An IRS plaque on the wall of the IRS building.
A new bill that would clarify existing gaps in the Internal Revenue Service's rules governing employer contributions to employee benefit plans may soon be under discussion in the U.S. House of Representatives.
The bi-partisan Optimizing Participant Tax Incentives through Optional Noncash Selections (or OPTIONS) Act was recently introduced by U.S. Representatives Greg Steube (R-Fla.) and Suzan DelBene (D-Wash.).
"American workers deserve more freedom and true financial security when it comes to their benefits," Steube said. "Unfortunately, ongoing confusion and inconsistencies with IRS rules governing employer contributions to benefit plans have shortchanged millions of Americans of potential savings. That is why I am introducing the OPTIONS Act to ensure workers have more choices and better benefits at the workplace."
"Workers want more flexibility in their financial planning, but employer contributions are mostly limited to retirement accounts currently," DelBene added. "With many employees wanting to prioritize student loans and health care bills, this legislation would let them direct their employer contributions to these needs. This commonsense bipartisan bill would give workers more options while ensuring those focused on retirement can continue to save."
In May 2024, the IRS issued Private Letter Ruling (PLR) 20243400, which permitted a single employer to implement a flexible benefits program allocating contributions to employee retirement accounts, Health Savings Accounts, Health Reimbursement Accounts, and educational assistance programs. The decision to grant unique permission for one specific employer has created uncertainty for other employers interested in adopting a similar flexible benefit package for their employees. The OPTIONS Act, according to Steube and DelBene, would extend the flexible benefits model to all employers.
The bill, which was referred to the House Committee on Ways and Means, already has the support of the American Retirement Association.
"American workers don't all face the same financial challenges, so their benefits shouldn't be one-size-fits-all," said Brian Graff, the association's CEO. "The OPTIONS Act is a smart, forward-looking solution that empowers employees to direct employer contributions where they need them most, whether that's retirement savings, health care, or paying down student debt."
He added that the bill strengthens financial security while preserving the integrity of an employer-sponsored system.
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