NC bill would expand benefit options for independent contractors

The North Carolina House Finance Committee advanced legislation Tuesday that would allow businesses to help fund benefit accounts for independent contractors without reclassifying them as employees.

House Bill 1083, the Voluntary Portable Benefits Plan Act, passed the committee without opposition on Tuesday. The measure now heads to the House Rules, Calendar, and Operations Committee before it can be voted on by the full House.

The primary sponsors of the legislation are NC Reps. Timothy Reeder, R-Pitt; Allen Chesser, R-Nash; Heather Rhyne, R-Lincoln; and Mike Schietzelt, R-Wake.

The bill would create a new framework in state law for portable benefit accounts owned by independent contractors. Those accounts could be used to purchase benefit plans, including health insurance, unemployment insurance, income-replacement insurance, disability insurance, life insurance, and retirement benefits.

Under the bill, a portable benefit plan would be administered by a third-party benefit plan provider chosen by the independent contractor and assigned to a beneficiary rather than to a hiring party.

Supporters say the proposal is designed for a changing workforce in which more North Carolinians earn income through contract work, gig work, app-based platforms, or other nontraditional work arrangements. Rather than tying benefits to a single employer, the bill would allow them to follow the worker.

“This bill authorizes a person who works as an independent contractor for their hiring party to volunteer and contribute funds for benefits, whether they be retirement benefits, health benefits,” said Reeder, one of the bill’s primary sponsors, during Tuesday’s Finance Committee meeting. “These benefits will be available to an estimated 900,000 people who work in North Carolina as independent contractors.”

Under the bill, a hiring party could voluntarily contribute money to an independent contractor’s portable benefit account for work performed. The definition of hiring party includes any public or private person or entity, including an internet or application-based company, that hires or enters into a contract with an independent contractor.

“House Bill 1083 recognizes that today’s workers and businesses need more flexible benefit options than the traditional employment model alone can provide,” said Donald Bryson, president and CEO of the John Locke Foundation.

“By creating a voluntary framework for portable benefits, the bill gives the market room to innovate — allowing employers, contractors, banks, technology providers, and benefit providers to develop new tools that better fit modern work,” Bryson added. “This is the right approach: protect worker choice, reduce regulatory uncertainty, and let voluntary solutions emerge to meet the real needs of both employers and independent workers.”

Reeder added that the bill is aimed at addressing concerns that benefit contributions could blur the legal line between contractors and employees.

“Right now, there’s a concern about becoming an employee of a hiring authority,” Reeder said. “This bill allows people to own their own benefits, to give funding from the hiring authority, and then purchase them on the free market.”

Contributions by a hiring party could not be treated as evidence that the worker is an employee under North Carolina unemployment insurance, workers’ compensation, taxation, or labor laws.

The measure would allow contributions to be made either directly from the hiring party, in addition to agreed compensation, or through a percentage withheld from the contractor’s compensation.

HB 1083 would also add a state income tax deduction for the amount received by an independent contractor from a hiring party in a portable benefit plan during the taxable year.

The bill moved through the House Commerce and Economic Development Committee in May before being sent to the Finance Committee. Tuesday’s vote keeps the proposal alive ahead of a potential House floor vote.

“NC bill would expand benefit options for independent contractors” was originally published on www.carolinajournal.com.