Northern Michigan business leaders are preparing for one of the most transformative shifts in workplace healthcare benefits in decades. The One Big Beautiful Bill (OBBB) raises key thresholds, expands tax incentives, and introduces new flexibilities designed to serve both employers and employees.
Rising healthcare costs, complex compliance rules, and shifting employee expectations have moved healthcare benefit design from a back-office task to a front-line business strategy. What employers choose to build into—or leave out of—their healthcare benefits package plays a defining role in controlling costs, keeping valued employees and staying competitive in a tight labor market.
Employers who take a forward-looking approach gain the tools to reduce expenses, support their workforce, and strengthen their edge. Here are a few provisions that deserve the attention of every Northern Michigan employer preparing for 2026.
Family Healthcare Benefit Enhancements: Three Paths to Big Impacts
Dependent Care Flexible Spending Accounts (FSAs)
Starting January 1, 2026, the cap on Dependent Care FSAs rises from $5,000 to $7,500 for single filers ($3,750 for married filing separately). This overdue adjustment offers meaningful relief to working families burdened by rising child care costs.
Employees may continue to set aside pre-tax dollars, lowering taxable income and stretching family budgets. For employers, the adjusted benefit requires proper plan setup, payroll administration, and reimbursement processes. Done correctly, it remains a highly visible way to show family support while helping staff reduce out-of-pocket expenses.
Employer-Provided Child Care Credit
Also in 2026, businesses gain access to expanded tax credits for directly supporting child care. The prior 25% of qualified expenses plus 10% of referral costs, capped at $150,000—proved too restrictive. OBBB changes that math.
Large employers may now claim a 40% credit on eligible expenses up to $500,000 annually, while small employers may receive a 50% credit capped at $600,000. Both adjust with inflation; eligibility expands to include payments to third-party providers or shared facilities. By lowering tax liability, this incentive makes it far more attractive for businesses to invest in meaningful child care solutions.
Trump Accounts
Beginning July 4, 2026, Trump Accounts will be automatically established for U.S. citizen children born between January 1, 2025, and December 31, 2028. Upon issuance of a Social Security number, each newborn receives a one-time $1,000 federal deposit.
Families may contribute up to $5,000 annually, with employers allowed to contribute up to $2,500 per child. Contributions are excluded from taxable income, provided written plan rules and nondiscrimination standards are followed. For employers, these contributions represent a new way to demonstrate support for employees’ families while aligning with tax advantages.
Expanding Access and Flexibility with Health Savings Accounts (HSAs)
Direct Primary Care (DPC) Compatibility
Beginning in 2026, employers can pair High Deductible Health Plans (HDHPs) with Direct Primary Care memberships without jeopardizing HSA eligibility. Historically, DPC disqualified employees from contributing to HSAs, blocking innovative care delivery. That barrier is now gone.
In addition, monthly DPC fees—up to $150 per individual or $300 per family—are now classified as qualified medical expenses, payable from HSAs. This change lets employers offer predictable, subscription-style primary care while preserving tax advantages.
First-Dollar Telehealth Coverage
Now permanent, HDHPs can cover telehealth visits before the deductible—a benefit that was once temporary but is effective retroactively to plan years starting after December 31, 2024.
For employers, this means greater flexibility in plan design, lower overall costs, and stronger HSA-qualified options. Telehealth expands access to care, reduces absenteeism, supports rural employees, and reinforces the value of affordable, convenient healthcare benefits that attract and retain talent.
Bronze and Catastrophic ACA Plans
Effective January 1, 2026, individuals enrolled in Bronze or Catastrophic ACA marketplace plans will finally be eligible to contribute to HSAs. These lower-premium, largest-deductible plans had been excluded, limiting tax-advantaged savings options.
For employees, this means greater ability to manage costs while saving for future care. For employers—especially those offering Individual Coverage HRAs (ICHRAs) or supporting staff who purchase through Healthcare.gov—it opens new opportunities. Companies can contribute directly to HSAs or allow pre-tax payroll deductions through a Section 125 plan, enhancing healthcare benefits while managing costs.
Workforce Agility: From Contractors to Core Employees
1099 Thresholds
On January 1, 2026, the reporting threshold for nonemployee compensation rises from $600 to $2,000. For businesses relying on contractors, this means fewer 1099-NEC forms, reduced paperwork, and lower compliance costs. Contractors remain responsible for reporting earnings, but employers gain administrative relief and can redirect resources toward growth.
Student Loan Repayment Assistance
What was once temporary is now permanent. Employers may contribute up to $5,250 annually, tax-free, toward an employee’s student loan payments. Starting in 2027, this limit will be indexed for inflation. The provision applies to payments made after December 31, 2025, making 2026 the year businesses can build sustainable assistance programs.
Payroll Updates
Beginning in 2025, new rules increased net pay for tipped and hourly employees. Up to $25,000 in reported tips can be deducted, along with the overtime premium (the extra half above the regular hourly rate) —capped at $12,500 for single filers and $25,000 for joint returns.
Although FICA still applies, these changes reduce taxable income, enhance paychecks, and improve workforce stability in restaurants, hospitality, retail, and other industries that rely heavily on variable wages.
From Reform Fatigue to Competitive Edge
For years, employers have weathered shifting reforms—the ACA, ARRA, TCJA, CARES, CAA, and ARPA—each layering new complexities onto workplace healthcare benefits.
Now, the One Big Beautiful Bill ushers in its own era of change. A rare opportunity for Northern Michigan businesses to modernize healthcare benefits, sharpen recruitment, strengthen retention, and improve employees’ financial health. Those who prepare today will turn these changes into a true competitive edge in 2026 and beyond.
