[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2003 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 2003
To 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.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 10, 2025
Mr. Scott of South Carolina (for himself, Mr. Cassidy, Mr. Tillis, and
Mr. Marshall) introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To 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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Strengthening Benefit Plans Act of
2025''.
TITLE I--SUPPORTING ACTIVE EMPLOYEES WITH CURRENT BENEFIT PLAN EXPENSES
SEC. 101. TRANSFER OF EXCESS HEALTH ASSETS FOR FUNDING ACTIVE EMPLOYEE
BENEFITS.
(a) In General.--Section 420 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(h) Transfer of Excess Health Assets for Funding Active Employee
Benefits.--
``(1) In general.--In the case of a pension plan with
excess health assets for a fiscal year--
``(A) an amount equal to such excess health assets
may be transferred in accordance with paragraph (3)
from a health benefits account established under
section 401(h),
``(B) a trust which is part of such plan shall not
be treated as failing to meet the requirements of
subsection (a) or (h) of section 401 solely by reason
of such transfer (or any other action authorized under
this subsection),
``(C) no amount shall be includible in the gross
income of the employer maintaining the plan solely by
reason of such transfer,
``(D) such transfer shall not be treated--
``(i) as an employer reversion for purposes
of section 4980, or
``(ii) as a prohibited transaction for
purposes of section 4975, and
``(E) the limitations of paragraph (4) shall apply
to the employer.
``(2) Excess health assets.--For purposes of this
subsection--
``(A) In general.--The term `excess health assets'
means the amount by which the applicable assets with
respect to a retiree health plan exceed an amount equal
to 125 percent of the total liability of the employer
for benefits for all participants under the retiree
health plan, determined in accordance with applicable
accounting standards.
``(B) Limitation.--In determining excess health
assets, there shall not be taken into account--
``(i) amounts attributable to contributions
(other than transfers under any other
subsection of this section, or contributions
made pursuant to a legally binding commitment
entered into before January 1, 2024) made after
December 31, 2023, to any health benefits
account established under section 401(h) with
respect to the retiree health plan, or
``(ii) any reduction in the liability of
the employer described in subparagraph (A) due
to a reduction in benefits pursuant to an
amendment to the retiree health plan adopted
after December 31, 2023.
``(C) Terminating plans.--In the case of a
terminating pension plan which includes a health
benefits account under section 401(h), all assets in
such health benefits account shall be treated as excess
health assets.
``(D) Applicable assets.--For purposes of
subparagraph (A), the term `applicable assets' means
all assets with respect to a retiree health benefits
plan of an employer--
``(i) in a health benefits account
established under section 401(h), or
``(ii) held by a voluntary employees'
beneficiary association (as defined in section
501(c)(9)).
``(3) Transfers permitted.--
``(A) In general.--A transfer under this paragraph
is a transfer--
``(i) of excess health assets, in the
fiscal year immediately succeeding the fiscal
year with respect to which such excess health
assets are determined--
``(I) to the pension plan under
which a health benefits account
pursuant to section 401(h) was
established, or
``(II) as provided in subparagraph
(B)(ii), to a voluntary employees'
beneficiary association (as defined in
section 501(c)(9)),
``(ii) which does not contravene any other
provision of law,
``(iii) with respect to which the use
requirements of subparagraphs (B) and (C) and
the minimum cost and benefit requirements of
paragraph (4)(B) are met, and
``(iv) with respect to which the vesting
requirements of subsection (c)(2) are met
(determined by treating such transfer as a
qualified transfer).
``(B) Use for active benefits.--
``(i) In general.--Except as provided in
clause (ii), a transfer of excess health assets
for purposes of this subsection shall be used
only to fund the pension plan.
``(ii) Transfer to voluntary employees'
beneficiary association.--A transfer described
in subparagraph (A)(i)(II) may be made only--
``(I) in the case of a defined
benefit plan, to the extent a transfer
to such plan as provided in
subparagraph (A)(i)(I) would cause the
plan to have a funding excess or
increase the funding excess of the plan
or, if the transfer is made in
connection with the termination of the
defined benefit plan, to the extent a
transfer to such plan would exceed the
amount necessary to satisfy the pension
liabilities of the terminating plan, or
``(II) in the case of a pension
plan which is not a defined benefit
plan.
Any transfer under the preceding sentence to a
voluntary employees' benefit association (as
defined in section 501(c)(9)) shall be used
only to pay any benefits permitted to be paid
by such association to any members of such
association (other than key employees not taken
into account under subsection (e)(1)(E)).
