Amendment of Section
Pub. L. 117–328, div. T, title I, § 127(e)(1), (g), Dec. 29, 2022, 136 Stat. 5324, 5330, provided that, applicable to plan years beginning after Dec. 31, 2023, this section is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection:
(e) Pension-linked emergency savings accounts
(1) In general
An applicable retirement plan—
(A) may—
(i) include a pension-linked emergency savings account established pursuant to section 801 of the Employee Retirement Income Security Act of 1974, which, except as otherwise provided in this subsection, shall be treated for purposes of this title as a designated Roth account, and
(ii) either—
(I) offer to enroll an eligible participant in such pension-linked emergency savings account, or
(II) automatically enroll an eligible participant in such account pursuant to an automatic contribution arrangement described in paragraph (4), and
(B) shall—
(i) separately account for contributions to such account and any earnings properly allocable to the contributions,
(ii) maintain separate recordkeeping with respect to each such account, and
(iii) allow withdrawals from such account in accordance with paragraph (7).
(2) Eligible participant
(A) In general
For purposes of this subsection, the term “eligible participant”, with regard to a defined contribution plan, means an individual, without regard to whether the individual is otherwise a participant in such plan, who—
(i) meets any age, service, and other eligibility requirements of the plan, and
(ii) is not a highly compensated employee (as defined in section 414(q)).
(B) Eligible participant who becomes a highly compensated employee
Notwithstanding subparagraph (A)(ii), an individual on whose behalf a pension-linked emergency savings account is established who thereafter becomes a highly compensated employee (as so defined) may not make further contributions to such account, but retains the right to withdraw any account balance of such account in accordance with paragraphs (7) and (8).
(3) Contribution limitation
(A) In general
Subject to subparagraph (B), no contribution shall be accepted to a pension-linked emergency savings account to the extent such contribution would cause the portion of the account balance attributable to participant contributions to exceed the lesser of—
(i) $2,500; or
(ii) an amount determined by the plan sponsor of the pension-linked emergency savings account.
In the case of contributions made in taxable years beginning after December 31, 2024, the Secretary shall adjust the amount under clause (i) at the same time and in the same manner as the adjustment made under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2023. Any increase under the preceding sentence which is not a multiple of $100 shall be rounded to the next lowest multiple of $100.
(B) Excess contributions
To the extent any contribution to the pension-linked emergency savings account of a participant for a taxable year would exceed the limitation of subparagraph (A)—
(i) in the case of an eligible participant with another designated Roth account under the defined contribution plan, the plan may provide that—
(I) the participant may elect to increase the participant’s contribution to such other account, and
(II) in the absence of such a participant election, the participant is deemed to have elected to increase the participant’s contributions to such account at the rate at which contributions were being made to the pension-linked emergency savings account, and
(ii) in any other case, such plan shall provide that such excess contributions will not be accepted.
(4) Automatic contribution arrangement
For purposes of this section—
(A) In general
An automatic contribution arrangement described in this paragraph is an arrangement under which an eligible participant is treated as having elected to have the plan sponsor make elective contributions to a pension-linked emergency savings account at a participant contribution rate that is not more than 3 percent of the compensation of the eligible participant, unless the eligible participant, at any time (subject to such reasonable advance notice as is required by the plan administrator), affirmatively elects to—
(i) make contributions at a different rate, or
(ii) opt out of such contributions.
(B) Participant contribution rate
For purposes of an automatic contribution arrangement described in subparagraph (A), the plan sponsor—
(i) shall select a participant contribution rate under such automatic contribution arrangement which meets the requirements of subparagraph (A), and
(ii) may amend such rate (prior to the plan year for which such amendment would take effect) not more than once annually.
(5) Disclosure by plan sponsor
(A) In general
With respect to a defined contribution plan which includes a pension-linked emergency savings account, the administrator of the plan shall, not less than 30 days and not more than 90 days prior to the date of the first contribution to the pension-linked emergency savings account, including any contribution under an automatic contribution arrangement described in section 801(d)(2) of the Employee Retirement Income Security Act of 1974, or the date of any adjustment to the participant contribution rate under section 801(d)(2)(B)(ii) of such Act, and not less than annually thereafter, shall furnish to the participant a notice describing—
(i) the purpose of the account, which is for short-term, emergency savings;
(ii) the limits on, and tax treatment of, contributions to the pension-linked emergency savings account of the participant;
(iii) any fees, expenses, restrictions, or charges associated with such pension-linked emergency savings account;
(iv) procedures for electing to make contributions or opting out of the pension-linked emergency savings account, changing participant contribution rates for such account, and making participant withdrawals from such pension-linked emergency savings account, including any limits on frequency;
(v) the amount of the intended contribution or the change in the percentage of the compensation of the participant of such contribution, if applicable;
(vi) the amount in the pension-linked emergency savings account and the amount or percentage of compensation that a participant has contributed to such account;
(vii) the designated investment option under section 801(c)(1)(A)(iii) of the Employee Retirement Income Security Act of 1974 for amounts contributed to the pension-linked emergency savings account;
(viii) the options under section 801(e) of such Act for the account balance of the pension-linked emergency savings account after termination of the employment of the participant; and
(ix) the ability of a participant who becomes a highly compensated employee (as such term is defined in section 414(q)) to, as described in section 801(b)(2) of the Employee Retirement Income Security Act of 1974, withdraw any account balance from a pension-linked emergency savings account and the restriction on the ability of such a participant to make further contributions to the pension-linked emergency savings account.
