02 Dec 2025 Fact Sheet: The Emergency Savings Enhancement Act of 2025 in Retirement and Social Security
The Emergency Savings Enhancement Act of 2025—led by Sens. Todd Young (R-IN) and Cory Booker (D-NJ) and Reps. Eugene Vindman (D-VA) and Glenn “GT” Thompson (R-PA)—simplifies a powerful employer tool to help workers save for an emergency through automatic contributions linked to their retirement plans, building on bipartisan reforms enacted under the SECURE 2.0 Act.
Explore the fact sheet:
The Emergency Savings Shortfall
Middle-class prosperity depends on the ability to withstand an emergency expense—a medical procedure, a leaky roof, or a broken transmission, for example. A study by academics and AARP found that one month of income in reserve can be enough for most families to weather this type of challenge. Yet only about half (51%) of households have this much saved. As a result, working families often resort to credit cards or other high-interest debt or take penalized withdrawals from retirement savings.
PLESAs: An Emerging Solution
As part of the SECURE 2.0 Act, Congress sought to reduce household financial strain by passing the Emergency Savings Act of 2022, authored by Sens. Young and Booker. The legislation authorized short-term, Roth-style pension-linked emergency savings accounts (PLESAs):
- Today, employers can automatically enroll workers in PLESAs alongside their retirement accounts. Workers receive the same match offered for retirement savings.
- More than 100 million Americans have access to a workplace retirement account and stand to benefit if their employer adds an emergency savings account alongside.
In 2023, IRS and the Department of Labor published initial guidance to employers on how to use PLESAs, but nearly all recordkeepers and plan sponsors have yet to offer the accounts due to administrative barriers.
Spurring Adoption: The Emergency Savings Enhancement Act of 2025
To incentivize and ease the adoption of PLESAs, the bill makes two key changes:
- The maximum contribution limit would increase from $2,500 to $5,000, allowing participants to build a meaningful emergency savings cushion.
- Eligibility would expand to include all employees who meet a plan’s general requirements for age, service, or other criteria, eliminating the exclusion of highly compensated employees (HCEs). Workers often move in and out of this status during their careers, making it costly for recordkeepers to continuously monitor eligibility. This will not distort the distribution of benefits, since PLESAs entail marginal tax advantages dwarfed by those offered by other savings vehicles.
Coming at no cost to the taxpayer, these changes will reduce complexity, lower costs, and incentivize uptake of a valuable new tool that helps workers withstand financial emergencies.
Download the full fact sheet here.