``(iii) Funding excess.--For purposes of
clause (ii), the term `funding excess' with
respect to a plan year means the excess, if
any, of--
``(I) the fair market value of the
assets of the defined benefit plan
(other than applicable assets, as
defined in paragraph (2)(D)), over
``(II) 110 percent of the present
value of all pension benefits earned or
accrued under the plan, as determined
for purposes of determining the
adjusted funding target attainment
percentage pursuant to section 436(j).
``(C) Only 1 transfer per year.--No more than 1
transfer with respect to any plan may be made under
subparagraph (A) during a taxable year. For purposes of
the preceding sentence, any transfer portions of which
are described in both subclauses (I) and (II) of
subparagraph (A)(i) shall be treated as 1 transfer.
``(4) Limitations on employer.--
``(A) Deduction limitations.--For purposes of this
title, no deduction shall be allowed--
``(i) for the transfer of any amount under
paragraph (3)(A),
``(ii) for benefits paid out of the assets
(and income) so transferred, or
``(iii) for any amounts to which clause
(ii) does not apply and which are paid for
benefits described in paragraph (3)(B)(ii) for
the taxable year to the extent such amounts are
not greater than the excess (if any) of--
``(I) the amount determined under
clause (i) (and income allocable
thereto), over
``(II) the amount determined under
clause (ii).
``(B) Minimum cost and benefit requirements.--Each
plan or arrangement under which benefits funded as
described in paragraph (3)(B)(ii) are provided shall
provide that--
``(i) the applicable employer cost for each
of the 5 taxable years beginning with the year
of the transfer under paragraph (3)(A) shall
not be materially less than the higher of the
applicable employer costs for the year of the 2
taxable years immediately preceding the taxable
year of such transfer, or
``(ii) benefits provided under the plan or
arrangement shall not be materially reduced
during the 5 year period described in clause
(i).
For purposes of clause (i), the term `applicable
employer cost' shall be determined under rules similar
to the rules of subparagraphs (B) and (C) of subsection
(c)(3), as applicable to the benefit being provided
under such plan or arrangement.
``(5) Coordination with sections 430 and 433.--In the case
of any assets transferred to a pension plan pursuant to
paragraph (3), such assets shall, for purposes of this section
and sections 430 and 433, be treated as assets in the plan.''.
(b) Conforming Amendments.--
(1) Subsection (h) of section 401 of the Internal Revenue
Code of 1986 is amended by adding at the end the following:
``Nothing in this subsection or this section shall prevent a
plan from transferring amounts from an account established
under this subsection pursuant to the provisions of section
420(h).''.
(2) Subparagraph (B) of section 420(c)(1) of such Code is
amended by adding at the end the following new clause:
``(iii) Coordination with transfers of
excess health assets.--Clauses (i) and (ii)
shall not apply to the amount of any excess
health assets transferred from a health
benefits account to the plan pursuant to
subsection (h)(3)(A).''.
(3) Subsection (e) of section 420 of such Code is amended
by adding at the end the following new paragraph:
``(8) Coordination with transfers of excess health
assets.--
``(A) In general.--A qualified transfer or portion
thereof shall not be subject to the limitations of
subsections (b)(3), (c)(1), (f)(2)(C), or (f)(2)(E) to
the extent an amount equal to such transfer (or
portion) is transferred during the same taxable year
under subsection (h).
``(B) Minimum cost and benefit requirements.--The
requirements of subsection (h)(4)(B) shall apply in
lieu of subsections (c)(3) and (f)(2)(D) in the case of
a transfer or portion thereof to which subparagraph (A)
applies.''.
(4) Subsection (l) of section 430 of such Code is amended
by adding at the end the following: ``Notwithstanding the
preceding sentence, any assets transferred to the plan pursuant
to section 420(h) shall be treated as assets in the plan.''.
(5) Section 4 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1003) is amended by adding at the end
the following new subsection:
``(d) Transfers of Excess Health Assets.--A pension plan shall not
be treated as failing to meet the requirements of this subchapter
solely by reason of any transfer made as permitted by section 420(h) of
the Internal Revenue Code of 1986.''.
(6) Section 303(l) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1083(l)) is amended by adding
at the end the following: ``Notwithstanding the preceding
sentence, any assets transferred to the plan pursuant to
section 420(h) of such Code shall be treated as assets in the
plan.''.
