I’ll go for option b. And I’m with Erik. I’ve argued before that “the Tathagata NO LONGER exists after death” is a better translation of the phrase in question. Because it implies that something existed before death, which now ceases to be. (Or is mistakenly taken to cease.)
Relevant is also SN22.85, the Yamaka Sutta, which concludes:
“Since a Tathagata is not seen by you as real and actual here in this very life [or “while alive”], is it fitting for you to declare: ‘As I understand the Dhamma taught by the Blessed One, a bhikkhu whose taints are destroyed is annihilated and perishes with the breakup of the body and does not exist [or “no longer exist”] after death’?”
“Formerly, friend Sāriputta, when I was ignorant, I did hold that pernicious view, but now that I have heard this Dhamma teaching of the Venerable Sāriputta I have abandoned that pernicious view and have made the breakthrough to the Dhamma.”
In other words, since there is no real “Tathagata” while “they” were still alive (but only 5 aggregates), it is not right to say that they no longer exist after death.
Notice also that these statements are (usually) not made about the arahant but about the “tathagata”. Although often the two functionally mean the same, it seems that the term “tathagata” was also used by other religions, and with quite potent meaning. We get this sense from the suttas quite clearly. Some have argued that the Jains used “Tathagata” to signify the highest liberated soul. It is a bit of a nuance, but these statements on Tathagatas after death were first made by others and then declined by the Buddha. To me that is different from the Buddha himself introducing them and then denying them. Because it does imply that the statement is indeed one of annihilation, being made first by other people. I hope I’m getting across what I’m trying to say. In other words, because the statements were made by others it is likely to contain a common wrong view. And annihilationism was such a view which is often addressed in the suttas.