OPTIONS Act

The OPTIONS Act establishes a new type of employer-sponsored benefit arrangement called a Qualified Benefit Options Plan (QBOP), affecting employers and their employees. Under a QBOP, employees can choose how their employer's contributions are allocated among various pre-tax qualified benefits, such as contributions to retirement plans, health savings accounts, or educational assistance programs. A key distinction is that employees cannot opt to receive cash or other taxable benefits instead of these qualified benefits. Employer contributions made through a QBOP are excluded from an employee's taxable income, offering a tax-advantaged way for employers to provide flexible benefit options. The bill includes rules to ensure benefits are not disproportionately skewed towards highly compensated employees and applies to taxable years beginning after December 31, 2025.