(7) Section 408(b)(13) of such Act (29 U.S.C. 1108(b)(13))
is amended by striking the period at the end and inserting ``,
or any transfer of excess health assets permitted under section
420(h) of such Code (as in effect on the date of the enactment
of the Strengthening Benefit Plans Act of 2025).''.
(c) Notice Requirements.--Section 101(e) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021(e)) is amended by adding at
the end the following new paragraph:
``(4) Transfers of excess health assets.--
``(A) Notice to participants.--Not later than 60
days before the date of a transfer by an employee
pension benefit plan of excess health assets pursuant
to section 420(h)(1) of the Internal Revenue Code of
1986, the administrator of the plan shall provide
notice (in such manner as the Secretary may prescribe)
of such transfer to each participant and beneficiary
eligible to receive benefits paid from the health
benefits account under section 401(h) of such Code from
which the transfer is to be made. Such notice shall
include information with respect to the amount of
excess health assets to be transferred, the plan or
voluntary employees' beneficiary association to which
the transfer is to be made, and the amount of pension
benefits of the participant which will be
nonforfeitable immediately after the transfer.
``(B) Notice to secretaries, etc.--Rules similar to
the rules of paragraph (2) shall apply for purposes of
this paragraph.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2024.
TITLE II--SUPPORTING ACTIVE EMPLOYEES WITH RETIREMENT CONTRIBUTIONS
SEC. 201. TRANSFER OF SURPLUS DEFINED BENEFIT PLAN ASSETS TO DEFINED
CONTRIBUTION PLAN.
(a) In General.--Section 401 of the Internal Revenue Code of 1986
is amended by redesignating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new subsection:
``(p) Transfer of Surplus Defined Benefit Plan Assets to Defined
Contribution Plan.--
``(1) In general.--
``(A) Transfer permitted.--If an employer
maintaining a defined benefit plan establishes or
maintains a defined contribution plan which would be a
qualified replacement plan (as defined in section
4980(d)(2)) with respect to the defined benefit plan
but for the fact that the defined benefit plan is not
terminated, subject to the requirements of paragraphs
(3) and (4), any surplus assets of the defined benefit
plan may be transferred to the defined contribution
plan.
``(B) Treatment of amount transferred.--In the case
of the transfer of any amount under subparagraph (A)--
``(i) such amount shall not be includible
in the gross income of the employer,
``(ii) no deduction shall be allowable with
respect to such transfer, and
``(iii) such transfer shall not be treated
as an employer reversion for purposes of
section 4980.
``(2) Surplus assets.--For purposes of this subsection, the
term `surplus assets' means the excess of assets of the defined
benefit plan over an amount equal to 110 percent of the value
of plan liabilities used to determine premiums imposed under
title IV of the Employee Retirement Income Security Act of 1974
for the plan year of the transfer.
``(3) Vesting of benefits.--The requirements of this
paragraph are met if all benefits under the defined benefit
plan become nonforfeitable in the same manner which would be
required if the plan had terminated immediately before the
transfer (or in the case of a participant who separated during
the 1-year period ending on the date of the transfer,
immediately before such separation).
``(4) No reduction in benefits.--The requirements of this
paragraph are met if, during the period beginning with the year
of the transfer and ending 4 plan years after the last plan
year during which the replacement plan is funded by the
transfer, no benefits under the replacement plan are
reduced.''.
(b) Conforming Amendments.--
(1) Section 4 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1003), as amended by section 101, is
further amended by adding at the end the following new
subsection:
``(e) Transfers of Surplus Defined Benefit Plan Assets.--A pension
plan shall not be treated as failing to meet the requirements of this
subchapter solely by reason of any transfer made as permitted by
section 401(p) of the Internal Revenue Code of 1986.''.
(2) Section 408(b)(13) of such Act (29 U.S.C. 1108(b)(13)),
as amended by section 101, is further amended by inserting ``or
of surplus defined benefit plan assets permitted under section
401(p) of such Code (as so in effect)'' before the period at
the end.
(c) Notice Requirements.--Section 101(e) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021(e)), as amended by section
101, is further amended by adding at the end the following new
paragraph:
``(5) Transfers of surplus defined benefit plan assets.--
Rules similar to the rules of paragraph (4) shall apply in the
case of any transfer by an employee pension benefit plan of
surplus defined benefit plan assets pursuant to section 401(p)
of the Internal Revenue Code of 1986.''.
(d) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2025.
<all>