Beauty is in the Eye of the Beholder
Jul 10, 2025
In 1878, Margaret Wolff Hungerford first penned this simple phrase in her book Molly Bawn and captured an incredibly complicated, deeply nuanced thought: The idea that beauty is subjective and open to multiple meanings and a variety of interpretations. The new budget reconciliation package, dubbed the “Big Beautiful Bill,” brings a new wave of tax incentives, savings programs, and family-focused benefits starting in 2026.
Major changes are coming to the benefits landscape — and many are great news for employers and employees alike. Here’s a quick, concise snapshot of what’s changing — and how to make the most of it. We are focusing on the facts and leave it to you to find the beauty in the new bill.
Family-First Benefits
Paid Family and Medical Leave Credit
- Permanently establishes the tax credit under IRC §45S
- Applies to wages or premiums paid during employee leave
- Not available if your state already mandates paid leave
Why it matters: Encourages voluntary leave programs and offsets employer costs.
Boosted Childcare Tax Credit (IRC §45F)
- Credit increases from 25% → 40% (50% for small businesses)
- Max credit: $500,000 (or $600,000 for small employers)
- Employer-run/shared childcare centers qualify
Dependent Care Assistance Expansion
- Employees can exclude up to $7,500 in care expenses (not inflation-adjusted)
- For most taxpayers, the limit is currently $5,000 annually
Tip: Educate your team during open enrollment — this is big for working parents!
HDHPs & HSAs: More Flexibility
Telehealth Coverage — No Deductible Needed
- HDHPs can cover telehealth pre-deductible starting in 2025 plan years
- The safe harbor was extended several times but expired in 2024 — and is now here to stay!
Direct Primary Care (DPC) is HSA-Compatible
- Starting in 2026, DPC arrangements count as HSA-eligible expenses
- Fee limit: $150/month per person ($300/family), inflation-adjusted
Employee Benefit: Personalized care and cost-effective options
Education & Kids’ Savings Get a Boost
Student Loan Repayment is Here to Stay
- $5,250/year exclusion is now permanent
- Inflation-indexed after 2025
New: Trump Accounts for Children (IRC §128)
- Tax-free savings accounts for children under 18
- Annual cap: $5,000 (adjusted post-2027)
- Employer match: up to $2,500 per employee, tax-free
- $1,000 federal credit for babies born 2025–2028
Employer Tip: Add this to your family benefits strategy — employees will notice!
529 Plan Expansion (Effective July 4, 2025)
- Covers K–12 tuition, tutoring, special needs therapies, and certification programs
Fringe & Lifestyle Benefits
Bicycle Commuting Tax Break Repealed
- Can still reimburse — just taxable now
Moving Expense Deductions
- Still allowed for military/intelligence community members
Temporary Tax Perks for Employees
Deduct Tips & Overtime
- Above-the-line deduction of:
- Up to $25,000 for tips
- Up to $12,500 (or $25,000 jointly) for overtime
Heads-up: IRS will release more guidance — help employees understand their options
ACA & Medicaid Changes (Mostly 2027+)
- Enhanced ACA subsidies expire Jan 1, 2026
- Medicaid eligibility checks & work requirements phase in starting 2027
- Could increase reliance on employer-sponsored plans
Strategic Insight: Be ready for higher enrollment and potential adverse selection. Work with a consultant that will help you support the transition for employees impacted by this change.
Communicating the Changes to Employees
- Start early: Preview during 2025 open enrollment
- Be clear: Use real-life examples and simple visuals
- Promote wins: Focus on family-friendly and future-focused features
- Encourage questions: Host Q&A sessions or webinars
Final Thought
This legislation represents a shift toward flexible, family-first, and financially savvy benefits. Employers who embrace the changes early will stand out as forward-thinking, supportive workplaces.
Need help updating your benefits strategy or communications? Let’s connect!
Sources
S. Internal Revenue Code Sections 45S, 45F, 127, 128, 129
Congressional Budget Office letter (June 4, 2025)
KFF Health News (June 2025)
CNBC reporting on employer support for Trump accounts (June 2025)
Axios, “Trump bill’s health effects won’t be felt until after midterms” (June 2025)