119-s2003

[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.
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