Sponsors (4)
The bill makes it easier for sponsors to repurpose overfunded retiree health and DB surpluses to benefit current workers and reduce sponsor risk by clarifying tax and fiduciary treatment, but it raises the likelihood that retirees and future beneficiaries will face reduced retiree-health support and weaker guaranteed pension security while adding administrative complexity.
Employers with overfunded retiree health accounts or DB plan surpluses can transfer those excess assets to fund active employee retirement/benefits or convert DB surplus to DC without those transfers being treated as employer taxable income or prohibited transactions, making it easier to reallocate plan resources to current workers and reduce PBGC exposure.
Participants (current employees and retirees) gain immediate nonforfeitable protection for accrued benefits and must receive advance notice (60 days) of transfers, and federal fiduciary/notice rules require benefit-protection and disclosure standards, improving transparency and participant protections.
The bill creates clearer federal tax/fiduciary and notice rules for surplus transfers, simplifying administrators' legal and compliance treatment and reducing uncertainty around such transactions.
Workers and future retirees face increased risk because employers can shift surplus to DC plans or use transfers as a pretext to freeze DB accruals, reducing guaranteed lifetime income and shifting investment and longevity risk onto employees.
Reallocating retiree health assets to active benefits risks underfunding retiree health coverage and reducing available resources for retirees if valuation or compliance rules are misapplied.
Transferred amounts and benefits paid from them are not deductible for employers (and transfers do not create employer taxable income), which reduces the tax incentive to fund retiree health and lowers federal tax revenue.
Based on analysis of 3 sections of legislative text.
Introduced June 10, 2025 by Tim Scott · Last progress June 10, 2025
Permits private pension plans to move certain excess retiree health assets and surplus defined-benefit (DB) plan assets into active-employee benefits or qualified defined-contribution (DC) replacement plans under detailed guardrails. The bill defines how to measure “excess” or “surplus,” sets timing, notice, vesting and benefit-protection rules, spells out tax treatment (no employer income, no deduction, not an impermissible reversion), and makes conforming ERISA and Code cross‑references. Effective dates differ: retiree-health transfers apply to taxable years after Dec 31, 2024; DB-to-DC surplus transfers apply to plan years after Dec 31, 2025.