Guidance on Abuse of 401(k)-Linked Emergency Accounts Imminent

Guidance to prevent abuse of recently authorized retirement plan-linked emergency savings accounts is coming soon, an IRS official said Thursday at the 2024 D.C. Bar Tax Conference.

The SECURE 2.0 Act (Pub. L. No. 117-328) allows employers to help workers who don’t qualify as highly compensated save for a rainy day by contributing up to $2,500 eligible for matching into a liquid sidecar savings account directly tied to their 401(k), 403(b), or 457(b) governmental plans.

The law allows plans to “employ reasonable procedures” to limit workers from abusing guaranteed matches by repeatedly contributing and withdrawing funds from their ...