January 24, 2019

Kaine, Wyden, Murray, Collins Introduce Bill To Eliminate Penalties For Federal Workers When Accessing Money From Retirement Savings During Shutdown

WASHINGTON, D.C. – Today, U.S. Senators Tim Kaine (D-VA), Ron Wyden (D-OR), and Patty Murray (D-WA), Susan Collins (R-ME) 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.

“This painful shutdown is affecting the ability of federal workers to put food on the table, pay for health care, make rent and mortgage payments, and pay for their children’s education. This bill is an effort to alleviate the additional financial burdens that come with accessing money from retirement savings in this extreme circumstance,” Kaine said.

“This Trump shutdown was wrong from the get-go, and the hundreds of thousands of workers going without paychecks shouldn’t be penalized for drawing temporarily from their retirement savings to get by,” Wyden said. “We are all hearing heartbreaking stories about people selling off possessions and scrambling to find gigs on the side to pay for groceries, gas and rent. This bill is all about finding an immediate solution for the many workers suffering financially as a result of Trump’s shutdown. I’m going to work hard to get this bill across the finish line ASAP.”

“It’s unacceptable that so many workers are struggling to make ends meet for their families and being forced to raid their retirement savings—but unfortunately that’s where we are thanks to President Trump’s government shutdown. This bill takes common sense steps to help make sure federal workers facing this hardship don’t also face hurdles, penalties, or lasting damage to their retirement security as they wait for President Trump and Senate Republicans to finally end this shutdown,” Murray said.

“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,” 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:

  • Ensures 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.
  • Suspends TSP Loan payments during shutdowns. TSP loan repayments are made through payroll deductions. This bill would suspend loan payments until the government reopens.

 

Kaine lodged an objection to the Senate adjourning while hundreds of thousands of federal workers were set to miss their first paycheck, which led to legislation becoming law to back pay federal employees.  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.

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) are cosponsors of the legislation.

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). 

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, click here.

 

###