Emergency Savings Act of 2022
Bill: S.4310 | Sponsor: Sen. Booker, Cory A. (D-NJ)
Policy area: Labor and Employment

Summary:
Emergency Savings Act of 2022
This bill permits employer-sponsored retirement plans to offer participants a pension-linked emergency savings account (1) with a maximum account limit of $2,500, and (2) from which withdrawals are not subject to a tax penalty.

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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