On January 12, the Internal Revenue Service (IRS) released initial guidance on implementation of SECURE 2.0 pension-linked emergency savings accounts (PLESAs). The guidance is in Notice 2024-22.

Generally, SECURE 2.0 authorized, as of plan years beginning on January 1, 2024, the creation of PLESAs. PLESAs are subject to Roth rules (i.e., after-tax contributions and tax-free withdrawals). Employers may make matching contributions to PLESAs, and employees may set up PLESAs even if they do not participate in their employer’s defined contribution plan. Contributions of up to a maximum account balance of $2,500 are permitted.

Notice 2024-22 provides guidance on the reasonable measures’ employers (that offer PLESAs) can take to discourage any potential for manipulation of the PLESA matching contribution rules. These are in addition to the statutory rules—e.g., contributions to the retirement savings plan will be matched ahead of contributions to PLESAs, PLESA matching contributions cannot exceed the employer-set limit up to the statutory $2500 maximum, and employer authority to limit PLESA withdrawals to a maximum of one per month.

The IRS guidance lists as not reasonably certain employer actions to limit manipulation/abuse of PLESAs. Such unreasonable employer actions include:

• PLESA matching contributions may not be forfeited if a plan participant makes withdrawals from a PLESA.
• Plan sponsors may not suspend a participant’s ability to contribute to a PLESA if the participant withdraws from the PLESA.
• Plan sponsors may not suspend matching contributions to the related defined contribution plan.

Notice 2024-22 also states that Rev. Rul. 74-55 and Rev. Rul. 74-56 (related to whether certain withdrawal provisions would cause a plan to fail its 401(a) requirements) do not apply to PLESAs.

The Notice also requests comments from the public on implementation issues related to this new tax-favored savings program. Comments are due by April 5.

Prospects: This is the first in what IRS promises to be a continuing series of guidance on PLESAs specifically and SECURE 2.0 generally.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.