Compliance Corner
Welcome to Novo Connection's Compliance Corner, where transparency meets expertise in your new benefit program. We understand the evolving nature of compliance and how it can quickly become complex. At Novo Connection, our commitment to transparency ensures that you receive accurate and actionable information. Our webpage serves as a reliable resource for groups and advisors, offering insights, updates, and solutions tailored to navigate new compliance laws effortlessly.
Quarter 3 Compliance Updates
The “One Big Beautiful Bill Act” Includes Changes for Employee Benefits
July 2025
On July 4, 2025, President Donald Trump signed a major tax and spending bill, commonly referred to as the “One Big Beautiful Bill Act” (OBBB Act), into law. The OBBB Act includes changes for employee benefit plans, including provisions that:
-
Expand the availability of health savings accounts (HSAs);
-
Permanently extend the telehealth exception for high deductible health plans (HDHPs);
-
Increase the maximum annual limit for dependent care flexible spending accounts (FSAs);
-
Allow employers to help pay employees’ student loans beyond 2025 and make cost-of-living adjustments to the tax exclusion for educational assistance programs; and
-
Allow employers to contribute up to $2,500 per year to a new type of tax-advantaged account for children, called a “Trump Account.”
Highlights
Key employee benefit changes made by the OBBB Act include the following:
-
Making the telehealth exception for HDHPs permanent;
-
Increasing the maximum annual limit for dependent care FSAs;
-
Allowing employers to continue paying employees’ student loans beyond 2025;
-
Adjusting the tax exclusion for educational assistance programs for inflation; and
-
Allowing employers to make contributions to a new type of tax-advantaged savings account for children.
HSA Expansion
Only eligible individuals can establish HSAs and make HSA contributions (or have them made on their behalf). To be HSA-eligible, an individual must:
-
Be covered by an HDHP;
-
Not be covered by any health plan that provides coverage below the minimum required HDHP deductible, with some limited exceptions;
-
Not be enrolled in Medicare; and
-
Not be eligible to be claimed as a dependent on another person’s tax return.
Effective Jan. 1, 2026, the OBBB Act expands HSA eligibility by allowing individuals with direct primary care (DPC) arrangements to make HSA contributions if their monthly fees are $150 or less ($300 or less for family coverage). These dollar limits will be adjusted annually for inflation. A DPC arrangement is a subscription-based health care delivery model where an individual is charged a fixed periodic fee for access to medical care consisting solely of primary care services. In addition, the OBBB Act treats DPC fees as a medical care expense that can be paid for using HSA funds.
Also, to expand the accessibility of HSAs in the individual market, the OBBB Act categorizes as HDHPs all bronze plans and catastrophic plans that are available through an Affordable Care Act (ACA) Exchange. This change is effective Jan. 1, 2026. Bronze plans have the highest deductibles and lowest premiums among the four categories (or metal levels) of individual plans. Catastrophic plans have lower premiums than bronze plans and very high deductibles.
HDHP Telehealth Exception
To be eligible for HSA contributions, individuals cannot be covered by a health plan that provides benefits, except preventive care benefits, before the minimum HDHP deductible is satisfied for the year. Historically, individuals who were covered by telehealth programs that provided free or reduced-cost medical benefits were not eligible for HSA contributions.
A pandemic-related relief measure temporarily allowed HDHPs to waive the deductible for telehealth services without impacting HSA eligibility. This relief expired at the end of the 2024 plan year. However, the OBBB Act permanently extends the ability of HDHPs to provide benefits for telehealth and other remote care services before plan deductibles have been met without jeopardizing HSA eligibility. This extension applies to plan years beginning after Dec. 31, 2024.
Dependent Care FSAs
Employers can provide dependent care assistance benefits for their employees on a tax-free basis, subject to a maximum annual limit. These benefit plans are referred to as dependent care FSAs (or dependent care assistance programs, DCAPs). Effective Jan. 1, 2026, the OBBB Act increases the maximum annual limit for dependent care FSAs to $7,500 for single individuals and married couples filing jointly and $3,750 for married individuals filing separately (up from $5,000 and $2,500, respectively). The new limit is not adjusted for inflation.
Educational Assistance Programs – Student Loans
Employers can offer programs to provide employees with undergraduate or graduate-level educational assistance. Educational assistance programs can pay for employees’ books, equipment, supplies, tuition and other fees. Also, these programs can pay principal and interest on employees’ student loans. The option to use educational assistance programs for student loans was set to expire on Dec. 31, 2025. However, the OBBB Act permanently extends this student loan payment option.
Also, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year. Typically, educational assistance provided above this level is taxable as wages. Effective for taxable years beginning after 2026, the OBBB Act annually adjusts the $5,250 limit for inflation.
