The OPTIONS Act would allow employers to create plans that let employees choose how to allocate employer contributions among various tax-advantaged benefits without facing tax penalties for having that choice. Currently, federal tax law treats an employee's ability to choose among different benefits as a taxable event, which can discourage employers from offering flexible benefit arrangements. Under this legislation, employees could select from options like retirement plan contributions, health savings accounts, health reimbursement arrangements, and educational assistance programs, all while maintaining their tax-free status. The bill includes protections to prevent discrimination in favor of highly paid employees or company executives. The changes would take effect for tax years beginning after December 31, 2025.
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