“Big Beautiful Bill”: How federal healthcare reform will impact your strategy.

Marie Holmes: Right. Folks are logging in welcome. Everyone give it a couple minute or 2.

Marie Holmes: Numbers are creeping up. Right? Okay? Well, I will jump in and get started because it looks like numbers are starting to stagnate a bit. But welcome everyone. Thank you for joining us today. I'm super excited to dig into the big, beautiful bill. So very timely topic kind of in our world today. And today, we're going to focus on like what these changes mean for you and your benefit strategy. So appreciate you. Taking the time on a

Marie Holmes: summer Friday to be here with us. I am joined by John Shimbari from Kutek Rock, who is a partner there, and we'll get in through introductions shortly. But if we want to jump ahead and get into the agenda.

Marie Holmes: All right. So today, we're going to focus in like, kind of 5 key areas. So 1st and foremost, we're going to jump into high, deductible health plans and Hsas. I know that's kind of a big marquee component of the bill. So understanding changes around telemedicine, some plan eligibility. So there's some pretty heavy hitter items there. Second, we're going to switch to fringe benefits and sort of tax advantaged accounts. So we'll highlight changes for student loan repayments, commuter programs kind of any other pre-tax accounts that might benefit employees. 3, rd is very near and dear to my heart is going to be new rules for family and child care benefits. So we'll break down new and expanded credits for families and dependent care support. So parents on the line listen up for sure changes to aca premium and tax credits is going to be our 4th topic. So updated rules around aca premium credits and what that might mean for your organization and your employees. And then finally, we'll kind of round things out with just some action items before we jump into Q. And A, so we'll talk through just some strategy approaches that we should be taking as we march forward towards 1, 1, 26.

Marie Holmes: So with that we'll do some introductions. My name is Marie Holmes. I'm a solutions consultant here at Nava benefits, and for those who may not know Nava, we are a modern benefits, brokerage firm, really, on a mission to fix healthcare. So we combine expert consulting with modern technology to help Hr leaders navigate kind of this like really complex world, that is healthcare. So our goals are contain cost. Figure out the right clinical management programs to deploy and just deliver an exceptional employee experience for you and your members, and we like to do that on an all year round basis, not just during renewal time.

Marie Holmes: So I particularly spend my days helping employers simplify benefits, topics, especially when big changes like this happen like the one big, beautiful bill. So today I will be the facilitator and kind of moderator as we guide through our conversation. But I'm super excited to be joined by John Shimbari. He's a partner at Ku-tac Rock, and he's kind of been at the forefront of employee benefits legislation for many, many years, and he has a keen ability to break down really complex topics into really just like digestible fashion. So, John, I'll turn it over to you for a formal introduction.

John Schembari: Thanks, Marie. It's great to be here. Great to be talking about the big, beautiful bill. As Marie said. I'm I'm John Shambar. I've been doing this for many, many decades. I've just done employee benefits law for large national law firms. I work from coast to coast with employers of all size, some of the largest companies in the world, and then small mom and pop shops. And I just focus on employee benefits. So be that compensation. retirement plans, and then, more recently, health and welfare benefits. including this one big, beautiful bill. So thanks, Murray.

Marie Holmes: Awesome, perfect, all right. So really quick kind of just like logistics. Any questions that come up during, you know the presentation. Please feel free to drop them in the Q. And a. We'll try to answer them sort of as we go throughout the presentation, but also we'll make sure that we leave time at the end, so encourage everyone any question that pops into your head. Please drop it in the Q&A tab, and we will do our best to get to all the questions at the end of the presentation. But with that I'll turn it over to you, John, to kind of jump into the beautiful world of high deductible health plans.

John Schembari: Great thanks. Thanks. Okay. So probably everybody on the on the phone or on the video knows what a high, deductible health plan and an Hsa is but just to kind of level set. As we as we get into this. a high, deductible health plan is a type of health plan that, not surprisingly by the name, has a high deductible. It's a particular type of plan design that tries to drive consumer behavior with a large deductible. It's not like your mom and Dad's old health insurance where everything was covered. Or maybe there was a hundred dollar, $200 deductible, and then insurance covered everything, and the whole world went about thinking. Health insurance doesn't cost anything because you go to a doctor. You never get a bill. All that's all. That's how is how it worked. so high deductible health plans came about as a way of trying to get consumers to, to shake off that old way of thinking and realizing. No going to the doctor. Going to the er actually does cost money, and somebody is paying for it, even though you're not getting a bill. So with a high, deductible health plan. there is now a larger deductible before your health plan will pay any expenses. So maybe it's a 3 or $4,000 deductible before your plan will pay expenses. Certain things are accepted. Government wants people to go get an annual physical, so certain type of preventative care can be done under a high, deductible health plan. But but mostly you're going to have to pay all of your medical expenses until you hit that deductible. And then there are other requirements. That that's the the minimum. Then there's a maximum. There's a maximum out of pocket that a plan can pay can require an employee to pay and have that plan still considered up via high deductible health plan.

