Strengthening Benefit Plans Act of 2025

This bill amends the Internal Revenue Code to allow employers to transfer excess assets from retiree health benefit accounts and surplus assets from defined benefit pension plans to fund benefits for active employees, including transfers to defined contribution plans and voluntary employees' beneficiary associations.

Title I, Supporting Active Employees with Current Benefit Plan Expenses: Section 101 permits employers to transfer excess health assets from a retiree health benefits account (under Internal Revenue Code section 401(h)) to the pension plan or to a voluntary employees' beneficiary association (VEBA) to fund active employee benefits. Excess health assets are defined as the amount by which applicable assets exceed 125% of total retiree health liabilities. Transfers are tax-free, not treated as employer reversions or prohibited transactions, and subject to deduction limitations and minimum cost or benefit requirements for five years. The transfer must be made in the fiscal year after the excess is determined, and only one transfer per year is allowed. Notice must be given to participants and beneficiaries at least 60 days before the transfer. These changes apply to taxable years beginning after December 31, 2024.

Title II, Supporting Active Employees with Retirement Contributions: Section 201 allows employers to transfer surplus assets from a defined benefit pension plan to a defined contribution plan that would qualify as a replacement plan if the defined benefit plan were terminated. Surplus assets are the excess of plan assets over 110% of plan liabilities used for PBGC premium purposes. The transfer is tax-free and not treated as an employer reversion. Requirements include that all defined benefit plan benefits become nonforfeitable as if the plan terminated immediately before the transfer, and that benefits under the replacement plan are not reduced for up to five years after the transfer. Notice rules similar to those in Title I apply. These changes apply to plan years beginning after December 31, 2025.