S. 2003: Strengthening Benefit Plans Act of 2025

This bill, known as the Strengthening Benefit Plans Act of 2025, aims to amend the Internal Revenue Code to allow certain excess assets from pension plans to be used to benefit active employees, while also addressing requirements for retirement contributions. Here’s a detailed overview of its main provisions:

1. Funding Active Employee Benefits

The bill facilitates the transfer of excess health assets from pension plans for the benefit of active employees. Key components include:

• Transfer of Excess Health Assets: Pension plans can transfer excess health assets (the amount by which the health plan's assets exceed 125% of employer liability) to benefit active employees. This transfer will not be considered as taxable income or a failure to meet other tax requirements.
• Limitations on Transfers: Transfers can only occur once per year and must follow specified conditions to be considered qualified.
• Use of Transferred Assets: The assets transferred must be used to fund the pension plan and cannot lower benefits for employees for five years following the transfer.
• Notice Requirements: Plan administrators must inform participants about the transfers at least 60 days in advance.

2. Supporting Active Employees with Retirement Contributions

This section of the bill allows for the transfer of surplus assets from defined benefit plans to defined contribution plans. The main aspects are:

• Transfer of Surplus Defined Benefit Plan Assets: Employers can transfer surplus assets (the amount exceeding 110% of plan liabilities) from a defined benefit plan to a defined contribution plan, as long as specific criteria are met.
• Treatment of Transfers: Transfers will not be counted as taxable income, and no tax deductions will be allowed for the amounts transferred.
• Vesting Requirements: All benefits within the defined benefit plan must become nonforfeitable prior to transferring any assets.
• No Benefit Reductions: Once the transfer occurs, benefits under the defined contribution plan should not be reduced for four years following the last plan year funded by the transferred surplus.

3. Notice Requirements

The bill emphasizes transparency through notice requirements similar to those in the existing Employee Retirement Income Security Act (ERISA). Administrators are required to inform affected participants about asset transfers from both health and defined benefit plans.

4. Effective Dates

The provisions related to excess health assets are effective for taxable years starting after December 31, 2024, while the provisions for transfers of surplus defined benefit plan assets will be effective for plan years starting after December 31, 2025.

Relevant Companies

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