All that is all that is really meaningful, that the definition of a high, deductible health plan is important, for Hsas Hsas are health savings accounts. These are accounts that people that have high deductible health plans can contribute money to on an annual basis, with the idea being that it's going to be used for future medical expenses, you know, hidden, hidden employee benefit secret for all the Hr. Folks out there that you probably are aware of this. But an Hsa. Is super powerful when it comes to tax savings and tax favored vehicles outside of telling your employees to save and get the company match. After that Hsas are incredibly powerful because contributions can go in tax free, they grow tax deferred, and then when you take the money out and you use it to pay a medical expense or premiums, medicare premiums, it can come out tax free. So it's kind of a trifecta of tax favorite accounts. So lots of employers will want to offer high deductible health plans that enable employees to save for an Hsa. Even though the Hsa. Is really not the employer, provided benefit employers have been really smart about packaging the tax benefits of an Hsa. To a company benefit, meaning the high, deductible health plan. So instead of rolling out to your employees, hey, we got this high, deductible health plan, it really stinks. You got to pay the 1st 3 grand of medical expenses. Employers are rolling it out, saying, Hey, great news! We now offer a high, deductible health plan that allows you to contribute to this Hsa. And it's wonderful. Oh, and in addition, we might, as the employer might, seed fund that Hsa. On behalf of employees. So it's again. I'm kind of speaking to the choir a little bit here. Everybody here probably knows that Hdhps and Hsas 10 years ago. These were not commonplace conversations and going forward. It's going to be second nature where we are really trying to push healthcare from a defined benefit plan model using retirement plan analogy to more of a defined contribution model. Let's put more of this on the employee, because the cost of health care is getting unsustainable for many, many employers, and and the way to do that, the way to make it more defined contribution approach is that higher deductible that employees have to pay for, and then that Hsa. Where employees are responsible for saving for their account. So the current administration is very, very much in favor of employer, provided benefits. Trying trying to talk about a 1 big, beautiful bill without getting political is pretty hard, but the current administration does not like anything that is affordable care Act that is, obamacare. So anti obamacare, and very much pro employer and pro-employer includes putting the burden on providing health insurance on employers. Some employers would say, if you're really pro employer, you would make it easier for me to not have to offer health insurance or give me something a little bit more affordable. That's not bankrupting the business. But the current administration is very much in favor of anything that allows employers to offer health benefits, because that then decreases the need to have obamacare state run exchanges things like that. So one of the things that they did with this bill is, they reintroduced the concept of telehealth care under a high, deductible health plan. So go back pre covid Telehealth was not much of a thing. It was pretty complicated. You didn't really think about going to a doctor over zoom Covid comes. And now you know, millions of Americans are being told. If you have symptoms, don't go out in public. Well, how are you going to go to the doctor to find out if you have Covid all this stuff? Telehealth really took off and and it took off primarily with with Covid, but then also with rural, just generally in rural health care. It was a it was a big boon to people that really it's it's hard to go get to a doctor. And if you can see a specialist over telehealth, that's a that's a huge benefit. So the problem, though with with telehealth, is a lot of the telehealth. The way they were structured is telehealth was offered as a kind of a free benefit. It was included in the group health plan. You could go see a telehealth doctor at no cost. and it was again Covid days. It was a means of of encouraging people to go see a doctor with Covid. Well, if you can go see a doctor because you've got Covid on telehealth at no cost, because the plans covering it. That means your plan is not a high, deductible health plan, because the high deductible health plan says Plan can't pay any benefits until you reach your high deductible. And if you're allowing somebody to go see a doctor because they're sick with Covid on telehealth without having to pay a deductible. That's a problem. So that was contrary to what Congress wanted. So Congress passed an exception to the high deductible health plan rules. And that exception says. Yeah, you gotta. You gotta meet your deductible unless you are going to telehealth. So if you're using telehealth, you can get around having to meet that deductible, and that was a great bet. It was very important for policy reasons with Covid. And then, after that, lots of employers really like this, particularly with remote or rural workforce. so Congress would every couple of years, maybe not that much. Every year would extend this exception to this, this safe harbor that applied for telehealth and and health and high deductible health plans and health savings accounts. Well, what the big, big, beautiful Bill did. Well, let me back up the last extension that would allow you to offer. Telehealth ended on December 31st of 2024. So that means you. If you're a sponsor of a high, deductible health plan that offers telehealth benefits prior to the passage of this bill. Your plan should not have provided no deductible telehealth services if you were trying to be a high, deductible health plan. The bill passed and it said, We agree. This is a really good thing. Telehealth is a good thing for high deductible health plans. We are going to allow it. We're not going to do it on a temporary basis anymore. We're going to make it permanent. And now any high, deductible health plan can offer telehealth with no deductible, and it will not blow your status as a high, deductible health plan which would in turn blow the status of the ability of employees to contribute to an Hsa. So this is a significant win. This is retroactive to the start of the year. So it's a retroactive to plan years beginning after December 31st of 2024. So that means a couple of things for employers. One. If you're an employer and you didn't hear about any of this. You didn't know about any of this before, and you still had telehealth benefits without a deductible good news. You're not going to get in trouble because this is a retroactive law.

