[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 4310 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
2d Session
S. 4310
To allow employers to offer pension-linked emergency savings accounts
for financial emergencies, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 25, 2022
Mr. Booker (for himself and Mr. Young) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To allow employers to offer pension-linked emergency savings accounts
for financial emergencies, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Emergency Savings Act of 2022''.
SEC. 2. EMERGENCY SAVINGS ACCOUNTS LINKED TO DEFINED CONTRIBUTION
PLANS.
(a) Employee Pension Benefit Plans.--Section 3 of the Employee
Retirement Income Security Act (29 U.S.C. 1002) is amended--
(1) in paragraph (2)(A), by inserting after the first
sentence the following: ``A pension plan may include a pension-
linked emergency savings account.''; and
(2) by adding at the end the following:
``(45) Pension-linked emergency savings account.--The term
`pension-linked emergency savings account' means an account
established or maintained by a sponsor of a defined
contribution plan for purposes of offering or providing a
participant of such plan the opportunity to maintain a short-
term savings account that--
``(A) is offered as part of such defined
contribution plan;
``(B) accepts only--
``(i) participant contributions which are
treated in the same manner as Roth
contributions for purposes of inclusion in
gross income; and
``(ii) employer contributions which are
includible in gross income of the participant
for purposes of the Internal Revenue Code of
1986; and
``(C) meets the requirements of part 8 of subtitle
B.''.
(b) Pension-Linked Emergency Savings Accounts.--
(1) In general.--Subtitle B of title I of the Employee
Retirement Income Security Act (29 U.S.C. 1021 et seq.) is
amended by adding at the end the following:
``PART 8--PENSION-LINKED EMERGENCY SAVINGS ACCOUNTS
``SEC. 801. PENSION-LINKED EMERGENCY SAVINGS ACCOUNTS.
``(a) In General.--A plan sponsor of a defined contribution plan
may make available to participants of such pension plan a pension-
linked emergency savings account. A plan sponsor that offers
participants a pension-linked emergency savings account may deduct
amounts from each participating employee's compensation in accordance
with subsection (c) and deposit such amounts, and any employer
contributions under such subsection, to an account that meets the
requirements of subsection (b).
``(b) Account Requirements.--
``(1) In general.--A pension-linked emergency savings
account offered in accordance with subsection (a) shall--
``(A) not have a minimum account balance
requirement;
``(B) allow for withdrawal by the participant 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 but, other
than in exceptional circumstances, not later than 1
week from the date on which the participant elects to
make such withdrawal;
``(C) be held as cash, in an interest-bearing
deposit account, or in an investment or insurance
product designed to preserve principal and provide a
reasonable rate of return, whether or not such return
is guaranteed, consistent with liquidity; and
``(D) not be subject to--
``(i) any unreasonable fees, restrictions,
expenses, or charges in connection with such
pension-linked emergency savings account; and
``(ii) any fees in connection with the
withdrawal of funds from such pension-linked
emergency savings account other than reasonable
reimbursement fees imposed for paper mailings
and the handling of paper checks related to
such pension-linked emergency savings account.
``(2) Establishment and termination of account.--
``(A) Establishment of account.--The establishment
of a pension-linked emergency savings account shall be
included in the defined contribution plan document of
the associated defined contribution plan.
``(B) Termination of account.--A plan sponsor may
terminate the pension-linked emergency savings account
feature of an associated defined contribution plan at
any time. Such termination shall be treated as if a
termination of employment had occurred in accordance
with subsection (d), except the reasonable time
described in such subsection shall be as soon as
practicable not later than 60 days after the date of
such termination of the pension-linked emergency
savings account feature of such associated defined
contribution plan.
``(c) Account Contributions.--
``(1) Employer contributions.--
``(A) In general.--Subject to the maximum account
balance under paragraph (3), a plan sponsor may,
without regard to any election otherwise by a
participant, deposit to the pension-linked emergency
savings account of the participant an amount in
addition to the amount contributed by the participant
under paragraph (2).
``(B) Employer contributions.--Employer
contributions shall be included in the gross income of
a participant for purposes of the Internal Revenue Code
of 1986.
``(2) Participant contributions.--
``(A) In general.--Subject to the maximum account
balance under paragraph (3)--
``(i) a plan sponsor may automatically
enroll a participant in the pension-linked
emergency savings account at a participant
contribution rate selected by the plan sponsor,
which, unless the participant affirmatively
elects a different percentage of the
compensation of the participant to be
contributed to the pension-linked emergency
savings account, may not exceed 3 percent of
the compensation of the participant; or
``(ii) a participant may enroll in the
pension-linked emergency savings account at a
participant contribution rate selected by the
participant.
