Senator Collins Introduces Bill to Eliminate Penalties for Federal Workers When Accessing Money from Retirement Savings During Shutdown
Washington, D.C. – Today, U.S. Senators Susan Collins (R-ME), Tim Kaine (D-VA), Ron Wyden (D-OR), and Patty Murray (D-WA) introduced the Emergency Relief for Federal Workers Act of 2019 to ensure that federal employees can access money from their Thrift Savings Plan (TSP) without penalty. The bill would waive penalties and contribution prohibitions as a result of financial hardship during the government shutdown.
“Throughout the partial government shutdown, I have been working to reopen the government as quickly as possible and mitigate the impact on hundreds of thousands of federal employees and their families. These families are being unfairly and seriously harmed, and they have no idea when they will receive their next paycheck. Our bill would ease some of the financial pressure they are facing by allowing them to use funds in their TSP accounts without penalty to pay for necessities like housing, food, utilities, and other bills,” Senator Collins said. “A new law I co-authored guarantees that federal workers will be paid retroactively upon the government reopening. As soon as these families receive their back pay, they will be able to recontribute the money they withdrew from their TSP accounts so that their retirement savings remain intact.”
The Emergency Relief for Federal Workers Act of 2019 would ensure federal workers are not penalized for making withdrawals from their retirement savings and gives them the opportunity to recontribute funds to their TSP accounts after the shutdown ends. The bill:
· Defines government shutdowns as a financial hardship. This bill would ease the process for making withdrawals of up to $30,000, eliminating the need for federal employees to provide additional evidence of financial hardship.
· Waives 10 percent early distribution penalty. This bill would waive the 10 percent penalty for early withdrawal from Thrift Savings Plans for participants who are 59 ½ years old or younger. The bill still makes individuals responsible for paying taxes on the amount of the withdrawal.
· Allows re-contribution of qualified shutdown distribution. In order to preserve long-term retirement savings, this bill would allow federal workers who take a qualified shutdown distribution to re-contribute some or all of the distribution within 120 days of the end of the shutdown.
The bill would also alleviate additional financial burdens for federal workers who want to take out a loan or have difficulty making payments for a current TSP loan as a result of the shutdown. The bill achieves this by:
· Ensuring TSP loans are available during shutdowns. Currently TSP loans are not available if a shutdown is expected to last more than 30 days. This bill would ensure that participants can access TSP loans during a shutdown that causes employees to miss a paycheck.
· Suspending TSP Loan payments during shutdowns. TSP loan repayments are made through payroll deductions. This bill would suspend loan payments until the government reopens.
This Emergency Relief for Federal Workers Act of 2019 allows federal workers who take money out of their retirement plan to recontribute the money once they receive back pay to preserve their long-term retirement savings.
The legislation is cosponsored by Senators Doug Jones (D-AL), Michael Bennet (D-CO), Catherine Cortez Masto (D-NV), Debbie Stabenow (D-MI), Chris Van Hollen (D-MD), Richard Blumenthal (D-CT), Tom Carper (D-DE), Elizabeth Warren (D-MA), Tammy Duckworth (D-IL), Chris Coons (D-DE), Bernie Sanders (D-VT), Mark Warner (D-VA), Maggie Hassan (D-NH), Bob Menendez (D-NJ), Sherrod Brown (D-OH), Jeanne Shaheen (D-NH), Mazie Hirono (D-HI), Cory Booker (D-NJ), Dick Durbin (D-IL), Tina Smith (D-MN), Martin Heinrich (D-NM), Brian Schatz (D-HI), Amy Klobuchar (D-MN), Tom Udall (D-NM), Joe Manchin (D-WV), and Rob Portman (R-OH).
The bill is also supported by National Treasury Employees Union (NTEU), American Federation of Government Employees (AFGE), AFL-CIO, Professional Aviation Safety Specialists (PASS), International Federation of Professional and Technical Engineers (IFPTE), and the Federal Law Enforcement Officers Association (FLEOA).
Click HERE to read a fact sheet on the Emergency Relief for Federal Workers Act of 2019.
Click HERE To read the bill text of the Emergency Relief for Federal Workers Act of 2019.
