Alabama just became the newest member of the portable benefits movement—passing legislation by a unanimous vote to not only support independent workers but also introduce tax deductions for contributions to portable benefits accounts, setting it apart from Utah and Tennessee.
A portable benefits account is designed to empower contract and freelance workers by helping them save for key benefits such as health insurance, income replacement, retirement, and disability insurance. These accounts are owned by—or legally tied to—the worker and remain with them as they move between jobs, industries, or locations. This portability gives independent workers the flexibility and security they need to thrive.
This year, Senator Arthur Orr sponsored SB86, accompanied by Representative Neil Rafferty’s HB142, which allows any person or entity to contribute to a worker’s portable benefits account. The legislation includes four key components:
- All contributions are voluntary
- All contributions made to portable benefits accounts will be tax-deductible for both contributors and recipients
- Contributions from hiring parties cannot be used to determine employment classification
- Contractors can use contributions to purchase whichever benefits best suit their needs
Alabama’s breakthrough comes hot off the heels of similar legislation that was passed in Tennessee, but Alabama’s bill takes things a step further with its innovative tax deduction component. This approach offers a powerful template for other states looking to support freelancers, gig workers, and the self-employed without compromising flexibility.
Another noteworthy milestone from this legislative victory was the strong bipartisan support behind SB86. Before introducing their 2025 bills, Senator Orr and Representative Rafferty collaborated on a portable benefits task force, established through a 2024 House Joint Resolution sponsored by Rafferty. The task force was created to examine the policy’s potential impacts, drawing insights from Utah’s SB233 and Pennsylvania’s 2024 pilot program. Thanks to this groundwork and cross-party collaboration, SB86 passed unanimously through both the House and Senate before being sent to the governor for signature.
Stride Health, Americans for Prosperity Alabama and Independent Women’s Forum all provided instrumental support for Senator Orr’s legislation.
At Libertas Institute, we’ve extensively researched portable benefits, and we stand ready to help your state pursue this opportunity as we have with Alabama. If you’re a lawmaker, organization, or advocate in another state interested in pursuing similar legislation, we’d love to help you get started!
