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IRS Provides Initial Guidance for Pension-Linked Emergency Savings Accounts

S.J. Steinhardt
Published Date:
Jan 16, 2024

The IRS has provided initial guidance to aid employers in establishing pension-linked emergency savings accounts (PLESAs), Accounting Today reported.

These individual accounts in defined contribution plans are designed to allow and encourage employees to save for financial emergencies. They were authorized by the SECURE 2.0 Act of 2022.

Employers can offer PLESAs in plan years beginning after Dec. 31, 2023, so, in some cases, eligible employees could have begun contributing to a PLESA as early as Jan. 1, 2024.

Employees who are eligible to participate in an employer's defined contribution plan and qualify to contribute to a PLESA, if one is offered, may contribute to it even if they do not participate in the employer's defined contribution plan. In general, the maximum balance in a participant's PLESA (attributable to contributions) is $2,500, although employers can choose to set a lower limit.

PLESAs are treated as designated Roth accounts, meaning that that contributions are not tax deductible, but withdrawals are generally tax free. Participants can withdraw funds held in the PLESA at least once a month, as necessary.

This IRS said that the notice is not intended to provide comprehensive guidance with respect to Section 127 of the SECURE 2.0 Act, but to provide initial guidance regarding anti-abuse rules under section 402A(e)(12) of the Internal Revenue Code to assist in the implementation of SECURE 2.0 Act Section 127 provisions.

Comments should be submitted in writing on or before April 5, and should include a reference to Notice 2024-22. Comments may be submitted electronically via the Federal eRulemaking Portal (type “IRS Notice 2024-22” in the search field on the home page to find this notice and submit comments). Alternatively, comments may be submitted by mail to:

Internal Revenue Service
Attn: CC:PA:LPD:PR (Notice 2024-22), Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044

The Treasury Department and the IRS will publish for public availability any comment submitted electronically or on paper to its public docket, according to the notice.

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