The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act was enacted in December 2022, introducing over 90 modifications to retirement plan and tax regulations. Many of these changes are not widely known and are designed to be implemented gradually over several years, rather than taking effect immediately.

According to a Bankrate survey, more than half of U.S. adults would turn to borrowing when confronted by an emergency expense of $1,000 or more — a figure that has held steady for years. In response, SECURE 2.0 contains provisions related to emergency access to retirement savings, including PLESAs. PLESAs are a financial tool designed to help employees save for emergencies within the framework of their existing retirement plan.

Beginning this year, employers can offer PLESAs linked to employees’ retirement accounts, with the PLESA treated as a Roth, or after-tax, account. Non-highly compensated employees can contribute to their emergency savings account up to a total account balance of $2,500. If the employer provides matching contributions within the plan, it must also match contributions to PLESAs at the same rate as it does for other matching contributions within the plan. Employees can make a tax-free withdrawal at least once per calendar month and the first four withdrawals in a calendar year are not subject to fees.

Please select this link to read the complete article from OSAP Mission Partner Clark Schaefer Hackett (CSH).