Bipartisan legislation giving employees greater control over their employer contributions was introduced on April 15 by two members of the influential House Ways and Means Committee.
Below we outline the opportunities unlocked by this proposed legislation — and by BeneSphere’s regtech-enabled orchestration of increasingly complex and dynamic benefits data.
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What is the OPTIONS Act?
If enacted, the OPTIONS Act [Optimizing Participant Tax Incentives through Optional Noncash Selections] will allow employees to allocate contributions according to their individual preferences and priorities.
For instance, younger employees may be burdened by student loan debt, the lawmakers explain, while older employees may face significant healthcare expenses. Providing the ability to allocate employer contributions according to individual needs would enhance financial well-being across all stages of life.
From PLR to Policy
The proposed act would create a new Code Section 125A extending and clarifying Code Section 125 to provide increased choice within non-taxable benefits [not just between taxable and non-taxable benefits].
In essence, the new legislation codifies an IRS Private Letter Ruling [PLR 202434006] issued in May 2024. [Note: PLRs apply only to the individual business requesting a ruling and cannot be relied upon by other employers as a legal IRS precedent.]
What Benefits Are Included?
Code Section 125A would permit employers to establish a Qualified Benefit Options Plan for employees [and former employees, including retirees] to allocate employer contributions across a menu of non-taxable benefits. [Cash or any other taxable benefits are not permitted.]
The proposal, which is subject to non-discrimination rules [similar to Section 125 cafeteria plans], explicitly identifies the following benefits as included:
- Retirement accounts [401(k), 403(b), and IRAs]
- Health savings accounts [HSAs]
- Health reimbursement arrangements [HRAs]
- Educational assistance programs [e.g., student loan repayment assistance]
The proposal is currently intended to be effective beginning TY2026.
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The BeneSphere Solution
Powered by BENEFITSCAPE, BeneSphere unlocks next-gen agility, efficiency, and opportunities for employee-centric benefits. BeneSphere orchestrates benefits data and execution across all the different systems, benefit plans, complex business rules, regulatory demands, tactical APIs, event-based architectures, and on-going employee interactions within a complex and dynamic benefits ecosystem.
For employers, BeneSphere includes synchronization between Payroll/HCM systems and detailed ben admin data, with allocation tracking at the individual earnings/deduction level, and enhanced auditability.
For carriers, BeneSphere includes real-time, friction-free data exchanges, enabling variable funding streams, complex eligibility synchronization, personalized decision support, new feedback loops, AI-assisted tools, and exciting product innovation.
How Benesphere works »
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Talk to BENEFITSCAPE about BeneSphere — one ecosystem for everyone’s benefits. The results are game-changing for employee-directed benefits.
