PLESA's New Guidance

 December 2023, Congress passed the SECURE 2.0 Act and was signed into law December 29, 2022.  The legislation is focused on assisting the American population prepare for their financial future--and strengthening the retirement system as a whole for both employers and employees.

 

SECURE 2.0 Act of 2022 is a law included retirement provisions, including the pension-like emergency saving account (PLESA).  PLESA let's workers contribute to an account in a defined contribution plan that can be used to cover unforeseen financial hardships.  

 

PLESAs allow eligible participants to contribute up to $2,500 (as Roth contributions) to an emergency savings account linked to a defined contribution plan (including a 401(k) plan). Participants can withdraw the funds monthly with no penalty and no requirement to provide documentation of an emergency. The idea is that Americans can build an emergency fund they can easily access while also taking advantage of any employer matching contribution. Because PLESA funds must be available for financial emergencies, they can only be invested in a limited range of investments designed for liquidity and preservation of capital.

 

Source(s): JacksonLewis, received on March 7, 2024; Empower, accessed on March 7, 2024