Congressman Don Beyer (D-VA), who represents a Northern Virginia district with one of the nation’s largest populations of federal employees, introduced the Emergency Relief for Federal Workers Act today. The bill would remove penalties for federal employees who need to make hardship withdrawals from their Thrift Savings Plan (TSP) during a prolonged government shutdown. It would also let them restore those funds to their retirement accounts later.
“Government shutdowns are a disaster for federal employees, contractors, and their families. I am working with my colleagues to do all we can to support these workers in every way we can until the shutdown ends,” said Beyer. “My bill would ensure feds can withdraw funds from their retirement accounts during a shutdown without penalties and remove other barriers that increase financial hardship at this difficult time.”
Sen. Tim Kaine (D-VA) introduced companion legislation in the Senate this week. Beyer also cosponsored the Emergency Relief for Federal Contractors Act, introduced by Rep. Suhas Subramanyam (D-VA), which would provide similar relief for federal contractors seeking retirement account withdrawals during a shutdown.
Beyer previously played a key role in passing a law that guarantees back pay for federal workers once a shutdown ends. He also cosponsors the Fair Pay for Federal Contractors Act, introduced by Rep. Ayanna Pressley (D-MA), to extend back pay to contractors. In addition, Beyer co-leads the Help Federal Employees During A Shutdown (FEDS) Act with Rep. Sarah Elfreth, which would make excepted federal workers eligible for temporary unemployment benefits during a shutdown.
The Emergency Relief for Federal Workers Act would:
- Establish government shutdowns are financial hardships. Current law allows TSP participants to withdraw funds due to financial hardship and requires them to certify under penalties of perjury that they are facing a financial hardship and the amount of the request is not greater than the dollar amount of the financial hardship. By establishing government shutdowns that last two weeks or longer as financial hardships, it would eliminate the need for federal employees to make additional demonstrations of this hardship.
- Waive the 10 percent Early Distribution Penalty for federal employees who withdraw funds under financial hardship. Under current law, federal employees who are 59 years old or younger are subject to an additional 10 percent early withdrawal penalty when they withdraw funds from their TSP. The bill would eliminate that penalty but still require them to pay taxes on the funds they withdraw.
- Allow for recontribution of funds. The bill would allow federal employees who withdraw funds from their TSP to recontribute some or all of the funds they have withdrawn from their TSP in order to preserve retirement savings.
- Ensure federal employees can access TSP loans. Under current law, TSP loans are not available if a shutdown is expected to last more than 30 days. This bill would ensure TSP loans will be available to affected federal employees who need to access those funds during a shutdown that causes such employees to miss a paycheck.
- Suspend TSP loan payments during shutdowns and deduct outstanding loan payments from back pay provided after shutdowns. TSP loan repayments are made through payroll deductions. This bill would automatically suspend loan payments until the government reopens. Once the government reopens, the outstanding loan payments will be deducted from federal employees’ back pay.
- Prohibit missed loan payments from becoming taxable distributions during shutdowns. The bill would prohibit any missed loan payments from becoming a taxable distribution that could be subject to the 10 percent withdrawal penalty.
The legislation is cosponsored by U.S. Representatives Sarah Elfreth (D-MD), Suhas Subramanyam (D-VA), Jennifer McClellan (D-VA), James Walkinshaw (D-VA), April McClain Delaney (D-MD), Seth Moulton (D-MA), Nydia Velazquez (D-NY), George Whitesides (D-CA), Jonathan Jackson (D-IL), Jerrold Nadler (D-NY), LaMonica McIver (D-NJ), Bonnie Watson Coleman (D-NJ), Troy Carter (D-LA), Rashida Tlaib (D-MI), Hank Johnson (D-GA), Brad Schneider (D-IL), Dan Goldman (D-NY), Lois Frankel (D-FL), Gwen Moore (D-WI), Shri Thanedar (D-MI), and Jim Costa (D-CA).
Full text of the bill is available here.
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