Number 2. If you did change your benefits back in the fall of 2024, like most of you did. To either add a deductible to your telehealth or remove telehealth altogether. You can now add it prospectively like like. Now you could amend your plan to reinsert it immediately and offer telehealth services without deductible. And then, 3, rd going forward as you're preparing for open enrollment for 2026. This is something, again that you can reinsert, or you can change, depending on your demographics, and how much your employees value it. And the good news is this, is this is now the law. This is not. This is permanent. Okay. The second item that was changed with high deductible health plans is something for direct primary care. Direct primary care is, is somewhat of a term of art. There. There is a definition in in the law, but it's still primarily a term of art. It's a concept where you pay a subscription fee. So think of your Netflix Fee, and you pay a subscription to be able to go to the doctor whenever you want, and you pay a monthly subscription fee, and you can go to your doctor whenever you want. It is really a valuable benefit for employees individuals with chronic health conditions, you know. They maybe need to go to the doctor every month to get checked up on something, and rather than you know, every visit has to be separate build and and deductibles and co-pays, and all that stuff. You just pay 100 bucks a month, 150 bucks a month, and you can go to the doctor as many times as you need. So it was a great benefit for again, for individuals with chronic conditions or a high need for going to the doctor. Maybe you got a bunch of kids. They're always skinning their knee. You got to go to the doctor all the time. This was a great benefit. It's also a benefit for some some employees. Some individuals treat this more as a like a concierge benefit Program benefit service, where your you know your doctors kind of always on speed dial. You don't have to worry about getting billed every time you pick up the phone and call your doctor. You're paying your Netflix subscription, and you get access to your doctor all the time without getting a bill. employers love it because it's a great benefit, encourages employees to go to the doctor if if they get sick. and that's a good thing that you know. Generally all the studies show that that if you're taking care of yourself, and when you get sick you go to a doctor that's going to lead that'll cut down on long term acute illnesses. And then, lastly, the doctors and the medical community love this because some studies have shown that sometimes 60 to 70% of a doctor's costs are tied up in insurance and billing. Whether that means the number of staff they need to have to collect insurance cards and process and bill and back and forth, and all of that stuff, doctors. If you're a cash pay patient. Oftentimes you will get a significant discount over what that doctor will, bill your insurance company, and it's because it's a pain in the butt to to bill an insurance company and deal with all that stuff. So doctors love it. So problem though we had with direct primary care and high deductible health plans, is that we didn't know how to deal with. What is this monthly subscription model do to a plan design that says you got to spend the 1st $3,000 on your deductible. It really didn't work. Some people would take the position that it would. That'd be very aggressive. But I'm pretty comfortable in saying that direct primary care and high deductible health plans didn't work. It would work after you satisfied your high, deductible. But then, presumably the subscription model doesn't make a whole lot of sense. If you've already satisfied that exorbitant, deductible. so direct primary care didn't really work with high deductible health plans, you could still offer them in a Ppo. I had some. I have some clients that still offered them with a high, deductible health plan. but they did not tell employees that that high, deductible health plan met the legal requirements and was eligible for an Hsa. So some some employers are saying, Well, we're still going to like we really like this high, deductible health plan model, because it's saving us money as the employer. And this direct primary care is something that employees will love. We just won't tell them that they can't contribute to an Hsa. Because that's really up to them and and their tax advisor. I never liked that approach, but that's something that people would do. Now, going forward, we've got 2 changes that impact direct primary care. And this is a huge win for the lobbying organization. Behind this direct primary care can be offered with a high, deductible health plan and it and and provide benefits. You can go to your doctor through your subscription without satisfying your high deductible, and it won't blow your ability to contribute to an Hsa. The total amount you can spend on this primary care model is 150 bucks a month, single $300 a month family. So you can't go to a direct primary care model. That is a thousand dollars a month, because it's really a concierge type service that won't work. It's got to be under and under $150, $300 that is indexed. It'll go up over time.

The other thing that it does is that you can use your Hsa. To pay your subscription so you can take money out of your Hsa account to pay your direct primary care subscription model. And so that's a that's a pretty significant benefit. So this is all effective beginning January one of 2026. Expect to see for all of you people in Hr. Out there expect to see a lot of talk about this. The direct primary care. Lobbying industry has been working on this for years and years and years. There is a lot of incentives to doctors. to insurance companies, to others to really push this. You're gonna see this a lot. You're gonna have employees asking about this a lot. I'm not sure we have enough time before the end of before you know enrollment time for January 1, 2026, for this to really be up and running, but I expect certainly by next year that if you haven't adopted something like this, you've at least thought about it, and considered whether it makes sense and the industry will keep evolving and keep refining these direct primary care relationships.

