Senators Coons, Kaine, colleagues introduce bill to support federal employees experiencing financial hardship during shutdown

WASHINGTON - U.S. Senators Chris Coons (D-Del.) and Tim Kaine (D-Va.) introduced the Emergency Relief for Federal Workers Act, legislation that would support federal employees who are experiencing financial hardship during government shutdowns.

During past shutdowns, many federal employees have turned to their Thrift Savings Plan (TSP) retirement accounts to make hardship withdrawals to cover bills. However, there are penalties for withdrawing these funds and barriers to recontributing funds once the government reopens. This bill would allow federal employees to withdraw funds from their TSP without being penalized in a prolonged government shutdown and ensure those funds could be recontributed later on.

"Delaware's 3,000 federal workers shouldn't have to suffer this month because Congressional Republicans shut down the government," said Senator Coons. "Washington created this problem, and Washington can help alleviate it by allowing federal employees to temporarily rely on their TSP as an emergency fund. Congress should pass this bill and spare ordinary Americans from the financial damage of Washington in-fighting."

"Government shutdowns inflict senseless pain on federal workers. While I successfully passed my bill to guarantee back pay for federal employees during a shutdown, paychecks can still be delayed," said Senator Kaine. "If workers need to withdraw funds from their retirement accounts during a shutdown, this bill would ensure they don't face penalties, that they can access TSP loans, and will address other problems a shutdown can create for TSP account holders."

Specifically, 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% 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% 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.
• 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 repayments 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% withdrawal penalty.

In addition to Senators Coons and Kaine, the legislation is also cosponsored by Senators Catherine Cortez Masto (D-Nev.), Angela Alsobrooks (D-Md.), Richard Blumenthal (D-Conn.), Tammy Duckworth (D-Ill.), John Hickenlooper (D-Colo.), Mazie Hirono (D-Hawaii), Amy Klobuchar (D-Minn.), Edward J. Markey (D-Mass.), Brian Schatz (D-Hawaii), Jeanne Shaheen (D-N.H.), Chris Van Hollen (D-Md.), Mark R. Warner (D-Va.), and Ron Wyden (D-Ore.).

Full text of the bill is available here. A summary of the bill is available here.