Sponsors (4)
The bill makes it easier for employers to redeploy surplus pension and retiree-health assets to provide current-worker benefits (and protects those transfers from immediate tax penalties) at the cost of reduced retiree health security and increased long-term fiscal/pension-system risk, while adding regulatory complexity.
Employers can transfer surplus pension or retiree-health assets into current-employee health benefits or into defined-contribution (DC) plans without triggering immediate taxable income or prohibited-transaction penalties, enabling additional benefits or contributions for current workers.
Participants get stronger legal protections when surplus is transferred: accelerated vesting comparable to a plan termination and replacement DC-plan benefits that cannot be reduced for the year of transfer through four years after the last year funded by the transfer, preserving promised retirement value.
Plan participants and retirees receive required advance notice (at least 60 days) before asset transfers, increasing transparency about asset movements and potential effects on retiree and active-member benefits.
Retirees (and their families) face a clear risk that employers will divert overfunded retiree-health assets to current employees, reducing future retiree health security.
Transferring surplus out of DB plans may increase long-term pension risk and expose taxpayers and the PBGC to greater liabilities if DB plans become underfunded, shifting fiscal risk to the government.
Employers will lose immediate tax deductions for making transfers, which could reduce incentives to fund pensions or alter employer financing decisions in ways that shift costs or reduce overall retirement funding.
Based on analysis of 3 sections of legislative text.
Allows employers to transfer excess retiree-health and pension surplus assets into active-employee benefit accounts or VEBAs, subject to valuation, vesting, and multi-year protection rules.
Introduced June 10, 2025 by Tim Scott · Last progress June 10, 2025
Allows employers to move surplus assets from retiree health accounts and overfunded defined benefit pension plans into accounts that fund current active-employee benefits without treating the transfers as taxable income or employer reversions. It sets numeric tests and protections (e.g., excess retiree health assets = assets >125% of retiree liability; pension surplus = assets >110% of PBGC-measured liabilities), requires valuation and vesting protections, directs Treasury/IRS to implement rules, and makes pension-to-defined-contribution transfer rules effective for plan years beginning after December 31, 2025. The bill creates a legal pathway for employers to repurpose excess benefit-plan assets to support active employee benefits (including transfers to VEBAs or qualified replacement DC plans), while specifying treatment for tax and ERISA purposes and multi-year benefit-protection requirements to limit reductions after a transfer.