Okay, the last item that changed with with the big, beautiful bill and high deductible health plans and Hsas. Bronze and catastrophic plans. This refers to kind of a a lower quality of a medical plan by quality, I mean doesn't provide the same benefits as your traditional major medical plan. Maybe it's more expensive as far as a deductible than a traditional, high, deductible health plan. Those plans are now automatically considered high deductible health plans. So so it's gonna get confusing going forward. But a high, deductible health plan is one that's going to have a minimum deductible and a maximum out of pocket coverage. That's what a high, deductible health plan is. Many bronze plans and bronze refers to the type of plan design on Obamacare or on a state run exchange and bronze being the lowest level. That that you can have. Many bronze plans will have a deductible that is above the high deductible amount that you can have. Sometimes they will have a deductible that is lower. You can get certain type of care before you satisfy the deductible on a high, deductible plan. That bronze plan is automatically covered. So you can have a high, deductible health plan that says you've got to meet this $3,000 level. But if you have a plan that is certified as bronze on an exchange, and it has a lower deductible for certain type of care that will automatically be covered. And what that means is employees can contribute to an Hsa. Employers can contribute to an Hsa. For a bronze plan. Catastrophic plans are different. Catastrophic plans are, you know, plans that that don't cover a doctor visit. They don't cover kind of routine stuff, but if I have to go to the emergency room, or I get some terrible illness. The catastrophic plan will come in and and pick up costs after I pay out of pocket a really high amount. So a catastrophic plan would not meet the normal definition of a high, deductible health plan, because I might have to pay out of pocket. 2030, $40,000. That's really not great insurance, but it is catastrophic insurance. If I have a million dollar hospital bill paying 2030 grand out of the pocket stinks. But it's not as bad as having a million dollar bill. So what again, thinking of this from the Administration's perspective, the Administration is trying to make employer provided benefits more attractive make Hsas and the defined contribution model of health care more available. Putting bronze and catastrophic plans in that category is a is a way to to do to do that before we go on. And and I apologize. I'm going. Really. I'm spending a lot of time here, but these are the kind of the major changes. I wanted to spend another 5 min on what didn't make it in the final bill that impacts high deductible health plans and Hsas. So a lot of people in this space were really excited for some huge changes that were going to come from the big, beautiful bill that impacted high deductible health plans and Hsas and a lot of those changes were in the version of the bill that was passed by the House of Representatives. So we got really excited about a lot of these changes, and and it was much more than you know. One slide on this webinar. but those got taken out by the Senate version, as the Senate was trying to, you know, meet their own constituents, demands a lot of things got taken out. The reason. I'll mention it now for 2 reasons. One, you may have read or heard about some of these changes, and I didn't talk about them on the on this slide, and you're like, Wait, whatever happened with those chances are they were in the house version didn't get passed. Second reason I want to mention it is. there's obviously a tremendous amount of support for these changes that I'm about to talk about, just because it didn't make it in the Senate. Bill does not mean there's still not a lot of support for this didn't make it in the Senate bill, because they were cutting and trying to make the things balance. But these are still very, very popular, and we could see them again even this year, pop up, or in future years depending on who's controlling the house. So one would be similar to direct primary care on-site medical clinics. Some larger employers have an onsite medical clinic. You can go down to the medical clinic if you're not feeling well and you can get treatment. Well, how does that work with a high, deductible health plan where you got to pay until you get to your deductible onsite. Medical clinics are usually free or really reduced charges. Onsite medical clinics would have been permitted just like direct primary care. and would not have impacted the high deductible health Plan status or the ability to contribute to an Hsa's. Another change was gym memberships, exercise classes, those would have been eligible. Hsa expenses. That would have been covered. That would have been nice when individuals become a certain age which in Hsa you can make a larger and a catch-up contribution. So there is a catch-up contribution. When you reach age 50 that you can make to an Hsa or 55. Excuse me, and the the problem with it. The way it's currently structured is that only the employee can contribute the Hsa catch-up limit to their Hsa. And if their spouse is also over 55, they have to set up their own Hsa. To contribute that this Bill would have made it a lot easier, and say both spouses can contribute the catch up limit to just one of the spouses. Hsas would have been an interesting part of of the bill was that they would have allowed flexible spending accounts out of a cafeteria plan. Fsas and Hras health reimbursement accounts in certain cases those could be rolled over into an Hsa. So unused amounts in an Fsa. Or an Hra which is technically employer. Money could have been rolled over into an Hsa. Which is now the employee's account and employee money. Certain other exceptions. It would have made it easier to have an Hsa. 2 that are significant. If if and if a spouse is enrolled, if a spouse is working and the spouse is enrolled at their employers, plan, and they have an Fsa. A flexible spending account that blows high deductible health plan status, and that blows the ability for either spouse to contribute to an Hsa. Because that's considered other coverage for medical expenses that can be paid before the high deductible is satisfied. The one part of the bill, the bill that the House passed that the Senate did not. This is not law. Is that if your spouse has an Fsa a flexible spending account that would not impact your ability to contribute to a Health savings account. and then maybe the biggest one was with individuals that become eligible for Medicare part a by basis of their age. Right now, if you're enrolled in Medicare A or B, you cannot contribute to an Hsa. If you enroll just in Medicare part A, but not B, so you're still probably on an employer's provided plan, you would have been able to continue to contribute to an Hsa. That is not the case that didn't make it so. I mentioned those, because you probably read about them, and we will read about them again in the future, because they are popular. Clearly by passing the house just didn't make it in this version of the bill.

I'm gonna breathe now, Marie.

Marie Holmes: No good job, John. Thank you. In your opinion. I know you went through a number of these already, but, like what is the biggest risk or opportunity for employers as they update their Hdhp Hsa, we've got a couple of questions in the chat that we'll talk to specifically, but just kind of overarching overarching on a macro level. What's your opinion.