(B) Notice requirements
A notice furnished to a participant under subparagraph (A) shall be—
(i) sufficiently accurate and comprehensive to apprise the participant of the rights and obligations of the participant with regard to the pension-linked emergency savings account of the participant; and
(ii) written in a manner calculated to be understood by the average participant.
(C) Consolidated notices
The required notices under subparagraph (A) may be included with any other notice under the Employee Retirement Income Security Act of 1974, including under section 404(c)(5)(B) or 514(e)(3) of such Act, or under section 401(k)(13)(E) or 414(w)(4), if such other notice is provided to the participant at the time required for such notice.
(6) Employer matching contributions to a defined contribution plan for employee contributions to a pension-linked emergency savings account
(A) In general
If an employer makes any matching contributions to a defined contribution plan of which a pension-linked emergency savings account is part, subject to the limitations of paragraph (3), the employer shall make matching contributions on behalf of an eligible participant on account of the participant’s contributions to the pension-linked emergency savings account at the same rate as any other matching contribution on account of an elective contribution by such participant. The matching contributions shall be made to the participant’s account under the defined contribution plan which is not the pension-linked emergency savings account. Such matching contributions on account of contributions to the pension-linked emergency savings account shall not exceed the maximum account balance under paragraph (3)(A) for such plan year.
(B) Coordination rule
For purposes of any applicable limitation on matching contributions, any matching contributions made under the plan shall be treated first as attributable to the elective deferrals of the participant other than contributions to a pension-linked emergency savings account.
(C) Matching contributions
For purposes of subparagraph (A), the term ‘matching contribution’ has the meaning given such term in section 401(m)(4).
(7) Distributions
(A) In general
A pension-linked emergency savings account shall allow for withdrawal by the participant on whose behalf the account is established of the account balance, in whole or in part at the discretion of the participant, at least once per calendar month and for distribution of such withdrawal to the participant as soon as practicable after the date on which the participant elects to make such withdrawal.
(B) Treatment of distributions
Any distribution from a pension-linked emergency savings account in accordance with subparagraph (A)—
(i) shall be treated as a qualified distribution for purposes of subsection (d), and
(ii) shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A).
(8) Account balance after termination
(A) In general
Upon termination of employment of the participant, or termination by the plan sponsor of the pension-linked emergency savings account, the pension-linked emergency savings account of such participant in a defined contribution plan shall—
(i) allow, at the election of the participant, for transfer by the participant of the account balance of such account, in whole or in part, into another designated Roth account of the participant under the defined contribution plan; and
(ii) for any amounts in such account not transferred under paragraph (1), make such amounts available within a reasonable time to the participant.
(B) Prohibition of certain transfers
No amounts shall be transferred by the participant from another account of the participant under any plan of the employer into the pension-linked emergency savings account of the participant.
(C) Coordination with section 72
Subparagraph (F) of section 408A(d)(3) shall not apply (including by reason of subsection (c)(4)(D) of this section) to any rollover contribution of amounts in a pension-linked emergency savings account under subparagraph (A).
(9) Coordination with distribution of excess deferrals
If any excess deferrals are distributed under section 402(g)(2)(A) to a participant, such amounts shall be distributed first from any pension-linked emergency savings account of the participant to the extent contributions were made to such account for the taxable year.
(10) Treatment of account balances
(A) In general
Except as provided in subparagraph (B), a distribution from a pension-linked emergency savings account shall not be treated as an eligible rollover distribution for purposes of sections 401(a)(31), 402(f), and 3405.
(B) Termination
In the case of termination of employment of the participant, or termination by the plan sponsor of the pension-linked emergency savings account, except for purposes of 401(a)(31)(B), a distribution from a pension-linked emergency savings account which is contributed as provided in paragraph (8)(A)(i) shall be treated as an eligible rollover distribution.
(11) Exception to plan amendment rules
Notwithstanding section 411(d)(6), a plan which includes a pension-linked emergency savings account may cease to offer such accounts at any time.
(12) Anti-abuse rules
A plan of which a pension-linked emergency savings account is part—
(A) may employ reasonable procedures to limit the frequency or amount of matching contributions with respect to contributions to such account, solely to the extent necessary to prevent manipulation of the rules of the plan to cause matching contributions to exceed the intended amounts or frequency, and
(B) shall not be required to suspend matching contributions following any participant withdrawal of contributions, including elective deferrals and employee contributions, whether or not matched and whether or not made pursuant to an automatic contribution arrangement described in paragraph (4).
The Secretary, in consultation with the Secretary of Labor, shall issue regulations or other guidance not later than 12 months after the date of the enactment of the SECURE 2.0 Act of 2022 with respect to the anti-abuse rules described in the preceding sentence.
See 2022 Amendment note below.
Pub. L. 117–328, div. T, title III, § 325, Dec. 29, 2022, 136 Stat. 5359, provided that, applicable to taxable years beginning after Dec. 31, 2023, except as to distributions which are required with respect to years beginning before Jan. 1, 2024, but are permitted to be paid on or after such date, subsection (d) of this section is amended by adding at the end the following new paragraph:
(5) Mandatory distribution rules not to apply before death
Notwithstanding sections 403(b)(10) and 457(d)(2), the following provisions shall not apply to any designated Roth account:
(A) Section 401(a)(9)(A).
(B) The incidental death benefit requirements of section 401(a).
See 2022 Amendment note below.