Early guidance on pension-linked emergency savings accounts


The IRS has released initial, limited guidance (Notice 2024-22) with respect to pension-linked emergency savings accounts (PLESAs), which were added by recent retirement legislation for plan years beginning after Dec. 31, 2023. 


Under this new provision, employer sponsors of individual account plans now have the option to offer their non-highly compensated employees PLESAs. Employers may automatically opt employees into these accounts at no more than 3% of their salary, and the portion of an account attributable to the employee’s contribution is capped at $2,500 (or lower as set by the employer). The cap will be increased periodically for cost-of-living adjustments beginning after 2024. These employee contributions are made on a Roth-like basis and are treated as elective deferrals for purposes of matching contributions under the plan with an annual matching cap set at the maximum account balance (that is, $2,500 or lower as set by the plan sponsor).


The notice is not intended to provide comprehensive guidance regarding PLESAs, but rather provides initial guidance regarding the discretionary anti-abuse rules that plan sponsors can elect to apply. The rules generally provide that defined contribution plans that offer PLESAs (i) may employ reasonable procedures to limit the frequency or amount of matching contributions with respect to employee contributions to the emergency savings account, solely to the extent necessary to prevent manipulation of the rules of the plan to cause matching contributions to exceed the intended amounts or frequency; and (ii) are not required  to suspend matching contributions following a participant’s withdrawal  of contributions from the emergency savings account. 




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