John Schembari: Yeah, yeah. I mean, I think the biggest opportunity are gonna be really all 3 of these. But the Telehealth Safe harbor was very, very popular. So, looking relooking at that, and seeing whether you should add that to your health, high, deductible health plan is, gonna be an opportunity maybe to save costs, but also to provide a meaningful benefit to your employees. Direct primary care. I this will fall on the risk and the opportunity category. I think it's a great opportunity. It's a great idea to change healthcare and way healthcare is paid for and delivered. But I think there's gonna be a lot of risks, because I think we're gonna I know we are going to see organizations really push the envelopes of what is direct primary care. I mean, I've already seen it. There are some vendors out there that say, Oh, yeah, you can offer direct primary before the bill. You can have direct primary care. It doesn't, doesn't impact your Hsa at all. It's salespeople talking, and they're just saying that. And you push them on it. They won't back it up. I think we're going to see a lot of that. So what I would do is I would caution Hr. Leaders that if somebody comes to them with the next bell and whistle that is called direct primary care. Don't just accept it at faith value. You're going to have to look at it and really peel it away and make sure it fits. In what Congress has said. Direct primary care is.

Marie Holmes: Okay, very helpful. all right. So next we'll jump into kind of the fringe benefits and tax advantaged accounts. So, John, I'll turn it back over to you.

John Schembari: Yeah, yeah, yeah, you bet. So 2 changes on student loans. So so recently. there was a temporary rule that was was passed. It was law that allowed employers, through their education plans to reimburse employees for student loan payments up to the limit of 52, 50. I think it is 5,200 and $50 And and so. normally, you know, normally, before this rule happened, you had employers that would have education reimbursement programs, encourage employees to go, get further education, go, get more certifications, licenses, and the employer will reimburse you for those costs, and it was tax free up to certain limits in the internal revenue code that was expanded to, not just cover future education expenses, but to cover past past expenses, that an individual took out debt. So this was a nice perk for employers, wanting to, certainly wanting to recruit and attract a lot of kids coming out of college that have a lot of debt if you can offer this tax free way of paying down some of that debt every year for employees. This is now permanent. So Congress recognizes this is important. This is working. So this is a permanent change which is again very welcome, because now people can can really plan on it, and then that you know that that means a lot. The second part about it is that it is indexed for inflation. We have been stuck at at that limit for many, many years. Now that limit will go up as inflation goes up. So again, a nice a nice change to that 52 50, limited as it will go up in the future. On the not so good side transit and commuter programs. prior. A number of years ago there were under the Biden Administration. There were incentives for people to ride their bike to work. and you could get tax-free reimbursements to grease the wheels on your bike and update your bike and all that kind of stuff that got taken away and not surprisingly under the current administration that is permanently now taken away. So bicycle reimbursements are no longer available. They've also updated the transit. So the traditional bus or subway commuter transportation or parking fringe benefits that are still can be provided tax-free. Those have been adjusted for inflation and then moving expenses again. This was taken away the last couple of years, where moving expenses are no longer provided, tax free, and this was made permanent. So this is not my favorite slide of the big, beautiful Bill summary other than the student loans ones, but the other ones have been taken away, and now they are permanently gone.

Marie Holmes: Okay? So from a communication standpoint implementation. John, like obviously communicating any changes coming after 1, 1, 26 to employees, is probably very highly recommended, but any implementation pitfalls you can kind of see coming.

John Schembari: Well, no, I mean, probably not, because we're not taking away the bicycle reimbursement program. It had been on pause and the moving expense. We're not taking it away because it had been on pause. We're just making it permanent. So had you. If you were an employer that said, Hey, as soon as this pause is lifted on the bicycle reimbursement, we're going to reinstitute it, reinstitute it. You can change your communication because that's not happening. The other part, though that might be a communication opportunity is on the student loans. I know. I've talked to a lot of employers over the last couple of years about this student loan issue. Lots of employers are really trying to figure out how to help their employees with debt. but they were very hesitant to amend their education, reimbursement plans to add student debt because it was temporary. They weren't, you know, they didn't want to do it for one year. Have it be taken away the next year. Now it looks like it's an employer takeaway of a benefit. That's not a good feeling. So now that this is permanent, and employers can count on it to the extent you can count on any law. I think you're going to see more employers more willing to make this a permanent employee benefit offering.

Marie Holmes: All right, very good, all right. So next we'll jump into kind of a more positive spin. One, right? So updates to family and childcare support. So, John, I know there's kind of 3 pillars here. this on.

John Schembari: Yeah, yeah, there, there are. So right now, employers employers can get a credit. Certain employers can get a credit for paid family leave and medical benefits that they provide. It's not required, I mean, some States might require you to provide paid family leave. Usually those paid family leave benefits are provided by the State, and employers are required to pay into the state program but now this has made it permanent for tax credits related to an employer, an eligible employer, offering paid Family Family medical Leave Act. So it's no longer temporary. And so this is. you know, when they made this tax credit available on a temporary basis. I didn't see a lot of employers rushing to do this to offer paid family leave to take advantage of the tax credit that said employers that were already doing it, or were already thinking about it. This was certainly a nice benefit, and now that it's permanent, it's it's there. it is still the tax. Credit is still probably not enough, for you know Amazon, to offer paid family medical leave to all of their employees. It's not going to move the needle, so I don't think we'll see it at that broad level. But again, smaller eligible employers that want to provide this benefit. It is, it is now a permanent benefit.

