Federal

IRS guidance on HSAs changes under One Big Beautiful Bill Act (OBBB)

IRS Notice 2026-5 explains how recent law changes expand HSA flexibility, including permanently allowing first-dollar telehealth coverage retroactive to 2025 and clarifying that certain bronze, catastrophic, and direct primary care (DPC) arrangements can be compatible with HSAs starting in 2026. The guidance provides employers and employees with clearer rules around telehealth, individual market coverage, and DPC fees, while highlighting key compliance considerations to preserve HSA eligibility.

House Ways and Means Committee introduces “Big Beautiful Bill”

The House Ways and Means Committee introduced a bill on May 13, 2025 that advances the President’s campaign promise to extend the 2017 tax cuts and includes several significant employee benefit proposals. Key provisions would codify and expand ICHRAs, enhance PFML and education assistance benefits, and make wide-ranging updates to HSAs and FSAs, including new compatibility rules, expanded contribution opportunities, and broader reimbursable expenses.

Benefit provisions in the budget reconciliation bill signed into law

President Trump signed a major budget reconciliation bill on July 4, 2025, introducing several benefit-related changes, including permanent HSA compatibility with first-dollar telehealth, new allowances for direct primary care starting in 2026, and higher limits or expanded eligibility for programs like Dependent Care FSAs, adoption assistance, student loan repayment, and paid family leave credits. While proposals to enhance ICHRAs were not included, employers will need to prepare for these updates, consider plan amendments, and await IRS guidance on new tax-favored “Trump Accounts” launching in 2026.

Affordability percentage increased to 9.96% for plan years beginning in 2026

The IRS increased the ACA affordability percentage to 9.96% for plan years starting in 2026, meaning employers can charge employees more for the lowest cost self-only plan while still meeting affordability requirements. Applicable large employers must choose a safe harbor method and set contributions before the plan year begins, with 2026 FPL affordability set at $129.89 per month.

Trial court vacates rules which expanded exemptions to contraceptive mandate

A recent court ruling vacated the ACA’s 2017 religious and moral exemption rules for contraceptive coverage, meaning most employers with non-grandfathered medical plans can no longer rely on those broad exemptions. Until the issue moves through expected appeals, only a very narrow set of employers qualify for outright exemption, while others with religious objections must follow the established accommodation process or work with legal counsel to determine next steps.

Medicare Part D notices due October 15

Employers offering prescription drug coverage must notify all Medicare-eligible employees, dependents, and retirees each year by October 15 whether their plan is “creditable” or “non-creditable,” based on how it compares to Medicare’s standard drug coverage. Using CMS’s model templates, employers should confirm their plan’s status, send the appropriate notice, and retain distribution records for compliance.

IRS indexes highly compensated and key employee thresholds

The IRS released Notice 2025-67, updating income thresholds that define highly compensated and key employees for non-discrimination testing across retirement and many non-retirement benefit plans. These updates affect employers offering §125 plans, DCAPs, FSAs, group term life, education assistance, and other benefits that rely on §414(q) definitions to ensure plans do not disproportionately favor higher earners. Employers should review these changes ahead of annual testing, particularly for plans like DCAPs that require early-year preliminary testing.

IRS releases 2026 inflation adjustments, including FSA maximums

In Rev. Procedure 2025-32, the IRS announced updated inflation-adjusted limits for 2026 across several benefit arrangements such as health FSAs, transportation benefits, and QSEHRAs. Employers must ensure these new amounts are reflected in their plans and communicated to employees.

Time to prepare for Gag Clause Prohibition Compliance Attestation (GCPCA) due to CMS by December 31, 2025

Under Section 201 of the Consolidated Appropriations Act (CAA-21), all group health plans must attest by December 31 each year that their contracts do not contain prohibited “gag clauses” restricting access to provider cost or quality data. Employers should confirm with carriers or TPAs whether such clauses exist, document efforts to remove them, and determine who will complete the online attestation to CMS. Even if a TPA or insurer handles the filing, the employer remains legally responsible for compliance and should keep all confirmations and documentation on file.

PCORI fee amount adjusted for 2025-2026

The IRS released Notice 2025-61, increasing the PCORI fee to $3.84 per covered life for plan years ending on or after October 1, 2025, and before September 30, 2026. Employers with self-insured or level-funded plans, including HRAs and ICHRAs, must file and pay this fee using the second quarter Form 720 by July 31, 2026. Although the fee is relatively small, the IRS enforces compliance closely, so employers should carefully verify plan year end dates, use the correct form version, and retain documentation for at least four years.

IRS finalizes instructions for ACA reporting (1094/1095-B & 1094/1095-C)

The IRS finalized 2025 ACA reporting instructions on October 30, 2025, confirming that employers no longer need to proactively distribute Forms 1095-B/C if they post a clear website disclaimer and provide the forms upon request (except for New Jersey residents, who must still receive them directly). The forms, codes, and deadlines remain unchanged—March 2, 2026, for furnishing forms to individuals and March 31, 2026, for electronic filing with the IRS. Employers should ensure compliance with the website disclaimer rules and verify their ACA reporting vendor contracts ahead of the 2026 reporting season.

ACA women’s preventive service updates for 2026

The Affordable Care Act (ACA) requires non-grandfathered health plans to cover a specific list of preventive health services in-network without cost-sharing to the plan participant. As ACA-required preventive service recommendations are updated, plan years starting one year after the new recommendation must cover those updated services in-network with no cost-sharing.

New flexibility for fertility benefits

On Thursday, October 16, 2025, federal agencies published new FAQs Part 72 granting additional flexibility for employers with respect to fertility benefits.

What is the Consolidated Appropriations Act of 2021 (CAA) and how does it impact employee benefits?

What is ERISA (and what are ERISA employee benefits?)