At their core, portable benefits mirror worker-owned flexible or health savings accounts, but can pay for a broader range of products and services. Generally speaking, a business (or other client) can decide — voluntarily — to offer contributions as part of an independent worker’s compensation package.
Workers then use the funds to pay for health insurance premiums, retirement savings, disability insurance or other benefits, gaining some of the stability and financial relief of traditional employment even as they move between projects or clients. Some states have given these accounts tax-advantaged treatment similar to that afforded to existing healthcare or retirement accounts.
Importantly, these portable benefits reforms do not require businesses or workers to participate. They do not create new government programs or entirely new financial or insurance systems.
Instead, the reforms remove a specific legal risk. Under many existing labor laws, if a company helps fund an independent worker’s benefits, regulators or courts may treat that as evidence that the worker should be classified as an employee. That can result in misclassification penalties and lawsuits for the business even when both parties prefer a more flexible arrangement. With portable benefits reforms, labor regulators are simply instructed to stop treating voluntary benefits contributions as evidence of misclassification or wrongdoing.
The need for legal clarity is a major reason portable benefits reforms have gained traction in business-friendly states. Many companies already compete for reliable independent workers. In some industries, especially those with worker shortages or high turnover, portable benefits are poised to become an important recruiting and retention tool.
As a result, a traveling nurse, freelance graphic designer, self-employed plumber or delivery driver can gain employment-like benefits while remaining self-employed. Some might receive contributions from multiple clients into the portable account while also contributing to it themselves — creating a benefits infrastructure, whether tax-advantaged or not, for a workforce that has long lacked one.
Census Bureau data shows that roughly 30 million Americans are now solo self-employed, up nearly 97 percent since the late 1990s. Independent work spans far beyond the gig economy, making portable benefits a potential game-changer for those performing creative work, skilled trades, driving, home care, consulting or professional services.
Critics of portable benefits sometimes argue that these millions of independent workers are better served with cash than a mix of payments and benefits. But based on our many conversations with workers, businesses and policymakers across the country, this is not necessarily the case.
Instead, one theme comes through clearly: Workers want benefits without giving up their current, flexible careers. Surveys say the same thing. Bureau of Labor Statistics data shows that only 8.3 percent of independent workers prefer a traditional employment arrangement, while more than 80 percent prefer their current work arrangement. At the same time, 4 out of 5 want access to benefits.
That’s why it’s so encouraging to see portable benefits gain momentum and bipartisan buy-in: Kansas and Utah are among the eight states that have enacted reforms, Hawaii and Connecticut are among those considering it, and legislation has appeared in Congress as well. Reforms are advancing in states that prioritize the business environment and in others that focus on worker protection, because they expand access to benefits while remaining voluntary and market-oriented.
In places where reforms have taken effect, some businesses have already begun contributing additional dollars toward benefits. For example, after Pennsylvania launched a portable benefits pilot, DoorDash contributed more than $1.3 million in benefit payments to independent delivery workers, giving nearly three-quarters of previously uncovered workers new access to portable benefits.
As AI makes it easier for more people to work independently, states will face growing pressure to modernize a benefits system still built around traditional employment. Portable benefits will not solve every challenge facing independent workers. But they offer states a practical way to modernize benefits access without forcing workers into models of employment that no longer reflect how millions of Americans want to earn a living.
Liya Palagashvili is a director of the Labor Policy Project at the Mercatus Center at George Mason University and co-writes the Substack Labor Market Matters. Jonathan Wolfson is a visiting fellow at the Institute for the American Worker and led the policy office at the U.S. Department of Labor in the first Trump administration. Their organizations have produced a video further exploring portable benefits programs.
Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.
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