The One Big Beautiful Bill Act (OBBBA) introduced a number of changes for employers. Luckily, Nextep is here to help!
As our clients’ PEO and Employer of Record, Nextep automates much of the compliance, tax reporting, and administrative burden created by the OBBBA. While the laws change, our partnership ensures your business stays compliant. Here are some of the things we’re doing for our clients.
1. Payroll & Tax Compliance
- W-2 Updates for 2026-2028: We are updating our payroll software to include the new mandatory reporting codes for qualified tax-exempt overtime (code TT) in box 12 of the W-2, and qualified tips (code TP) in box 14.
- 2025 Transition Support: Since the IRS isn’t requiring overtime/tip reporting on the 2025 W-2, Nextep has made sure that your employees’ final pay stubs of 2025 will show the correct overtime info so your employees can calculate their own federal tax deductions easily. Read more about how to calculate your tax exemption for tips and overtime in 2025.
- Taxable Fringes: We’ve updated our platforms to ensure that moving expense reimbursements, employee meals, and bicycle commuting benefits are automatically processed as taxable wages (W-2 income) for 2026, protecting you from under-withholding.
- Trump Accounts: Before the July 4, 2026 effective date, our payroll system will be ready to facilitate your optional contributions (up to $2,500/year) to your employees’ children’s Trump Accounts. We will handle the tracking to ensure these do not count as taxable income for your employees.
2. Benefits Administration
- Telehealth & HSA “Safe Harbor”: Nextep has already confirmed that both our High-Deductible Health Plans (HDHPs) and Teladoc plans are utilizing the retroactive “safe harbor.” This means your employees can continue to use $0 or flat copay telehealth visits without losing their HSA eligibility.
- DCA Limit Increase: We have already updated our systems to allow the $7,500 Dependent Care Account (DCA) limit to take effect in 2026. Our annual FSA & HSA enrollment period included the new maximum DCA option.
- Contribution Maximums: The OBBBA makes permanent several previously temporary employer tax credits. Nextep has already updated our systems to reflect the new maximums allowed for adoption assistance, tuition reimbursement, and other optional employer contributions.
- Employer Policies: Our HR Business Partners and Compliance Specialists are ready to help your company stay compliant. Contact your Nextep expert to help craft or revise policies that may need updates to accommodate OBBBA. This can include your company’s stance on sponsoring foreign-born employees, adoption assistance, childcare, and other benefits.
3. HR & Workforce Compliance
- I-9 Audit Readiness: The $170 billion increase in immigration enforcement includes increased government scrutiny of your employees’ I-9 forms. While our onboarding platform already ensures complete I-9 forms, an internal proactive audit is always a good idea. Contact your Nextep HR Business Partner to help review your company’s forms to ensure they’re accurate and complete. Our HR teams are conducting proactive internal audits of your I-9 forms.
- Paid Leave Tax Credits (2026): Starting in 2026, employers can choose to offer paid family and medical leave to employees after 6 months of employment, rather than the previous 12 months. Use your Nextep reports to easily choose between the “wages paid” or “insurance premium” method for claiming your tax credit. Please note that this update does not change the FMLA leave provisions or eligibility. Contact your HR Business Partner at Nextep for guidance.
- Medicaid Reporting: People ages 19-64 must prepare to prove they work at least 80 hours per month to be eligible for Medicaid benefits. Your employees on Medicaid will therefore need access to their pay stubs. Nextep has already made that information easy tpo find. Click here for instructions on finding pay stubs and more in the Elevate by Nextep™ account.
- Medicaid Transition Support: As the enforcement for the Medicaid work requirement approaches, Nextep’s benefits team is prepared to assist any of your employees who may lose Medicaid eligibility. If they lose Medicaid coverage, this creates a qualified event that may make them eligible to enroll in your company-sponsored health plan. Our Benefits Specialists are ready to administer those changes and answer any questions.
As always, Nextep is here to help! Contact our experts for questions or one-on-one guidance. We look forward to connecting!
Get all of the details in our OBBBA Resource Center!
Legal Disclaimer
Information regarding the One Big Beautiful Bill (OBBB) is provided for informational purposes only and does not constitute tax or legal advice. Eligibility for deductions, including those referenced in IRS Notice 2025-114, depends on individual circumstances. The information provided herein is subject to revision and may not be the most current information available. Nextep strongly recommends consulting a certified tax advisor to ensure compliance and accuracy. Nextep assumes no liability for eligibility determinations or the receipt of tax credits. See IRS guidance here for more info.
