Separate 2025 telehealth treatment from 2026 dependent care changes. Review education assistance limits, payroll setup, program documents and employee messages.

July 7, 2025 · Financial Forte Staff

Historical article: prepared retrospectively using information available as of July 7, 2025.

The tax law signed on July 4, 2025, gives employers several benefits provisions to review. The immediate task is to identify which arrangements the business actually offers and when each change becomes effective. Treating every new limit as available on the next payroll can create avoidable errors.

Focus first on educational assistance, dependent care assistance and the telehealth rules relevant to HSA-compatible coverage. Then coordinate the plan documents, payroll setup, provider responsibilities and employee explanation. A statutory opportunity does not automatically amend the employer's program or establish that every employee qualifies.

Educational assistance continues, with one combined limit

The law removes the scheduled end of the section 127 exclusion for qualifying employer student-loan payments after 2025. It also provides for inflation adjustments to the $5,250 educational-assistance limit for tax years beginning after 2026. The $5,250 amount therefore remains the relevant statutory limit for 2025 and 2026; a larger inflation-adjusted amount should not be assumed now.[1]

The program requirements still matter. Qualified student-loan payments and other qualifying educational assistance share the annual exclusion limit; they do not each receive a separate $5,250 allowance. A compliant written program, eligible expenses and applicable nondiscrimination rules need to be reviewed.[2]

Suppose an employer plans to provide Jordan with $3,000 of qualifying tuition assistance and $3,000 of qualifying student-loan payments in one year. The combined amount is $6,000, which is $750 above the $5,250 exclusion limit. Extending the student-loan provision does not make that excess disappear.

For example, $3,000 of qualifying tuition assistance plus $2,250 of qualifying loan payments would total $5,250. The employer could revise the benefit amounts or have payroll and the tax advisor determine the proper treatment of amounts above the exclusion. It should not describe all $6,000 as tax-free without a valid basis. Keep this benefit distinct from a retirement plan's optional matching contribution based on qualified student-loan payments, which follows different rules.[3]

Prepare dependent care changes for 2026

The law increases the maximum exclusion for qualifying dependent care assistance from $5,000 to $7,500, or from $2,500 to $3,750 for a married employee filing separately. The change applies to tax years beginning after December 31, 2025. It is not a higher 2025 election limit.[4]

The amount an employee can exclude still depends on the arrangement and the employee's circumstances, including applicable earned-income and qualifying-expense requirements. Employer contributions and benefits through a spouse's employer can affect the household calculation. The new maximum is not a promise that every employee can use the full amount.[2]

For a calendar-year program that adopts the higher amount where permitted, a $7,500 election spread across twenty-four equal 2026 paychecks would be $312.50 per paycheck. Compare that with a $5,000 annual election, approximately $208.33 per paycheck. The roughly $104.17 difference reflects an additional $2,500 of annual salary reduction, not an employer-funded raise; payroll must handle rounding across the year.

HR should confirm the plan's adoption process, the administrator's capabilities and the payroll testing schedule before presenting a final election option. Explain the applicable use and reimbursement rules as well as the larger number. Employees need to understand the consequences of electing more than their eligible expenses.

Review telehealth with the health-plan provider

The law permanently extends the safe harbor allowing an otherwise qualifying high-deductible health plan to cover telehealth and other remote care without first applying the deductible. The amendment applies to plan years beginning after December 31, 2024.[5]

This removes a particular HSA-eligibility concern under the statutory framework; it does not mean every health plan or every employee is automatically HSA-eligible. Other coverage, Medicare enrollment and the rest of the HSA rules still need consideration.[6]

Ask the insurer or administrator whether the employer's current arrangement uses the permitted treatment and whether any plan or service changes are needed. Do not tell employees that a service is free or covered before confirming the actual contract. A tax-law permission and an insurer's benefit promise are different things.

Other HSA-related provisions in the law have later effective dates and specific conditions. Add any relevant ones to the employer's review calendar, rather than applying a broad statement that HSA rules have already changed for every arrangement.

Give each change an owner and a communication date

Build a short implementation list showing the provision, effective date, affected program, document review, payroll change and employee communication. Finance should identify the cost assumption; HR should confirm how employees enroll and obtain help; the administrator should confirm operational requirements.

For any affected ERISA-covered health plan, retain the appropriate fiduciary process for administration and provider oversight. Design decisions, tax qualification and fiduciary operation are related but distinct responsibilities. A new tax provision does not remove the duty to operate the arrangement according to its terms.[7]

The business may improve the value of benefits without increasing every budget line. Educational assistance can support skills and debt repayment, while better administration can reduce errors and repeated employee questions. Those outcomes depend on the design and execution, not simply the existence of a larger limit.

Before announcing changes, ask the providers to confirm the treatment in writing and test the affected payroll codes, including a case where tuition assistance and loan payments are provided to the same employee. As official implementation guidance develops, update the review file. Employees should receive an explanation of what their employer has adopted, when it begins and what they need to do next.

Related reading

Have more questions about employer benefits changes under the July 2025 tax law? Email Dave at dave@financialforte.com to discuss your questions and next steps.

The contact invitation is current; it does not imply this contact path existed on the historical reference date.

Educational information, not personalized investment, tax, legal or benefits advice. Examples use hypothetical assumptions. Verify current rules and your circumstances before acting.

Sources

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