24 Jan 2023

Not Your Father’s 401(k): Adding SECURE 2.0 Pension-Linked Emergency Savings Accounts to Your 401(k) Plan

For plan years beginning in 2024, individual account plans, like 401(k) and 403(b) plans, can offer non-highly compensated employees the opportunity to contribute to a short-term savings account (called a “pension-linked emergency savings account”) within the plan that accepts only designated Roth contributions and permits penalty-free distributions—up to four-times-a year. No hardship needs to be demonstrated! Account balances for this purpose are capped at $2,500. This SECURE 2.0 change recognizes that employees often need emergency funds—so why not make small plan distributions less painless? See Pub. L. No. 117-328, Div. T, §§ 801–804. Read more about this and other SECURE 2.0 provisions in our new practice note on SECURE 2.0.

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