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Alert

From Paychecks to Perks: Navigating New OBBBA Rules on Compensation

From the elimination of taxes on certain overtime to the increased income threshold for Form 1099 reporting, the reforms enacted by the One Big Beautiful Bill Act signal a complex new era for employers in the United States.

By Pillsbury’s Human Capital Solutions Team

Alert

By Pillsbury’s Human Capital Solutions Team

Takeaways

OBBBA provisions require cross-functional coordination among payroll, benefits and finance teams, and employers should coordinate such efforts now to ensure that payroll and HRIS systems are ready for the transition before year-end as many OBBBA provisions go into effect as soon as January 1, 2026.
Pillsbury’s summary chart of key compensation and benefits provisions in the OBBBA is your guide to navigating these changes.
Notable compensation and benefits-related provisions of the OBBBA include expanding Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), to include compensation paid to covered employees by members of a publicly held corporation’s controlled group, allowing hourly workers to deduct overtime from their taxable income, increasing the maximum annual exclusion for dependent care FSAs and increasing the employer-provided childcare credit.

07.24.25

The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, may have made headlines for its political theatre, but included in the OBBBA are changes that will significantly reshape the compensation and employee benefits landscape. While many of these changes only become effective in 2026, proactive employers should begin planning now to address these changes, communicating these changes to employees and modifying plan documents and pay practices to accommodate these changes. Failure to adequately address these changes could lead to missed tax savings for employers and hamper employers’ efforts to recruit and retain key talent.

The table linked here summarizes the key compensation and benefits provisions of the OBBBA and provides practical guidance to employers for implementing the OBBBA’s mandates. The table is broken down into three sections: (1) key executive compensation developments; (2) key payroll developments; and (3) key health and welfare benefit developments.

To learn more about these developments, Pillsbury is hosting roundtables discussing updates relating to executive compensation and payroll and health and welfare benefits.

Register to learn how OBBBA updates may affect your company and employees:

Executive Compensation & Payroll (August 12, 2025)
Health and Welfare Benefits (August 14, 2025)

Tags
Jessica Lutrin, Nora E. Burke, Rebecca Carr Rizzo, Colleen E. Lamarre, Marcus Wu, Mark Jones, Christine L. Richardson, Laura L. McDaniels, Corporate, Executive Compensation & Benefits, Board Advisory & Corporate Governance, Tax, Employment Law, Human Capital Solutions
These and any accompanying materials are not legal advice, are not a complete summary of the subject matter, and are subject to the terms of use found at: https://www.pillsburylaw.com/en/terms-of-use.html. We recommend that you obtain separate legal advice.

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