IRS Issues Guidance on PLESA Matching Anti-Abuse Procedures

Employers who make matching contributions to defined contribution plans linked to emergency savings accounts (PLESAs) must make matching contributions based on participants' contributions to PLESAs. 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. According to the IRS, employers can implement reasonable anti-abuse procedures, as long as those procedures balance the interests of participants in funding the PLESA for its intended purpose with the plan’s interest in preventing manipulation of the matching rules. For more information on PLESAs, visit Tax Facts Online. Read More: Link to Q3798.1. Note: Q is updated.