Bill Would Allow Retirement Plan Withdrawals for Federal Employees Affected by Shutdown

Members of the House of Representatives have introduced a bill to provide relief to federal employees affected by the partial government shutdown, H.R. 545, the Financial Relief for Feds Act.

The bill would allow furloughed federal employees, “essential” federal employees working without pay and contractors whose sole source of earned income is their federal contract to make a withdrawal from their retirement savings accounts without the 10% penalty that normally applies. That includes not only the federal Thrift Savings Plan (TSP) but also accounts such as IRAs.

There would be no limit to the number of distributions made to an individual and each distribution would be $4,000, multiplied by the number of 14-day periods beginning during any Federal appropriations lapse with respect to such individual.

In addition, any individual who receives a Federal Government shutdown distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), of the Internal Revenue Code of 1986. These repayments of distributions would be treated as eligible rollovers.

The bill has been referred to the Committee on Ways and Means and the Committee on Oversight and Reform.