Similarly kind of a little less known, but but employers that, provided childcare benefits to their employees could qualify for a tax credit and that has been made permanent and increased. And so it's right now, up to 40% of an employer's qualified child care expenses can be can be covered with a tax credit up to a limit. The limit used to be. $500,000. I think it's now. Well, it's been increased to $500,000. So you know, an employer has to spend, you know. I think it's I don't know 1.2 million dollars to qualify for the for the full benefit of this tax credit. So again, I'm not necessarily sure it's gonna lead to a lot more employers offering childcare, but it is a permanent benefit. It is a tax credit for those that were on the fence. This might be enough to cause the employer to to think about that. and then the last one, which is a much more widespread way of of employers dealing with childcare are dependent care programs. This is part of cafeteria plans. Where employees can contribute to. It's like it's an Fsa. But instead of medical expenses, it's for dependent care. So it's a dependent care. Fsa. so employees can contribute up to it. Used to be up to $5,000 into a dependent care assistant account, and then you can take that money out of the account to cover your daycare costs on a tax free basis. So it's a nice benefit for an employer to provide because it doesn't cost the employer anything other than having a dependent care plan document, maybe a little bit of administration and testing, but not much. And employees fund the benefit themselves, but they save unemployment taxes. That $5,000 limit has been around for 40 years. I couldn't believe it when they said 4 decades, but it's been around for 40 years. It's been $5,000. It is now increased, beginning in 2026 to $7,500, which is great. It's a nice, you know. It's a Perk to recognize the cost of of daycare is going up. Probably a lot more than that unfortunately, Congress didn't have the stomach to index this for inflation. So it is going to be $7,500 until they change it again. Hopefully. It won't take 40 years to do it again, but it's going to be 7,500 bucks for a while. Another part here, you know, depending on your organization. I don't want you to get super excited about this. I mean this, this can be something that you really want to publicize to your employees. You want to change your documents. You probably have to amend your document to do this and roll it out. But before you do that there is non-discrimination testing that goes with dependent care plans. Maybe some employers maybe don't know that. But but most employers do know that. And they do that testing lots and lots of employers cannot pass the discrimination testing which what that means is that the highly compensated employees that want to take advantage of daycare this daycare benefit. They can't. They can't get to the maximum of $5,000 because they keep flunking the test. Going to 7,500 bucks is really not going to help. If you're not passing at 5 grand, you're probably not passing at 7,500. So what I want to mention here is before you go out and and have a big party and announce the expansion of the $7,500 benefit. Take a look at your testing and take a look at whether you're really going to be able to take advantage of it, and that just might frame your communication. You may still want to go to your non highly paid employees and really promote this because you want them to going up to 7,500 bucks, because that helps the highly paid. But you probably don't want to be rolling this out to all of your highly paid employees. Is this wonderful increase in wonderful benefit. And then at the end of the year, when it comes time for non-discrimination testing, you're telling all your highly paid employees that they aren't going to get this higher limit.

Marie Holmes: All right, very helpful context, John. Let's jump forward to kind of the new Aca premium tax credits and what that means from the employer. Perspective.

John Schembari: Yeah, yeah, yeah. And we'll we'll fly through the next couple of slides here. So so this one is is again, keep in mind of the administration that passed the rules. Premium tax credits, or those are depending on how much you make if you are not offered, if you, as an employee are not offered affordable health care by your employer. You can go out on to a State, run, exchange or obamacare. and you can buy a plan just for you and your family? And have the Federal Government provide you a tax subsidy on the premiums. So you so basically, the Federal government is subsidizing, paying for a good portion of your health insurance premium. It's only available to individuals that are not offered affordable coverage from their employer, and the way the Government partially pays for this subsidy that they're giving these employees is they send a bill to all you employers out there that are not offering affordable health coverage to your employees. So if you're a large employer, 50 or more employees, and you offer health insurance to your workforce great if that health insurance is affordable for some of your employees. Great! You don't have to worry about it if it's not affordable for some of your lower paid employees, and those lower paid employees say, I can't afford your health insurance employer. I'm going on the exchange. I'm getting a subsidy. You should expect in the next 2 or 3 years to get a bill from the Irs for the premium subsidy that that employee qualified for. You get a bill coming from this administration. They don't like the exchanges. They don't like obamacare. so getting rid of subsidies or making it harder to get subsidies makes it harder for people to go to get health insurance on the Exchange and Obamacare, and this administration wants employers back in charge of providing health care to employees so eliminating the people that can get. The subsidy has the benefit benefit. I use very loosely the benefit of getting people off the exchange plans, but it also has the benefit in that employers are not going to be penalized anymore, because fewer employees are going to qualify for that subsidy. So. again, not surprising with this administration, but the eligibility for the premium tax subsidies now have a number of immigration related requirements so depending on your immigration status, things like that you may not qualify for a subsidy again. That really only impacts the employer, and I hate to say it, but a positive way, and that if you've got some employees that are immigrants that are working for you, but they're getting subsidized coverage on the exchange. They may no longer qualify for subsidized coverage on the Exchange, which just means you will get a smaller bill from the Irs. If you're not offering affordable coverage to everybody also, and this is under the kind of the Doge fraud and abuse type method it used to be. Once you qualified for the subsidy on the Exchange, you were just automatically enrolled, and we just assume that you're always going to qualify for the subsidy. We're going to re-enroll. You re-enroll you very passive. Now it's a more active. You've got to sign up for the exchange coverage every year prove that you're eligible for a subsidy every year. Also, there are you normally you can sign up for the exchange at annual and open enrollment time. But there are certain times in the middle of the year with certain events, you know, marriage, new baby, where you might have a special enrollment opportunity to go get insurance on the exchange, and you used to immediately be able to qualify for your tax credits right when you signed up for the exchange. Again, the Administration is trying to lessen that. And so you still have the right as an individual. When you have a special enrollment, opportunity to enroll on an exchange plan. But you are not going to get the subsidy. If you do that mid-year you'll have to wait until the start of the new tax year to show that you are eligible for that tax subsidy. Okay, okay.

