Congress is considering major changes to U.S. pensions after a new bill was introduced this week.
The proposal, put forward by Democratic Representative Eugene Vindman of Virginia, seeks to make it easier for Americans to build emergency savings without sacrificing their retirement security.
Why It Matters
Vindman’s Congressional bill would modify eligibility rules and raise contribution limits for pension-linked emergency savings accounts—programs that allow workers to set aside funds for unexpected expenses alongside their retirement savings.
If enacted, it could reshape how millions of employees prepare for financial shocks, offering a safety net that complements long-term retirement planning.
It follows the reintroduction last week of the “Retirement Simplification and Clarity Act,” a bipartisan bill that would allow employees to move funds from their 401(k) accounts into personal annuities while still employed, known as “in-service rollovers,” signaling a growing Congressional push to bolster financial resilience amid economic uncertainty.
What To Know
Vindman’s new legislation seeks to build on a Biden-era overhaul to the U.S. pensions system.
It seeks to “modify the eligibility requirements and account contribution maximum for pension-linked emergency savings accounts (PLESAs), and for other purposes.”
Anyone who meets the plan’s age, service, and other standard eligibility rules—and is not classified as a highly compensated employee—can participate in its PLESA.
Vindman’s bill would look to reassess these requirements to improve access for all Americans.
All money that goes into a PLESA is after-tax Roth contributions, meaning employees won’t pay taxes when they take it out.
Under federal rules, the amount you contribute can’t exceed $2,500 (adjusted for inflation over time).
Another part of Vindman’s proposal would be to increase that amount.
Employers can set up automatic enrollment, but if they do, the default contribution rate must be 3 percent or less of employees’ pay—unless they choose a different amount.
Contributions to a PLESA also count toward the overall Internal Revenue Service (IRS) limit on elective deferrals for retirement plans, which is $23,000 for 2024, according to the Department of Labor (DOL).
PLESAs were authorized under the SECURE 2.0 Act of 2022 to help workers build short-term savings for emergencies without tapping into their retirement funds.
They are Roth-style accounts embedded within defined contribution plans (like 401(k) or 403(b)) and became effective for plan years starting after December 31, 2023.
The goal is to reduce “retirement plan leakage”—premature withdrawals that erode long-term savings—by offering a dedicated emergency fund option.
The intent behind PLESAs is to give workers a financial cushion for unexpected expenses—like medical bills or car repairs—without forcing them to raid retirement accounts or take hardship loans.
This feature aims to improve overall financial resilience and encourage greater participation in retirement plans among lower-income workers who might otherwise avoid contributing due to liquidity concerns.
Democratic Representative Jimmy Panetta of California and Republican Representative Darin LaHood of Illinois have also launched new proposals to shake up U.S. retirement plans.
Their bill, reintroduced last week, aims to give Americans more options and clearer information for securing a guaranteed income in retirement.
It also instructs the IRS, which told Newsweek it does not comment on pending legislation, to redesign the required 402(f) notice, making retirement distribution options more understandable.
These actions are intended to help workers make informed decisions about rolling their savings into new plans or keeping them in their current accounts. The proposal also builds on the SECURE 2.0 Act, which raised the age for required minimum distributions (RMDs) from 72 to 75 over the next decade.
What Are People Saying
The Department of Labor says on its website: “Employees who contribute to a PLESA may draw from the PLESA as frequently as monthly without reducing their retirement savings in their accounts within the linked defined contribution plans and without incurring the tax penalties ordinarily associated with early withdrawals from a retirement account.”
Speaking about his bipartisan bill, Democratic Representative Jimmy Panetta of California said: “Navigating the various methods of saving for retirement can get very complicated, very fast. This bipartisan bill helps Americans plan for retirement by making the process simpler and giving them more flexibility. By helping Americans make informed decisions about their savings, we can strengthen their financial security for retirement and the years ahead.”
Republican Representative Darin LaHood of Illinois said: “Hardworking Americans planning for retirement shouldn’t have to face extraneous complications that create uncertainty about their financial future. Providing more flexibility and better guidance during the process will help ensure Americans can properly prepare for retirement and feel confident in their decisions. I am proud to lead this bipartisan effort with Representative Panetta to help eliminate needless hurdles and reduce the confusion surrounding retirement.”
What Happens Next
Vindman’s bill has been sent to the House Committees on Education and Workforce and Ways and Means, where it will be reviewed under each committee’s jurisdiction at a timeline set by the Speaker.
The proposed 401(k) annuity rollover bill has been referred to the House Committee on Ways and Means, where lawmakers will hold hearings and analyze the plan’s implications on retirement readiness and consumer protections.
Both bills would then be voted on by the House and the Senate if they progressed and, if both chambers approve, they will be sent to the President, who can either sign them into law or veto them.
If these changes are enacted, millions of American workers—both in the private sector and federal government—could face new retirement planning realities, with revised timelines and altered income projections.