As part of the SECURE 2.0 law, there’s a new benefit option for employees facing emergencies. It’s called a pension-linked emergency savings account (PLESA) and the provision authorizing it became effective for plan years beginning January 1, 2024. The IRS recently released guidance about the accounts (in Notice 2024-22) and the U.S. Department of Labor (DOL) published some frequently asked questions to help employers, plan sponsors, participants and others understand them.

PLESA basics

The DOL defines PLESAs as “short-term savings accounts established and maintained within a defined contribution plan.” Employers with 401(k), 403(b) and 457(b) plans can opt to offer PLESAs to non-highly compensated employees. For 2024, a participant who earned $150,000 or more in 2023 is a highly compensated employee.

Here are some more details of this new type of account:

• The portion of the account balance attributable to participant contributions can’t exceed $2,500 (or a lower amount determined by the plan sponsor) in 2024. The $2,500 amount will be adjusted for inflation in future years.

• Employers can offer to enroll eligible participants in these accounts beginning in 2024 or can automatically enroll participants in them.

• The account can’t have a minimum contribution to open or a minimum account balance.

• Participants can make a withdrawal at least once per calendar month, and such withdrawals must be distributed “as soon as practicable.”

• For the first four withdrawals from an account in a plan year, participants can’t be subject to any fees or charges. Subsequent withdrawals may be subject to reasonable fees or charges.

• Contributions must be held as cash, in an interest-bearing deposit account or in an investment product.

• If an employee has a PLESA and isn’t highly compensated, but becomes highly compensated as defined under tax law, he or she can’t make further contributions but retains the right to withdraw the balance.

• Contributions will be made on a Roth basis, meaning they are included in an employee’s taxable income but participants won’t have to pay tax when they make withdrawals.

Proof of an event not necessary

A participant in a PLESA doesn’t need to prove that he or she is experiencing an emergency before making a withdrawal from an account. The DOL states that “withdrawals are made at the discretion of the participant.”

These are just the basic details of PLESAs. Contact us if you have questions about these or other fringe benefits and their tax implications.

Student On-Campus Events

Our recruiter and accounting professionals will be attending the following college career fairs and on-campus events. At these events, students will grow their network and explore career opportunities. They will be available to answer any questions and help guide students through the application and interview process.

Podcast

More Money, More Problems? The Unseen Complexities of Bigger Paychecks

In this episode of Tax Insights Podcast, Jeff explores the unexpected drawbacks of a larger paycheck in 2024. Discover the unforeseen complexities of reduced withholdings, increased tax brackets, and standard deductions. Let’s listen in. 

Since July 2023, the IRS has taken a series of actions in response to what it has termed a “flood of ineligible claims” for the Employee Retention Tax Credit (ERTC). Most recently, it launched a Voluntary Disclosure Program (VDP). The program presents a valuable, but temporary, opportunity for eligible employers.

Flood of invalid ERTC claims

The ERTC is a refundable tax credit intended for businesses that 1) continued paying employees while they were shut down due to the pandemic in 2020 and 2021, or 2) suffered significant declines in gross receipts from March 13, 2020, to December 31, 2021.

With the credits worth up to $26,000 per retained employee, fraudulent promoters and marketers quickly pounced, offering to help employers file claims in exchange for large upfront fees or percentages of the money received. But the requirements for the credit are stringent, and many employers were misled into filing claims that have proven to be invalid, leaving those claimants at risk of liability for credit repayment, penalties and interest, as well as other tax problems.

IRS’s response

In the face of the deluge of invalid claims, the IRS intensified audits and criminal investigations of both promoters and businesses filing suspect claims. As of December 2023, it had more than 300 criminal cases underway with claims worth nearly $3 billion, and thousands of ERTC claims had been referred for audit.

The IRS also has instituted a moratorium on the processing of new ERTC claims. And, in October 2023, the agency began offering a withdrawal option for eligible employers that filed a claim but haven’t yet received, cashed or deposited a refund. Withdrawn claims will be treated as if they were never filed, so taxpayers need not fear repayment, penalties or interest.

In late December 2023, the IRS announced another ERTC relief initiative, the VDP. The program is intended for employers that claimed and received credit money but weren’t entitled to it.

VDP nuts and bolts

Employers that participate in the VDP may benefit in several ways. For example, they’re required to repay only 80% of the credit received (if repayment in full isn’t possible, the IRS may authorize an installment plan). They also aren’t required to repay any interest received on an ERTC refund or amend their income tax returns to reduce wage expense.

These employers won’t be subject to penalties or underpayment interest if the 80% repayment is made before the signed closing agreement is returned to the IRS. The 20% reduction won’t be treated as taxable income, and the IRS won’t audit the ERTC on employment tax returns for the tax periods covered by the closing agreement.

An employer can apply for the VDP for each tax period in which:

• Its ERTC claim was 1) processed and paid as a refund that has been cashed or deposited, or 2) paid in the form of a credit applied to that or another tax period
• It believes it wasn’t entitled to the ERTC
• It isn’t under IRS audit for employment taxes
• It isn’t under IRS criminal investigation
• The IRS hasn’t reversed, or notified the employer of its intent to reverse, the ERTC to zero (for example, with a letter or notice disallowing the credit)

Notably, the IRS is sending up to 20,000 letters with proposed tax adjustments for the 2020 tax year to recover ineligible claims, in addition to 20,000 denial letters it sent earlier. The agency continues to work on the 2021 tax year, with more mailings to come. When an employer is identified through this work as receiving excessive or erroneous ERTCs, the IRS will pursue normal tax assessment and collection procedures.

If a third-party payer filed an employment tax return that reported an employer’s ERTC-related wages and credits, the employer can participate in the VDP only through the third-party payer. It’ll be rejected if it applies with its own employer identification number.



Act now

Bear in mind that not every ERTC claim was invalid. If you’re at all uncertain about the validity of your claim, regardless of whether you’ve received payment, we can help you navigate this increasingly complex area of your tax liability. The VDP is open only until March 22, 2024, though, so don’t delay.

Financial Resolutions for 2024: Plan, Review, and Adapt

As we step into the new year, it’s the perfect time to set financial goals that pave the way for a secure future. Ryan Laughlin explores two crucial financial resolutions to consider:

There’s a New Threshold for Electronically Filing Information Returns

Does your business file 10 or more information returns with the IRS? If the answer is yes, brace for a significant rule change that came into effect on January 1, 2024, impacting the 2023 tax year.

Client Feature: The Gateway Collective Brings Socially Inclusive Housing to Green Bay



The Gateway Collective, a new nonprofit started by Wood, the former Executive Director of St. John’s Ministries in Green Bay, WI, is working towards creating a socially inclusive, privately funded housing project named City Center Lofts.