Marie Holmes: That is very, very helpful, John. I guess we'll kind of round out the conversation before we jump into Q, and a. And sort of just action items into the new savings opportunities potentially so. Just kind of some of the new found things that happened in the bill.

John Schembari: Yeah. Yep, yep, 5 more minutes to go, and then we'll get to the questions. So 5, 29 and 5, 29 a accounts though those are. These are college savings plans. These are state sponsored plans for college saving expenses, and then for individuals with disabilities. Those are called able accounts. These have been very, very popular there. It's a tax. It's a tax favored way for parents, grandparents to save for kids. College lots of people know what 529 plans are now. And and certainly, if you have somebody in your universe that has a disability, you probably know what an able account, or 529 account is. Congress is. They're not dumb when they see that something is popular. They are always trying to tweak it and see if it can help solve other problems or benefit other people. So a number of years ago, these 529 college savings accounts they were expanded to cover elementary school K. Through 12 expenses could be covered as well. So it wasn't just a college savings vehicle. It could save for a parochial or a private high school, or or elementary school. Congress has increased the amount that can be taken for those expenses from 10,000 to $20,000. In addition, they've taken out. They've changed and expanded. What qualifies as a education related expense. So for college, it's, you know, tuition room and board for K. Through 12. It was just tuition. It's now been expanded to include other expenses related to K. Through 12. Education also covers other trade specific type. Education expenses can now be covered through a 529 account. On the able side it made permanent the contribution limit. It had been temporary and was going to go back with many of the other tax. Law changes that that trump passed in his 1st administration. It is now permanently set at the 529 a contribution limit. Okay? Last item, which I think has the potential to be the most interesting item here for individuals and also for employers as an employer provided benefit, and these are trump accounts. Think of it as an Ira, because it's going to be taxed kind of like an Ira trump. Accounts or accounts cannot be set up, yet they will be able to be set up in 2026 in the middle of the year. I think they can be set up in 2026 trump account can be set up for any child under the age of 18, and it can be funded up to $5,000 annually by anybody. and that is, that is not taxable to anybody. When that is contributed, it's not tax deductible. So if if Mom or dad wants to put money into their kids trump account, they they can do it. But it's not. It's going to be after tax money. In addition, employers can fund up to $2,500 annually for their employees dependents in a trump account. So I know a lot of employers have over the years tried to figure out, how can they provide for? You know you're trying to provide peace of mind to your employees so that they can focus on work. And one of the things that takes away that peace of mind is, how the heck am I going to pay for little Johnny to go to college. So lots of employers have looked at different ways of doing that. Maybe it's a scholarship program. Maybe it's partnering with a State to put money into a college savings account. Those have been a little cumbersome. It hasn't really taken off the idea. Here is the trump accounts might. and so as an employer, you can adopt a benefit plan. And you do need a plan document. a benefit plan that allows you to put in up to $2,500 each year for your dependents under the age for your employees, dependents under the age of 18. It's in the name of the employees kid at. They cannot get the money until they are 18. At age 18. They can take that money out just like they could take it out of an Ira. So if they, if they take it out of the Ira, if they take it out at age 18 to go buy a new car. They're going to pay taxes on the money that comes out. And they're going to pay a 10% penalty tax because they're not under 59 and a half or an approved expense at age 18. If they take it out because they have serious medical conditions, they're not going to pay that 10% tax. If they're going to take that money out to go buy a house, they don't have to pay that 10% tax. So it's going to be a significant benefit there also. This is not really one for employers to plan for, but the Government is going to give a $1,000 contribution to a trump account for new babies. for in 2026, through 2028 we'll see how that goes. But but that that's going to be an extra benefit. It counts towards the $5,000 limit. But this $2,500 employer provided benefit is going to be a meaningful benefit. Money in the trump account is intended to be invested in only in a mutual fund or an exchange traded fund has to be tied to a index fund that is primarily invested in us companies. Again, think about all these things from the lens of the administration. So really, what it's going to be is you're going to be in an S. And P. 500 fund, maybe a broader fund. But it's going to be mostly Us. Stocks, very low cost. There's a limit on how much the mutual funds can cost. It's designed to give younger folks exposure to the publicly traded markets. In a tax favored fashion. So it's gonna be a. It'll be an interesting development going forward for sure.