``(B) Control of transfer.--A participant, at any
time (subject to such reasonable advance notice as is
required by the plan administrator), may--
``(i) adjust the participant contribution
rate under subparagraph (A) to the pension-
linked emergency savings account of the
participant; or
``(ii) opt out of or pause for a specified
period of time such contributions.
``(C) Adjustment of participant contribution rate
by plan sponsor.--A plan sponsor may adjust the
participant contribution rate selected by such plan
sponsor described in subparagraph (A)(i) not more than
once annually.
``(3) Account limits.--
``(A) In general.--Subject to subparagraph (B), no
contributions under paragraphs (1) and (2) shall be
accepted to the extent such contributions would cause
the balance of the pension-linked emergency savings
account 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 1, 2023, the Secretary shall
adjust the amount under clause (i) at the same time and
in the same manner as the adjustment made by the
Secretary of the Treasury under section 415(d) of the
Internal Revenue Code of 1986, except that the base
period shall be the calendar quarter beginning July 1,
2022. 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 directed to plan.--To
the extent any elected contributions under paragraphs
(1) and (2) to the pension-linked emergency savings
account of a participant for a taxable year would cause
the balance of the pension-linked emergency savings
account to exceed the maximum account balance described
in subparagraph (A)--
``(i) the participant may be treated as
having elected to increase the participant's
contributions to the associated defined
contribution plan by an amount not more than
the rate at which contributions were being made
to the pension-linked emergency savings
account; and
``(ii) any such contributions shall be
treated as elective deferrals (as such term is
defined in section 402(g)(3) of the Internal
Revenue Code of 1986) under such plan and shall
be contributed to the plan on behalf of the
participant instead of to the pension-linked
emergency savings account.
``(4) Disclosure by plan sponsor of transfer.--
``(A) In general.--Not less than 15 days prior to
the date on which the first transfer under this
subsection occurs, the percentage of compensation and
amount of the participant's compensation transferred
under paragraph (1) is adjusted, or the plan sponsor
adjusts the percentage of compensation of the automatic
participant contribution under paragraph (2)(A)(i), the
plan sponsor shall provide to the participant notice
of--
``(i) the purpose of the account being for
short-term, emergency savings;
``(ii) the amount of the intended
contribution or the change in the percentage of
the compensation of the participant of such
contribution;
``(iii) in accordance with paragraph
(2)(B), the instructions on how to--
``(I) adjust the participant
contribution rate under paragraph
(2)(A) to the pension-linked emergency
savings account of the participant; or
``(II) opt out of or pause for a
specified period of time such
contributions;
``(iv) how such contributions will be
invested;
``(v) the limits on, and tax treatment of,
such contributions;
``(vi) any fees, expenses, or charges
associated with such pension-linked emergency
savings account; and
``(vii) procedures for participant
withdrawals from such pension-linked emergency
savings account, including any limits on
frequency.
``(B) Consolidated notices.--The required notices
under subparagraph (A) may be included with any other
notice under this Act, including under section
404(c)(5)(B) or 514(e)(3), or under section
401(k)(13)(E) or 414(w)(4) of the Internal Revenue Code
of 1986, if such other notice is provided to the
participant not less than 15 days prior to the date
described in such subparagraph and not more than 60
days prior to the date on which the first transfer
under this subsection occurs.
``(5) 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--
``(i) any contribution under paragraph (2)
to a pension-linked emergency savings account
of the participant shall be treated as an
elective deferral for purposes of matching
contributions by such employer to such defined
contribution plan; and
``(ii) such employer shall make matching
contributions on behalf of such participant to
the associated defined contribution plan on
account of such contributions under paragraph
(2) at the same rate as any other matching
contribution on account of an elective deferral
by such participant.
To the extent any such matching contribution exceeds
the maximum account balance under paragraph (3)(A),
such contributions shall be contributed to the plan as
provided in paragraph (3)(B).
``(B) Definitions.--For purposes of subparagraph
(A), the terms `matching contribution' and `elective
deferral' shall have the meanings given such terms in
section 401(m)(4) of the Internal Revenue Code of 1986.
``(d) Account Balance After Termination of Employment.--Upon
termination of employment of the participant, the pension-linked
emergency savings account of such participant shall--
``(1) allow, as relevant, for transfer by the participant
of the account balance of such account, in whole or in part,
into the designated Roth account (within the meaning of section
402A of the Internal Revenue Code of 1986) of the participant
under the associated defined contribution plan; and
``(2) for any amounts in such account not transferred under
paragraph (1), make such amounts available within a reasonable
time not later than the earlier of the date on which the
employer contributing to the plan makes the final compensation
payment related to such employment or 60 days after the date of
such termination--
``(A) to the participant or the beneficiary; or
``(B) as a direct rollover to a Roth IRA (as
defined in section 408A(b) of the Internal Revenue Code
of 1986) of such participant.