Trump Accounts
The OBBB Act creates a new type of tax-advantaged savings account for children under age 18, named a “Trump Account.” Effective in 2026, Trump Accounts will operate similarly to individual retirement accounts, or IRAs, where earnings grow tax-deferred. In general, annual contributions are limited to $5,000 per child (as adjusted annually for inflation beginning after 2027). The OBBB Act provides that children born in 2025-2028 may be eligible to receive a special $1,000 contribution from the federal government.
Employers may make tax-free contributions to the Trump Account of an employee or an employee’s dependent of up to $2,500 per year (as adjusted annually for inflation beginning after 2027). These programs will require a written plan document and will be subject to some of the same tax rules that apply to dependent care FSAs, such as annual nondiscrimination testing and employee notifications.
Mental Health Parity & Addiction Equity Act (MHPAEA)
June 2025
On May 12, a federal court granted a request from the Departments of Labor, Health and Human Services, and Treasury (“the Departments”) to pause litigation regarding the 2024 Mental Health Parity & Addiction Equity Act (MHPAEA) final rule while the Departments reconsider whether to modify or rescind the rule through new proposed rulemaking. Then on May 15, the Departments announced a temporary non-enforcement period for the 2024 MHPAEA final rule that will remain in place until a final court decision is made plus an additional 18 months, giving employers time to comply accordingly. See the non-enforcement statement can be found below:
While enforcement efforts for the 2024 MHPAEA final rule are paused, employers do not have to comply with the new fiduciary certification requirement, certain new definitions, the requirement to provide meaningful benefits, and the requirement to collect and analyze relevant data as part of the written comparative analysis. However, the Departments have made it clear that the framework for MHPAEA that existed prior to the 2024 MHPAEA final rule is unaffected, including:
-
The 2013 final rule (e.g., classifications for benefits, substantially all and predominant level tests for financial requirements and quantitative treatment limitations, and the concept of parity for non-quantitative treatment limitations (NQTLs);
-
Guidance and FAQs issued since the 2013 final rule; and,
-
The written comparative analysis for NQTLs added by Congress in the Consolidated Appropriations Act of 2021.
Therefore, employers should continue with efforts to design and administer their group health plans in accordance with MHPAEA and to maintain a current NQTL written comparative analysis in case of agency audit or participant request. We will continue to carefully monitor this situation.
Upcoming Deadlines
Form 5500 - July 31, 2025
Each year, employers that are subject to the Employee Retirement Income Security Act of 1974 (ERISA) must electronically file an annual report (Form 5500) for each employee benefit plan they maintain unless a filing exemption applies.
Employers with employee benefit plans that operate on a calendar year basis must file their annual reports for 2024 with the U.S. Department of Labor (DOL) by July 31, 2025. An employer may extend this deadline by 2.5 months (until Oct. 15, 2025) by filing Form 5558 with the IRS by July 31, 2025.
Small welfare benefit plans (fewer than 100 covered participants) that are unfunded or fully insured (or a combination of unfunded and insured) are exempt from the Form 5500 filing requirement.
Additionally, employers that are required to file a Form 5500 must provide participants with a summary of the information in the Form 5500, called a summary annual report (SAR) within nine months of the close of the plan year or by Sept. 30, 2025 for calendar year plans.
PCORI Fee - due July 31, 2025
The Affordable Care Act (ACA) requires health insurance issuers and self-insured plan sponsors to pay Patient-Centered Outcomes Research Institute fees (PCORI fees). The fees are reported and paid annually using IRS Form 720, the Quarterly Federal Excise Tax Return.
Form 720 and full payment of the PCORI fees are due by July 31 of each year and generally covers plan years that end during the preceding calendar year. For plan years ending in 2024, the PCORI fees are due by July 31, 2025.
Calculating the PCORI Fee Payment
In general, the PCORI fees are assessed, collected and enforced like taxes. The PCORI fee is imposed on an issuer of a “specified health insurance policy” and a plan sponsor of an “applicable self-insured health plan” based on the average number of lives covered under the plan. Final rules outline a number of alternatives for issuers and plan sponsors to determine the average number of covered lives. Please work with your Client Experience team with any questions on the average number of lives calculation.
2026 Deductible & Out-of-pocket limits
The IRS has announced the inflation-adjusted contribution and related amounts for health savings accounts (HSAs) and HSA-compatible high-deductible health plans (HDHP) for 2026.
*Please remember that for there to be an individual embedded deductible amount under the family deductible, it must be greater than or equal to the minimum family deductible amount ($3,400 in 2026)
In addition, HDHPs have a different annual out-of-pocket (OOP) limit than the annual limit under the ACA. HDHPs must use the lower of the OOP limits (ACA limit vs. HDHP limit).