Marie Holmes: Very cool. Thanks, John. I appreciate all of that. So we'll kind of round out the conversation before we jump into Q&A, and just like some sort of strategic moves that everyone should kind of be thinking about as we get closer to 2026. So number one is going to be audit your benefits. So John had alluded to sort of like what is happening in your Hdhp program right now with telehealth. Do you have a Dpc, anything like that. So just understanding what you have going on in your program right now is going to be point critical. Second is like, Don't go at it alone. Right? I think it's very clear. These are incredibly complex topics. There's tax implications to almost all of them. So consult with your broker, with your consultant to just kind of understand, like, what is our best approach. Moving forward. Once you do have a strategy in place, you're going to want to update all of your documents and policies. Right? So let's make sure employee handbooks are updated. All of your Spds are updated to reflect any kind of new changes that you're making to your plans. making sure you're doing that now is going to avoid compliance headaches just down the road. So just get that done 1st and foremost kind of simultaneously with updates and sort of setting the strategies. You're obviously going to want to forecast budget impact. So if you are potentially adding in telemedicine as being potentially a 1st dollar coverage on your high deductible health plan. What is the cost impact to that? So just making sure that you, as the employer and also your finance team, are aware of any financial implications for some of these decisions. and then, finally, is going to be communicating with employees. So a lot of these things like our benefits in some form or fashion, to an employee, potentially. So let's make sure that folks understand where they came from. Why, we're doing these changes so that, like everyone, just kind of leaves, the open enrollment period just less confused potentially, especially if you are making some of these market changes that we walked through. But we did get some wonderful questions in the Q. And a. So, John, I'm just going to like pepper through a couple of them. Number one, I think this is great. Do a lot of these and specific to the high deductible health plan. Hsa stuff do those apply to self-funded programs? So think medical prescription self-funded programs.

John Schembari: Yep, app. Great, great question. Yep. The rules that apply to high deductible health plans here would apply, whether you're fully insured, self funded, or even a level funded plan.

Marie Holmes: Awesome. Let's see, is there a mandate? Another interesting question. Is there a mandate to offer the telehealth kind of as 1st dollar, and not applicable to the deductible? Or does the employer still have a choice in that matter?

John Schembari: Yeah, another good question. There is no mandate employers can ignore this. They can keep their plan design, as it currently is, which hopefully, before this bill meant you had to apply the deductible, or you could go back to the Covid days and apply it without deductible completely up to the employer.

Marie Holmes: Awesome, all right, I guess same thing is true. Kind of in the in the vein, with the dependent care. Right? Someone who has an issue with passing ndt. They're not required to increase that limit to 7,500. They can happily say that 5,000 is that accurate.

John Schembari: They can. Absolutely right. It's not a mandate I would encourage, though the employers to probably still pat to raise that limit, maybe not raise it for the highly paid employees if they're not passing. But if you can get a couple of your non highly paid employees to save more, that just helps the math when you do the discrimination test.

Marie Holmes: That's very true. Okay, a good, interesting question, because it's came up twice. Now, is there any grandparent language in the trump account? So can grandparents open up trump accounts on behalf of grandchildren? Or is it exclusive to parents.

John Schembari: It is not exclusive to parents, it's grandparents. It can be anybody. So if anybody on the call needs to know my kids names for purposes of setting up trump accounts. I can pass that on to you.

Marie Holmes: Perfect. All right. And then what happens if an employee goes to an exchange, even though the employer offers affordable coverage, so I know not super, you know, applicable to to this bill, but I think it would be interesting to to.

John Schembari: No, it's a great question. There is no problem within. With employees declining. The employers provided coverage and going on the exchange. Lots of employers love it. When that happens. The the problem happens when the employer provides the coverage. But it wasn't affordable, and the employee goes to the exchange and gets subsidized coverage. When that happens, the employer is going to get a bill from the Irs. But if an employee just goes to the Exchange, and even

John Schembari: if the employer's coverage was affordable, no, no issue to the employer, or if the employee gets unaffordable coverage from the employer, but doesn't qualify for subsidized coverage again, no issue for the employer at all.

Marie Holmes: Okay, that's very helpful. And can you define affordability really quickly? Just so that we can understand sort of what is considered to be affordable.

John Schembari: Yeah, I don't have the numbers in front of me. I apologize. It's around 9 point something percent of of income that that covers there. And there's there are 3 ways to pass affordability. And, Maria, I apologize. I just I get those numbers.

Marie Holmes: There's a lot.

John Schembari: Confusing ahead.

Marie Holmes: A lot going on today. No.

John Schembari: It's around 9% of your compensation, though, is, gonna be considered affordable.

Marie Holmes: Okay, perfect, awesome. So I think we got through most of the questions that have come in. So again, I really appreciate everyone's time. Today. I hope you walked away just feeling a lot better and more comfortable, with sort of what's going on legislatively. This recording will be shared out. So if you did register, you will get the recording. Also. A copy of the deck will also go along with it, so you can dive into anything. But thank you again, and I hope everyone has a nice weekend. Thanks, John.

John Schembari: Thank you.

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