Sponsors (4)
The bill makes it easier and tax‑safe for employers to repurpose pension and retiree-health surpluses to reduce employer costs or boost DC retirement accounts while adding participant notice and temporary protections — but it raises risks that retiree benefits and long‑term pension safeguards could be weakened and increases compliance complexity.
Employers with overfunded defined benefit plans can move surplus into defined contribution accounts without immediate tax, enabling increased retirement savings for employees.
Employers can use retiree health plan surpluses to reduce or pay active employee benefit costs without those transfers being treated as taxable employer income, lowering near-term employer benefit costs.
The bill clarifies IRS/ERISA treatment and exempts these transfers from prohibited-transaction and reversion rules, reducing legal uncertainty and fiduciary penalty risk for plan sponsors and administrators.
Seniors and other retirees risk reduced retiree-health benefits if employers repurpose retiree-health surpluses for active employee costs, shifting long‑term healthcare costs onto retirees or taxpayers.
Middle-class workers may face less secure retirements if sponsors move DB surplus into DC plans, transferring investment and longevity risk to employees despite temporary nonforfeitability protections.
Taxpayers could face greater exposure because extracting surplus above DB funding needs can weaken the PBGC's buffer and increase the risk of future PBGC claims or deficits.
Based on analysis of 3 sections of legislative text.
Permits employers to transfer excess retiree health and pension surplus into active employee benefits or qualified DC replacement plans with tax and ERISA protections.
Official title: Amend the Internal Revenue Code of 1986 to permit certain excess plan assets to be used for benefits for active employees, and for other purposes.
Introduced June 10, 2025 by Tim Scott · Last progress June 10, 2025
Allows employers to move excess assets from retiree health accounts and overfunded defined‑benefit pension plans into active employee benefit plans or qualified defined‑contribution replacement plans. The bill creates new Internal Revenue Code provisions and matching ERISA conforming rules that define "excess health assets" and "surplus assets," set limits and protections, require notices and reporting, and exempt these transfers from certain tax, prohibited transaction, and minimum‑funding penalties.