How a New Bill to Make Benefits Portable Could Help Entrepreneurs
A new bill introduced in the U.S. Congress aims to revolutionize the way entrepreneurs and independent workers access benefits, addressing a critical gap in the modern workforce. As the gig economy grows, millions of Americans are embracing freelance, contract, or small business work, often sacrificing essential benefits like health insurance, retirement plans, and paid leave. This legislative proposal seeks to make portable benefits more accessible, offering a flexible solution to a system that has long been tied to traditional employer-employee relationships.
What Are Portable Benefits?
Portable benefits are programs that aren’t tied to a single employer. They include health coverage, retirement accounts, and paid leave, designed to follow workers as they move between jobs or projects. This model is particularly relevant as the workforce shifts away from long-term, single-employer careers toward more flexible arrangements.
A New Legislative Proposal
On July 7, 2025, Senators Bill Cassidy (R-LA) and Tim Scott (R-SC) introduced a legislative package to update federal labor laws, focusing on portable benefits for independent contractors. The bill includes several key features:
- Safe Harbor for Employers: Companies can voluntarily provide portable benefits to independent contractors without risking their classification as non-employees. This addresses a major concern under current law, where offering such benefits might lead to workers being reclassified as employees, triggering costly obligations.
- Expansion of Retirement Plan Access: The Independent Retirement Fairness Act would allow independent workers to participate in retirement savings plans typically reserved for employees, such as Pooled Employer Plans and Simplified Employee Pension Plans, without changing their employment classification.
- Voluntary Participation: The legislation doesn’t require businesses to offer benefits to independent workers. Instead, it provides an optional framework for companies to offer non-cash benefits, such as contributions toward insurance or savings, on their own terms.
- State and Local Flexibility: The bill encourages states, localities, and private organizations to experiment with different portable benefits models, incentivizing innovation in creating financial security nets for non-traditional workers.
Proponents argue that this bill will empower independent workers to access critical forms of insurance and savings while encouraging businesses to support gig workers and small business owners without fear of legal repercussions. However, critics highlight several shortcomings.
Potential Impact and Criticism
Proponents of the bill argue that it could significantly improve the financial security of independent workers by providing them with access to essential benefits like health insurance and retirement plans. Additionally, it may encourage more businesses to support gig workers and small business owners without the fear of legal repercussions related to worker classification.
However, critics have raised several concerns about the proposed legislation:
- Worker Misclassification: The bill does not address the issue of worker misclassification, where companies may incorrectly label workers as independent contractors to avoid providing full employment benefits. This could leave many workers without the protections they deserve.
- Second-Tier Status: By creating a separate benefit structure for independent workers, the bill could perpetuate a “second-tier” status for these workers. This would mean they still lack access to rights such as minimum wage, overtime pay, unemployment insurance, and collective bargaining.
- Voluntary Participation: Since the legislation does not require businesses to offer benefits to independent workers, the reach and effectiveness of the program could be limited. Participation by companies is optional, and there is no guarantee that a significant number of businesses will take advantage of the framework.
- Modest Outcomes: Early programs under similar voluntary structures have shown limited success. For example, in a pilot program, DoorDash set aside just 4% of pre-tip earnings (less than $400 annually for some workers), and only a portion of workers used these funds, primarily for paid leave.
Broader Context
The push for portable benefits has gained bipartisan interest, reflecting the growing recognition that the American workforce is evolving rapidly. The traditional benefits system, designed for long-term, single-employer careers, is no longer adequate for the millions of workers embracing entrepreneurship, gig work, and freelancing.
Recent state-level initiatives highlight the momentum for reform. For instance, Alabama is considering tax incentives for businesses that contribute to portable benefits. This indicates a growing interest in addressing the needs of non-traditional workers at both federal and state levels.
In summary, while the new bill represents a step toward modernizing the benefits system for the gig economy, its voluntary nature and lack of broader worker protections mean it may only partially address the challenges faced by independent workers. The legislation could pave the way for further reforms, but more comprehensive solutions may still be needed to ensure financial security for all workers in the modern economy.
Conclusion
The proposed bill to make benefits portable represents a significant step toward addressing the challenges faced by entrepreneurs and independent workers in the modern economy. By providing a framework for portable benefits, the legislation has the potential to improve financial security for millions of Americans who have traditionally been left without access to essential benefits like health insurance and retirement plans.
While the bill offers promising solutions, such as safe harbor for employers and expanded retirement plan access, its voluntary nature and lack of broader worker protections may limit its impact. Critics argue that the legislation does not fully address issues like worker misclassification and the second-tier status of independent workers. Despite these limitations, the bill marks a crucial step in the evolution of labor laws, acknowledging the growing gig economy and the need for flexible benefits systems.
As the workforce continues to shift away from traditional employer-employee relationships, the conversation around portable benefits will likely evolve. This bill could pave the way for further reforms, but more comprehensive solutions may still be needed to ensure financial security for all workers in the modern economy.
Frequently Asked Questions
What are portable benefits?
Portable benefits are programs that allow workers to maintain access to benefits like health insurance, retirement accounts, and paid leave even as they move between jobs or projects. These benefits are not tied to a single employer, making them ideal for independent contractors, freelancers, and small business owners.
How does the new bill help entrepreneurs?
The bill provides entrepreneurs and independent workers with access to portable benefits, offering financial security and flexibility. It also incentivizes businesses to support gig workers without fear of legal repercussions related to worker classification.
What are the key features of the proposed legislation?
The bill includes safe harbor for employers, expansion of retirement plan access, voluntary participation for businesses, and state and local flexibility to experiment with portable benefits models.
Why is the bill controversial?
Critics argue that the bill does not address worker misclassification, may create a second-tier status for independent workers, and relies on voluntary participation, which could limit its effectiveness. Additionally, similar voluntary programs have shown modest outcomes in the past.
How will the bill impact independent workers?
The bill could improve financial security for independent workers by providing access to essential benefits. However, its voluntary nature and lack of broader protections mean it may only partially address the challenges faced by gig workers.
What’s next for portable benefits?
The bill could pave the way for further reforms, but more comprehensive solutions may still be needed. State-level initiatives and bipartisan interest in the issue suggest ongoing momentum for modernizing the benefits system to meet the needs of the evolving workforce.