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REGULATION/LEGISLATION

Use of excess DB plan assets for health care extended to 2025

Excess defined benefit plan assets can now be used to pay for retiree health care and life insurance through 2025.

President Barack Obama on Friday signed a short-term highway funding bill approved by the Senate Thursday and earlier in the week by the House that allows more time for using those assets.

The highway bill provision adds four years to the expiration date of Internal Revenue Code Section 420(b), which allows defined benefit pension plans that would remain funded above 125% to use assets for retiree medical costs or life insurance.

“The section allows employers to provide really important retiree benefits,” said Kathryn Ricard, senior vice president for retirement policy with the ERISA Industry Committee. In an interview, Ms. Ricard said ERIC is also exploring ways of expanding Section 420 “so more companies can use it for other benefit purposes.”

Section 420 has been amended several times, including as part of the MAP-21 highway bill in 2012, which allowed the use of excess pension assets to purchase life insurance.