Bipartisan legislation has been introduced to increase the amount that workers can set aside for emergencies via pension-linked emergency savings accounts, established under the Secure 2.0 Act.
The bill, the Emergency Savings Enhancement Act, would increase the current $2,500 PLESA contribution cap to $5,000, and eliminate the PLESA exclusion for highly compensated employees.
The bill is led by Sens. Todd Young, R-Ind., and Cory Booker, D-N.J., as well as Reps. Eugene Vindman, D-Va. and Glenn Thompson, R-Pa.
The Secure 2.0 Act authorized short-term, Roth-style pension-linked emergency savings accounts, a fact sheet of the bill explains. Funds in the emergency account can be withdrawn at any time, tax- and penalty-free, to cover unexpected expenses.
"Today, employers can automatically enroll workers in PLESAs alongside their retirement accounts. Workers receive the same match offered for retirement savings," the fact sheet says. "More than 100 million Americans have access to a workplace retirement account and stand to benefit if their employer adds an emergency savings account alongside."
In 2023, IRS and the Labor Department published initial guidance on how to use PLESAs, the fact sheet explains, "but nearly all recordkeepers and plan sponsors have yet to offer the accounts due to administrative barriers."
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