Emergency savings accounts linked to individual account plans
Provides employers the option to offer their non-highly compensated employees plan-linked emergency savings accounts. Employers may automatically opt employees into these accounts at no more than 3% of their salary, and the portion of an account attributable to the employee’s contribution is capped at $2,500 (or lower as set by the employer). Once the cap is reached, the additional contributions can be directed to the employee’s Roth defined contribution plan or stopped until the balance attributable to contributions falls below the cap. Contributions are made on a Roth-like basis and are treated as elective deferrals for purposes of retirement matching contributions with an annual matching cap set at the maximum account balance – $2,500 or lower as set by the plan sponsor. The first four withdrawals from the account each year may not be subject to any distribution fees or charges. At separation from service, employees may take their emergency savings accounts as cash or roll it into their Roth defined contribution plan or IRA.