The Strengthening Benefit Plans Act of 2025 allows employers to redirect excess assets from retiree health benefit accounts and overfunded pension plans to provide additional benefits to active employees. Specifically, it permits employers to transfer "excess health assets" (retiree health plan assets exceeding 125 percent of liabilities) to fund current employee pension or health benefits, and allows transfers of surplus assets from overfunded defined benefit pension plans to defined contribution retirement plans like 401(k)s. These transfers are not treated as taxable income to employers or as prohibited reversions, and employers must notify affected employees at least 60 days before any transfer occurs. The legislation includes safeguards requiring that employer contributions to active employee benefits not be materially reduced and that retirement benefits remain stable for at least four to five years following the transfer. The law takes effect for tax years beginning after December 31, 2024, with provisions for surplus pension plan transfers effective for plan years beginning after December 31, 2025.
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