``(e) Coordination With Plan Hardship Rules.--Under the terms of
the plan of which a pension-linked emergency savings account is a part,
a participant shall be required to withdraw all amounts in a pension-
linked emergency savings account of the participant before receiving
any plan distribution which is based on financial hardship or any loan
from the plan.
``SEC. 802. ANNUAL NOTICE FOR PENSION-LINKED EMERGENCY SAVINGS ACCOUNT.
``(a) In General.--At least annually, the plan sponsor of a
pension-linked emergency savings account shall provide to the pension-
linked emergency savings account participant a notice containing such
information as the Secretary may require, including a description of--
``(1) the purpose and tax treatment of the pension-linked
emergency savings account and contributions;
``(2) procedures for opting out of the pension-linked
emergency savings account, changing participant contribution
rates for such account, and making withdrawals from such
account, and limits on contributions and withdrawals;
``(3) designated investment options for amounts contributed
to the pension-linked emergency savings account;
``(4) the options under section 801(d) for the account
balance of the pension-linked emergency savings account after
termination of the employment of the participant;
``(5) any fees, expenses, or charges associated with such
pension-linked emergency savings account; and
``(6) the amount that a participant has contributed to the
pension-linked emergency savings account and the amount the
plan sponsor has contributed to such pension-linked emergency
savings account for the plan year, and the account balance.
``(b) Consolidated Notices.--The required notice under subparagraph
(A) may be included with any other notice under this Act if such other
notice is provided to the participant at least annually.
``SEC. 803. PREEMPTION OF STATE ANTI-GARNISHMENT LAWS.
``Notwithstanding any other provision of law, this part shall
supersede any law of a State which would directly or indirectly
prohibit or restrict the use of an automatic contribution arrangement,
in accordance with section 801(c)(2), for a pension-linked emergency
savings account. The Secretary may promulgate regulations to establish
minimum standards that such an arrangement would be required to satisfy
in order for this subsection to apply with respect to such an account.
``SEC. 804. REPORTING AND DISCLOSURE REQUIREMENTS.
``The Secretary shall prescribe such regulations as may be
necessary to address reporting and disclosure requirements for pension-
linked emergency savings accounts in order to prevent unnecessary
reporting and disclosure for such accounts under this Act, including
for purposes of any reporting or disclosure related to pension plans
required by this title or title IV or under the Internal Revenue Code
of 1986.
``SEC. 805. REPORT TO CONGRESS ON MAXIMUM ACCOUNT BALANCE LIMITS.
``The Secretary of Labor and the Secretary of the Treasury shall--
``(1) conduct a study on the use of emergency savings from
a pension-linked emergency savings account regarding--
``(A) whether the maximum account balance under
section 801(c)(3) is sufficient;
``(B) whether the limitation on contributions under
sections 801(c)(2)(A)(i) are appropriate; and
``(C) the participation rate of such accounts by
plan sponsors and participants and the resulting impact
on participant retirement savings, including the impact
on retirement savings leakage and the effect of such
accounts on retirement plan participation by low- and
moderate-income households; and
``(2) not later than 7 years after the date of enactment of
the Emergency Savings Act of 2022, submit to Congress a report
on the findings of the study under paragraph (1).''.
(2) Clerical amendment.--The table of contents in section 1
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1001 note) is amended by inserting after the item
relating to section 734 the following new items:
``Part 8. Pension-Linked Emergency Savings Accounts
``801. Pension-linked emergency savings accounts.
``802. Annual notice for pension-linked emergency savings account.
``803. Preemption of State anti-garnishment laws.
``804. Reporting and disclosure requirements.
``805. Report to Congress on maximum account balance limits.''.
(c) Reporting for a Pension-Linked Emergency Savings Account.--
(1) Alternative methods of compliance.--Section 110(a) of
the Employee Retirement Income Security Act (29 U.S.C. 1030(a))
is amended by inserting ``(including pension-linked emergency
savings accounts offered in conjunction with a pension plan)''
after ``class of pension plans''.
(2) Minimized reporting burden for pension-linked emergency
savings accounts.--Section 101 of such Act (29 U.S.C. 1021) is
amended--
(A) by redesignating subsection (n) as subsection
(o); and
(B) by inserting after subsection (m) the
following:
``(n) Pension-Linked Emergency Savings Accounts.--
``(1) In general.--The requirements of subsection (a) shall
not apply to a pension-linked emergency savings account made
available under section 801.
``(2) Simplified reporting.--Nothing in this subsection
shall preclude the Secretary from providing, by regulations or
otherwise, simplified reporting procedures or requirements for
such a pension-linked emergency savings account.''.
