Sponsors (4)
The bill makes it easier and tax-favored for employers to convert plan surpluses into present employee benefits or DC contributions and reduces legal uncertainty while adding participant notice and limited protections — but it raises the risk that retiree health and long‑term retirement security could be reduced, shifts risk onto workers and taxpayers, and increases administrative complexity.
Employers (and their employees) can move retiree-health or pension surpluses into active employee benefits or defined-contribution accounts without immediate tax on the transfer, enabling increased near-term benefits or retirement savings.
Participants in affected defined-benefit plans will have accrued benefits made immediately nonforfeitable and replacement defined-contribution benefits are protected against reduction for several years, giving workers short-term stability in their accrued benefits.
The bill clarifies and shelters these transfers from being treated as prohibited transactions or employer reversions and coordinates tax/ERISA treatment, reducing legal uncertainty and fiduciary/penalty risk for employers and plan fiduciaries.
Seniors and retirees could lose retiree-health resources as employers reallocate surpluses to current employee benefits, potentially reducing retiree health coverage or shifting costs onto retirees or taxpayers.
Middle-class workers may face less secure retirements if employers transfer DB surplus into DC plans, shifting investment and longevity risk to employees despite temporary nonforfeitability protections.
The rules add material administrative, reporting, and compliance burdens—especially for small employers and plan administrators—to determine surpluses, apply look-back/five-year conditions, provide notices, and coordinate with Treasury and Labor.
Based on analysis of 3 sections of legislative text.
Authorizes transferring retiree-health and pension surpluses into active-employee benefit accounts under defined thresholds, protections, and reporting rules.
Introduced June 10, 2025 by Tim Scott · Last progress June 10, 2025
Allows employers to move surplus money from retiree health accounts and overfunded defined benefit pension plans into accounts that pay active employee benefits, subject to formulas, notice rules, vesting protections, and tax/ERISA safeguards. The transfers are protected from being taxed as employer income, treated as forbidden transactions, or counted as employer reversions, and the law sets thresholds for how much can be moved and several required notices and timing rules. Creates two new tax-code rules: one for retiree health plan surpluses (defines “excess health assets” and ties procedures to ERISA disclosure and funding rules) and one for defined benefit pension surpluses (lets employers move surplus to a defined contribution replacement plan if the pension is not terminated, but requires immediate benefit vesting and multi-year limits on reducing replacement-plan benefits).