2026 Fringe & Account-Based Benefit Plan Updates

As we head into 2026, there are a few key changes on the horizon for employee benefits. The recently passed budget reconciliation bill — HR 1: “One Big Beautiful Bill Act”, signed on July 4, 2025 — includes several updates that HR professionals and small business owners should take note of before the new plan year begins.

Bicycle Commuter Reimbursement Exclusion

If your company has been considering reinstating a tax-free bicycle commuting benefit, hold off for now.

Under HR 1, the tax-free reimbursement exclusion for qualified bicycle commuting expenses — which was suspended from 2018 through 2025 — is now permanently excluded.

What this means for employers: You cannot reinstate bicycle commuting reimbursements as a tax-free benefit in 2026. If your fringe benefit documents still reference the temporary suspension period, be sure to amend them to remove outdated language.

Dependent Care FSA Limit Increase

Working parents will have a little more room in their budgets next year. Beginning with plan years that start in 2026, the Dependent Care Flexible Spending Account (DCFSA) annual contribution limit will increase to $7,500.

Key takeaways:

• The increase is optional for employers.

• If you choose to adopt the higher limit, you’ll need to update your cafeteria plan documents and notify employees before the plan year begins.

• This change could provide valuable tax savings for employees with dependent care expenses.

  
  

Direct Primary Care Service Arrangements & HSAs

Starting January 1, 2026, certain Direct Primary Care (DPC) service arrangements — where employees pay a monthly fee directly to a primary care provider — will no longer disqualify them from contributing to a Health Savings Account (HSA).

Here’s the update:

• Employees can now use HSA funds to pay for qualified DPC fees (up to $150/month for an individual).

• Employers should review and update HSA plan materials to reflect this change.

  
  

This adjustment allows employees to blend the personalized attention of direct primary care with the flexibility and tax advantages of an HSA.

Next Steps for Employers

To prepare for these 2026 updates, HR and business leaders should:

✅ Review and update fringe benefits documentation for outdated bicycle reimbursement language.

✅ Adjust Dependent Care FSA limits if adopting the higher cap.

✅ Communicate Direct Primary Care eligibility changes to employees with HSAs.

✅ Ensure all plan documents and employee notices align with current legislation.

Proactive updates now will help your organization stay compliant and ready for a smooth transition into 2026.

Need Help Updating Your Plan Documents?

Elevated HR Consulting specializes in benefits compliance and plan documentation for small businesses. If you’d like help reviewing your current plans or drafting updated policy language for 2026, we’re happy to assist.