s a great time to revisit telehealth. 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. Consider talking with your benefits consultant about affordable telehealth options that work with your HSA plan.
4. Consider exploring direct primary care options. Decide whether offering a direct primary care arrangement to employees makes sense for your organization. If so, work with your benefits consultant to find providers in your area that meet the new legal requirements and support HSA eligibility.
5. Update your benefits materials. Make sure your employee communications reflect the new rules for dependent care FSAs and HSAs. EBC will be updating its standard materials to help our clients stay compliant.

These updates offer new opportunities for employees and employers alike—but they also come with a few complexities. If you need help navigating the changes, we’re here to support you.

If you're a current client and have questions about the impacts of the bill, contact your Client Account Representative. Their contact information can be found in your online account. If you're a prospective client, we invite you to reach out to EBC at sales@ebcflex.com to learn more about how our products can meet your needs.