IRS Releases Secure 2.0 Emergency Savings Account Guidance

By Melanie Waddell

News January 12, 2024 at 02:18 PM

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The Internal Revenue Service issued initial guidance Friday to help employers implement pension-linked emergency savings accounts (PLESAs), which were authorized under the Secure 2.0 Act.

PLESAs, as the IRS explains, "are individual accounts in defined contribution plans and are designed to permit and encourage employees to save for financial emergencies."

PLESAs are Roth accounts.

"This means that contributions are not tax deductible, but withdrawals are generally tax free," the IRS explains. "Participants can withdraw funds held in the PLESA at least once a month, as necessary."

Employers can offer PLESAs in plan years beginning after Dec. 31, 2023, according to the IRS.

The agency explains that this means that, in some cases, eligible employees could have begun contributing to a PLESA as early as Jan. 1, 2024.

"Subject to certain restrictions, matching contributions are made with respect to PLESA contributions at the same rate as contributions to the linked defined contribution plan," the IRS states.

"Employees who are eligible to participate in an employer's defined contribution plan and qualify to contribute to a PLESA, if their employer offers one, may contribute to the PLESA even if they don't participate in the employer's defined contribution plan," the IRS notice said.

In general, the maximum balance in a participant's PLESA (attributable to contributions) is $2,500, though employers can choose to set a lower limit.

"Guidance on reasonable measures employers who offer PLESAs can take to discourage potential manipulation of the PLESA matching contribution rules can be found in Notice 2024-22," according to the IRS.

The notice also requests public comment.

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