OPTIONS Act
- Sponsor
- Rep. Steube, W. Gregory [R-FL-17]
- Committees
- Ways and Means Committee (primary)
- Last action
- Apr 15, 2026
Bottom line
The OPTIONS Act introduces a new framework for employer-provided benefits, granting employees more flexibility in customizing their tax-favored non-cash compensation while maintaining the tax-exempt status of these contributions.
What it actually does
This bill amends the Internal Revenue Code of 1986 by creating a new section, 125A, to establish "Qualified Benefit Options Plans" (QBOPs). These plans allow employers to offer employees a choice in how employer contributions are allocated among various tax-favored non-cash benefits, such as retirement plans, health savings accounts, and educational assistance programs. Employees cannot elect to receive cash instead of these qualified benefits, ensuring their tax-exempt status.
Proponents argue
Proponents argue that this bill significantly enhances employee choice and flexibility, allowing individuals to better tailor their tax-favored benefits to their unique financial situations and life stages. It simplifies benefit administration by consolidating various options under a single plan type and encourages greater utilization of important benefits like retirement savings, healthcare, and education by making them more accessible and customizable.
Opponents contend
Opponents might contend that while increased choice appears beneficial, the complexity of navigating multiple tax-advantaged options could be overwhelming for some employees, potentially leading to suboptimal financial decisions without extensive guidance. Concerns could also be raised about the administrative burden on employers, particularly smaller businesses, to establish and manage these new plans, and the potential for unintended tax consequences or increased tax expenditures.
The bill is concise and can be read and understood quickly by an informed reader, making it accessible for evaluation.
Section 2(a), inserting new Section 125A into the IRC.
Establishment of Qualified Benefit Options Plans (QBOPs)
This provision creates a new section in the Internal Revenue Code, Section 125A, which authorizes employers to offer Qualified Benefit Options Plans. Under these plans, employees can choose how their employer's contributions are allocated among various tax-favored non-cash benefits. A key condition is that employees cannot opt to receive cash instead of these benefits, ensuring that the contributions remain excluded from their gross income.
Supporters argue
Supporters argue this provision empowers employees by giving them more control over their benefit packages, allowing them to optimize their tax-advantaged savings and benefits according to their personal financial situations and life stages. It modernizes benefit offerings to meet diverse workforce needs.
Critics contend
Critics might contend that while choice is generally positive, the complexity of navigating multiple tax-advantaged options could overwhelm some employees, potentially leading to less optimal choices without robust financial education. It could also create significant administrative overhead for employers.
Tradeoffs
This provision balances the desire for greater employee autonomy and personalization of benefits against the potential for increased administrative complexity for employers and the need for informed employee decision-making.
Section 2(a), new Section 125A(b)(2) of the IRC.
Definition of 'Qualified Benefits'
This section specifies the types of benefits that can be included in a Qualified Benefit Options Plan. It explicitly lists non-elective employer contributions to retirement plans (under IRC sections 402 or 403), contributions to health reimbursement arrangements (HRAs) or health savings accounts (HSAs) (under sections 105 or 106), and amounts for qualified educational assistance programs (under section 127). It also includes a broad category for "other benefits which are excluded from gross income under any other provision of this chapter."
The bill applies existing nondiscrimination rules (similar to those for cafeteria plans under Section 125) to the new Qualified Benefit Options Plans. It also clarifies how employer contributions to qualified retirement plans within a QBOP are treated for nondiscrimination testing, regardless of employee election. Additionally, it mandates reporting and recordkeeping requirements for these plans by amending Section 6039D.
Section 2(a), new Section 125A(c) and (d); Section 2(b) amending Section 6039D.
Why it matters:This is standard legislative practice to avoid re-writing extensive existing code sections, instead incorporating them by reference. While efficient for drafting, it makes the bill less accessible to those without a deep understanding of tax law.
Case for: Supporters argue that incorporating existing rules by reference ensures consistency with established tax policy, prevents new loopholes, and leverages familiar compliance frameworks, making the new plans easier to integrate into the existing regulatory landscape and promoting equity.
Case against: Critics might argue that this method obscures critical compliance details, making it difficult for employers, especially small businesses without dedicated legal or HR teams, to understand and implement the plans correctly without costly expert advice, potentially discouraging adoption.
Estimated impact: Ensures fair access to benefits across all employee levels and provides the IRS with necessary data for oversight, impacting all employers who adopt QBOPs by requiring adherence to complex compliance standards.