View all Articles

SECURE 2.0 & Emergency Savings Accounts: A Guide for Employers 

The SECURE 2.0 Act, signed into law in December 2022, introduced Pension-Linked Emergency Savings Accounts (PLESAs). This optional feature allows employers to offer tax-advantaged emergency savings options to employees within their retirement plans. The IRS recently issued initial guidance to assist employers in implementing PLESAs, offering crucial details for navigating this new program. 

What are PLESAs? 

  • PLESAs are individual accounts set up within defined contribution retirement plans, like 401(k)s, specifically designed for short-term emergency savings. 
  • Employee contributions are not pre-tax, meaning they are not tax-deductible. 
  • Earnings on contributions grow tax-deferred within the account. 
  • Withdrawals are generally tax-free for qualified emergency expenses. 

Key Points for Employers 

  • Employers have the discretion to decide whether to implement the program. 
  • Employers may automatically enroll their employees into PLESAs, but employees must be given the chance to opt out. 
  • The maximum contribution limit is $2,500 per year, per participant. 
  • Employers can match employee contributions to PLESAs, but these matching contributions must be directed to the employee’s retirement savings within the plan. 
  • Participants can withdraw funds at least once per month for qualified emergency expenses, which include: 
    • Medical expenses 
    • Funeral expenses 
    • Certain home repairs 
    • Certain education expenses 

Next Steps 

Employers should carefully review Notice 2024-22 from the IRS for detailed information on implementing and managing PLESAs. The US Department of Labor has also issued guidance in the form of 20 frequently asked questions

If offering PLESAs, employers will need to update their plan documents to clearly communicate the PLESA option to employees, outlining eligibility, contribution limits, and withdrawal rules. 

HR Works, headquartered in Upstate New York, is a human resource management outsourcing and consulting firm serving clients throughout the United States for over thirty years. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.