As of January 1, employers can now offer Pension-Linked Emergency Savings Accounts (PLESAs) to non-highly compensated employees. These short-term savings accounts, integrated within a defined contribution plan, allow eligible employees to withdraw funds without tax penalties or reducing their retirement savings.
Here are the key points about PLESAs:
- Roth Contributions: Contributions to PLESAs must be Roth contributions made on an after-tax basis.
- Contribution Limits: The maximum balance is capped at $2,500, though employers can set a lower limit if they choose.
- Employer Match: If the underlying defined contribution plan includes an employer match, the PLSA contribution must be eligible for the same match rate.
- Flexible Withdrawals: Participants can withdraw funds up to once a month without needing to prove hardship or an emergency.
PLESAs provide a flexible and penalty-free option for employees to manage short-term financial needs while maintaining their long-term retirement savings goals.