SECURE 2.0 and Pension-Linked Emergency Savings Accounts: New DOL and IRS Guidance, Fees, Limitations, Reporting

Description

The SECURE Act 2.0 created PLESAs, which is a special retirement plan feature providing a flexible savings opportunity for eligible non-highly compensated employees. The requirements for these accounts under the SECURE Act must be carefully examined by counsel and plan sponsors to determine whether or not to amend their defined contribution plans to make PLESAs available.

PLESAs are short-term savings accounts within a defined contribution plan, such as a 401(k) or 403(b) plan. These accounts allow eligible non-highly compensated employees to make Roth (after-tax) contributions up to a specified amount that can be withdrawn at any time at their discretion without early distribution penalties or satisfying other requirements. This is a significant feature aimed at assisting non-highly compensated employees, subject to certain requirements and limitations under the SECURE Act 2.0.

Recently, the DOL and IRS issued guidance providing clarification on (1.) eligibility and participation; (2.) contributions, withdrawals, and distributions; (3.) investment requirements; (4.) reporting and disclosure requirements; and (5.) application of IRS anti-abuse rules. ERISA attorneys, plan sponsors, and employers must recognize the impact of PLESAs on defined contribution plan design, implementation, and administration and prepare for IRS and DOL interpretations and requirements.

Listen as our panel discusses including PLESAs within defined contribution plans, key provisions and requirements under SECURE 2.0, and best practices for ERISA compliance for plan sponsors and employers.