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January 17, 2024 at 01:38 PM
The Labor Department on Wednesday released frequently asked questions guidance on pension-linked emergency savings accounts as part of the Secure 2.0 Act.
Lisa Gomez, assistant secretary of Labor for the Employee Benefits Security Administration, said the savings accounts are designed to “enhance retirement security by reducing retirement plan leakage and, at the same time, offering additional flexibility to workers.”
Secure 2.0 amended the Employee Retirement Income Security Act to authorize the accounts, which Labor described as “short-term savings accounts established and maintained as part of an individual’s retirement savings plan, such as a 401(k) plan.”
The department consulted with the Treasury Department and the Internal Revenue Service in developing the FAQs. Labor said that it’s also considering additional guidance.
The IRS issued initial guidance on the accounts on Jan. 12, developed in consultation with Labor, to help employers implement PLESAs, which the agency said are Roth accounts.
“This means that contributions are not tax deductible, but withdrawals are generally tax free,” the IRS explained. “Participants can withdraw funds held in the PLESA at least once a month, as necessary.”
PLESAs, as the IRS explained, “are individual accounts in defined contribution plans and are designed to permit and encourage employees to save for financial emergencies.”A
