3798.1 / What rules govern the pension-linked emergency savings accounts (PLESAs) created by the SECURE Act 2.0?

Non-highly compensated employees may be entitled to contribute the lesser of (1) 3% of compensation or (2) $2,500 to pension-linked emergency savings accounts (PLESAs) using after-tax dollars if their employer elects to establish a PLESA.

Initial IRS guidance¹ addresses the anti-abuse rules under IRC Section 402A(e)(12). The IRS notes that PLESAs are optional, and plans may stop offering a PLESA option at any time.

PLESAs are treated as Roth accounts (i.e., contributions are made with after-tax dollars and the contributions themselves are not taxable when withdrawn). Participants must be permitted to make withdrawals at least once a month.

If an employer makes matching contributions to the related defined contribution plan, the employer must make matching contributions on behalf of an eligible participant based on their contributions to the PLESA at the same rate as any other matching contributions made based on the participant's elective contributions (the matching contribution will be made to the individual's retirement account, not the PLESA). The matching contributions cannot exceed the maximum account balance under Section 402A(e)(3)(A) for the plan year (matching contributions are first treated as being attributable to the individual's elective deferrals for purposes of determining the limit on the employer match).

The DOL has also released a fact sheet² to help clarify some of the newly released rules governing pension-linked emergency savings accounts (PLESAs).

The guidance clarifies that the employer has discretion in whether to include or exclude earnings on employee contributions when applying the $2,500 contribution cap. For example, the employer can limit the employee's contributions to $2,500 (excluding earnings from the limit). Any earnings on the $2,500 employee contribution will not cause the PLESA to violate the limit. Conversely, the employer can cap the employee's entire account balance at $2,500, prohibiting contributions even if merely earnings on the balance cause the account to exceed $2,500.

However, employers cannot impose an annual limit on employee contributions (for example, employees will be permitted to replenish the account if they deplete the balance throughout the year even if the annual contributions for the year exceed $2,500—the focus is on the account balance at any given time).

Employers must transfer amounts withheld from employee wages as soon as reasonably possible, but no later than the 15th business day of the month immediately following the month in which the contribution is either withheld or received by the employer.



The IRS has published guidance on preventing employees from manipulating the employer matching requirements by funding the PLESA only to receive an employer match, taking a distribution and then re-funding the PLESA to get another match.  Although employers can set lower limits on PLESA account balances and limit withdrawals to once per month, many employers remained concerned about employees manipulating the PLESA rules solely to get the employer match.³



While reasonable anti-abuse procedures are permissible to limit the frequency or amount of employer matching contributions, the IRS did not offer many specifics on procedures that will be deemed “reasonable”.  The guidance provides that a reasonable anti-abuse procedure balances the interests of participants in funding the PLESA for its intended purpose with the plan’s interest in preventing manipulation of the matching rules.  



The IRS did offer examples of anti-abuse procedures that will be deemed unreasonable.  Employers cannot provide that matching contributions are forfeited if the employee withdraws funds from the PLESA.  Similarly, employers cannot suspend the employee’s right to fund the PLESA due to withdrawals and cannot suspend matching contributions made on account of participant elective deferrals to the underlying defined contribution plan.