Employers that maintain overfunded pension plans and are looking for ways to fund retiree health and/or group term life should take a fresh look at Section 420 of the Internal Revenue Code ("Section 420"), as amended by a provision tucked away near the end of the massive package of retirement plan changes in SECURE 2.0. Originally set to expire at the end of 2025, the SECURE 2.0 provision extends Section 420 through the end of 2032 and relaxes one of the key requirements to use surplus pension assets to pay retiree health and life insurance benefits for newly created de minimis transfers. We highlight this new option below. Background Section 420 permits a transfer of assets in an overfunded pension plan to a separate health benefits "401(h) account" or an applicable life insurance account, that is part of that plan, to provide the retiree health and/or group term life insurance benefits reasonably estimated to be incurred over a "transfer period" selected by the plan sponsor. The "transfer period" (1) can be limited to the taxable year of the transfer for plans with surplus assets that exceed 125% of the plan’s Code Section 430 funding target and target normal cost […]
K&X Design and Investment Technology, LLC
Invest The Invisible Impact
K&X Design and Investment Technology, LLC
Invest The Invisible Impact