(d) Fiduciary Duty.--Section 404(c) of the Employee Retirement
Income Security Act (29 U.S.C. 1104(c)) is amended by adding at the end
the following:
``(6) Default investment arrangements for a pension-linked
emergency savings account.--For purposes of paragraph (1), a
participant in a pension-linked emergency savings account shall
be treated as exercising control over the assets in the account
with respect to the amount of contributions and earnings which
are invested in accordance with section 801(b)(1)(C).''.
(e) Tax Treatment of Pension-Linked Emergency Savings Accounts.--
(1) In general.--Subpart A of part I of subchapter D of
chapter 1 of the Internal Revenue Code of 1986 is amended by
inserting after section 409A the following new section:
``SEC. 409B. PENSION-LINKED EMERGENCY SAVINGS ACCOUNTS.
``(a) In General.--Any pension-linked emergency savings account
established pursuant to section 801 of the Employee Retirement Income
Security Act of 1974 shall be treated for purposes of this title as
provided in this section.
``(b) Treatment as After-Tax Contributions.--Any contribution to a
pension-linked emergency savings account shall be--
``(1) an employee contribution, or
``(2) if made by an employer, shall be includible in gross
income of the employee.
``(c) Plan Qualifications.--Any plan of which a pension-linked
emergency savings account is a part shall not be treated as failing to
meet any requirement of this chapter solely by reason of including such
account, or solely by reason of allowing distributions from such
account in a manner consistent with section 801(b)(1)(B) of the
Employee Retirement Income Security Act of 1974.
``(d) Coordination With Plan.--
``(1) In general.--No distribution of amounts from a
pension-linked emergency savings account shall be contributed
or rolled over to any eligible retirement plan (as defined in
section 402(c)(8)(B)) except as provided in paragraph (2).
``(2) Rollover on termination of employment.--Upon
termination of employment of the participant with the employer
sponsoring the plan of which a pension-linked emergency savings
account is part, the account balance of such account may be
contributed to--
``(A) a designated Roth account (within the meaning
of section 402A) of the participant, or
``(B) a Roth IRA of the participant,
in accordance with section 801(d) of the Employee Retirement
Income Security Act of 1974. Such contribution shall be treated
in the same manner as a rollover contribution to which section
402A(c)(4) applies or as a qualified rollover contribution
within the meaning of section 408A(e), whichever is applicable,
except that subparagraph (F) of section 408A(d)(3) shall not
apply to such contribution (including by reason of section
402A(c)(4)(D)).
``(e) Coordination With Nondiscrimination Requirements and
Contribution Limitations.--For purposes of paragraphs (4) and (30) of
section 401(a), paragraphs (3), (12), and (13) of section 401(k),
section 401(m), section 403(b)(1)(E), and section 415, contributions to
a pension-linked emergency savings account--
``(1) shall be treated as elective deferrals, and
``(2) shall be aggregated with contributions to the plan of
which such account is a part.
``(f) Hardship Rules.--A plan of which a pension-linked emergency
savings account is a part shall not be treated as failing to meet any
requirement of this chapter solely because under the terms of the plan
a participant is required to withdraw all amounts in a pension-linked
emergency savings account of the participant before receiving any
distribution which is based on financial hardship or any loan from the
plan.
``(g) Exemption From Additional Tax on Early Distributions.--A
pension-linked emergency savings account shall not be treated as a
qualified retirement plan for purposes of section 72(t).
``(h) Treatment of Earnings.--Any earnings on contributions to a
pension-linked emergency savings account shall not be included in gross
income, and distributions from such account shall not be subject to
withholding.''.
(2) Basis recovery.--Section 72(d) of such Code is amended
by adding at the end the following new paragraph:
``(3) Treatment of contributions to a pension-linked
emergency savings account.--For purposes of this section,
contributions to a pension-linked emergency savings account to
which section 409B applies (and any income allocable thereto)
may be treated as a separate contract.''.
(3) Clerical amendment.--The table of sections for subpart
A of part I of subchapter D of chapter 1 of such Code is
amended by inserting after the item relating to section 409A
the following new item:
``Sec. 409B. Pension-linked emergency savings accounts.''.
(f) Joint Regulatory Authority.--The Secretary of Labor and the
Secretary of the Treasury (or a delegate of either such Secretary)
shall have authority to issue joint regulations or other guidance, or
to coordinate in developing regulations or other guidance, to carry out
the purposes of this Act, including adjustment of the maximum benefit
under section 801(c)(3) of the Employee Retirement Income Security Act,
as added by this Act, to account for inflation, as well as expansion of
corrections programs, if necessary.
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