How the "One Big Beautiful Bill" Impacts Your Business and How a PEO Can Help

The legislative landscape has shifted dramatically with the passage of H.R. 1 of 2025, nicknamed the "One Big Beautiful Bill Act" (OBBBA). This sweeping budget reconciliation law introduces broad tax cuts, alters federal spending programs, and creates policy changes that will ripple through every aspect of how businesses operate, from payroll and benefits to compliance and strategic planning.

For small and midsize businesses (SMBs), this bill is a game-changer that presents both unprecedented opportunities and complex new challenges. OBBBA will impact your business, but a PEO can help navigate these new challenges and opportunities.

Major changes in benefits options

One of the most significant changes involves health care benefits. The bill introduces the "CHOICE" arrangement, a new type of Health Reimbursement Arrangement (HRA) that allows small businesses to contribute to employees' individual marketplace coverage while receiving a $100 per month tax credit per employee.

This creates an alternative to traditional group health plans that could be particularly attractive for businesses with limited HR staff or those with employees spread across multiple states. For employees, the enhanced HSA rules allow Medicare-eligible employees to contribute to HSAs, increase contribution limits significantly for lower-income workers, and expand what qualifies as an HSA-eligible expense to include fitness and wellness costs.

The legislation also introduces generous tax credits that benefit your employees and help support their families:

• Child Care Credit: A 40% credit for qualifying child care expenses, making it financially feasible for smaller companies to offer benefits that previously only large corporations could afford
• Paid Family Leave Credit: Credits for wages paid during qualifying family leave, allowing you to compete for talent with comprehensive benefits packages

Tax benefits for small and midsize businesses

The bill extends and expands the Tax Cuts and Jobs Act provisions, making the 20% pass-through deduction permanent and even increasing it to 23% for qualifying businesses. For many SMB owners, this translates to immediate cash flow improvements that can be reinvested into growth, hiring, or competitive benefits.

But the benefits extend beyond business owners. Employees now benefit from tax deductions for overtime pay and tip income, effectively increasing their take-home pay without increasing your labor costs. This creates a win-win scenario where your team feels the benefit of their hard work more directly.

Shifts in compliance requirements

On the surface, H.R. 1 simplifies some compliance requirements. The 1099 reporting threshold increases from $600 to $2,000, reducing paperwork for businesses that work with multiple small vendors. However, this simplification comes with new complexities in other areas: enhanced verification requirements for benefits, tighter immigration enforcement, and new documentation standards create a compliance landscape that requires expert navigation. The businesses that thrive will be those that can efficiently implement these changes.

Where a PEO can help

In this new environment, the difference between businesses that thrive and those that struggle often comes down to having expert guidance to navigate these new complexities while maximizing opportunities. This is where a Professional Employer Organization (PEO) becomes essential, providing:

• Seamless implementation of new requirements and keeping up with compliance rules
• Maximizing your business’s tax benefits
• Expanding the power of PEO-facilitated health care and benefits offerings

H.R. 1 represents both the biggest opportunity and the biggest challenge that small and midsize businesses have faced in years. When the business landscape is quickly changing, and competitors struggle to decipher the new bill’s implications for their business, the choice is clear: partner with experts who make it their business to stay apprised of these changes. With BestFit PEO Solutions, you get a strategic partner that helps you turn legislative complexity into competitive advantage, implementing strategies for your business that save money, attract talent, and position your business for growth.

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