Benefits Monthly Minute
In the December Monthly Minute, we unwrap new guidance that permanently permits pre-deductible telehealth coverage under HDHP/HSA plans as well as the latest IRS guidance addressing how the new Trump Accounts will work in the coming year.
Guess Who’s Back? Pre-Deductible Telehealth Is Back!
Generally, under IRC § 223, an HDHP is not permitted to provide benefits for any year until the minimum annual deductible is satisfied; however, a plan does not fail to be treated as an HDHP merely because it does not apply a deductible for certain types of preventive care. Earlier this month, IRS Notice 2026-05 announced that Section 71306 of the One Big Beautiful Bill Act (“OBBBA”) makes permanent a safe harbor for pre-deductible telehealth and other remote care services that was initially enacted on a temporary basis under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act telehealth carveout applied for plan years beginning on or before December 31, 2021, and later legislation extended it -- but only through taxable years beginning before January 1, 2025. As a result, in 2025, employers and employees were left scrambling to handle ongoing HSA contributions in conjunction with HDHP coverage that previously offered pre-deductible telehealth benefits. Thankfully, this new permanent extension applies retroactively for plan years beginning after December 31, 2024, effectively continuing – without interruption – the HDHP carveout for telehealth services.
KMK Comment: The permanent exemption for telehealth and remote care services is a welcomed development for HSA-eligible individuals and allows parties to avoid undertaking correction measures to address related HSA contribution errors. Employers should work with benefit advisors and legal counsel to determine whether pre-deductible telehealth services should be offered to HDHP participants and carefully coordinate participant communications to avoid any confusion.
Meet IRA Jr: Trump Accounts Offer Tax-Deferred Savings for Children
The Working Families Tax Cuts allows a Trump Account to be established on behalf of every eligible child for whom an election is made (by a parent or guardian), and who has not turned age 18 before the end of the election year. IRS Notice 2025-68, released on December 2, 2025, provides a general overview of how the new Trump Accounts work. Although similar to traditional IRAs in many respects, Trump Accounts are subject to special rules that apply only during a “growth period” -- the period that ends before January 1 of the calendar year in which the account beneficiary attains age 18. These special growth period rules include:
- funds in a Trump Account can be invested only in certain eligible investments,
- a Trump Account has a separate contribution limit from other IRAs,
- a Trump Account is generally not allowed to make distributions,
- no deduction is permitted by an individual for contributions to a Trump Account, and
- trustees of Trump Accounts have similar but different reporting requirements from other IRA trustees.
Trump Accounts also have special contribution rules. For example, the federal government will make a one-time $1,000 pilot program contribution to the Trump Account of each eligible child for whom a special election is made. Other persons may also contribute – such as parents, family and friends -- up to an aggregate limit of $5,000 per year (to be adjusted annually after 2027) which excludes government contributions. In addition, an employer may establish a Trump Account contribution program under which an employer may contribute to a Trump Account of an employee or the employee’s dependent up to $2,500 per year (to be adjusted annually after 2027). The employer contribution counts against the $5,000 annual limit, and the $2,500 annual limit is per employee, not per dependent. Employer contributions will be excluded from the employee’s taxable income. Contributions cannot be made before July 4, 2026.
Amounts generally cannot be withdrawn before January 1st of the calendar year in which the child turns 18 years old. After that point, the account is treated as a traditional IRA and subject to the same distribution rules (including the 10% penalty for early distributions before age 59 1/2).
KMK Comment: Employers interested in establishing Trump Accounts for the benefit of their employees and dependents should coordinate with legal counsel to establish a Trump Account contribution program. Employer Trump Account contribution programs must be memorialized in a separate written plan, and requirements similar to those that apply to a Section 129 dependent care assistance program (regarding discrimination, eligibility, notification, statements, and benefits) also apply. Finally, clear participant communications should be prepared to ensure employees are informed about the special restrictions and benefits that pertain to Trump Accounts. More guidance is anticipated to be released in the future.
The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.
Lisa Wintersheimer Michel
513.579.6462
lmichel@kmklaw.com
John F. Meisenhelder
513.579.6914
jmeisenhelder@kmklaw.com
Antoinette L. Schindel
513.579.6473
aschindel@kmklaw.com
Kelly E. MacDonald
513.579.6409
kmacdonald@kmklaw.com
Rachel M. Pappenfus
513.579.6492
rpappenfus@kmklaw.com
KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.
