Menendez, Booker Co-sponsor Bill to Eliminate Penalties for Unpaid Federal Workers Forced to Access Retirement Savings During Trump Shutdown

Menendez, Booker Co-sponsor Bill to Eliminate Penalties for Unpaid Federal Workers Forced to Access Retirement Savings During Trump Shutdown

WASHINGTON, D.C. – Today, U.S. Senators Bob Menendez and Cory Booker co-sponsored the Emergency Relief for Federal Workers Act of 2019 to make sure federal workers experiencing financial hardship due to the government shutdown can access money from their Thrift Savings Plan (TSP) without penalty.

“I’ve seen the pain and hardship the Trump Shutdown is causing thousands of federal workers in New Jersey– many who’ve been forced to raid their retirement savings just to pay bills or keep food on the table for their families,” said Sen. Menendez. “The least we can do is get rid of the financial penalties that normally come with accessing these accounts until the president comes to his senses and re-opens the government.”

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 would 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.

The bill is co-sponsored by Senators Tim Kaine (D-Va.), Ron Wyden (D-Ore.), Patty Murray (D-Wash.), Susan Collins (R-Maine), Doug Jones (D-Ala.), Michael Bennet (D-CO), Catherine Cortez Masto (D-NV), Debbie Stabenow (D-MI), Chris Van Hollen (D-Md.), Richard Blumenthal (D-Conn.), Tom Carper (D-Del.), Elizabeth Warren (D-Mass.) Tammy Duckworth (D-Ill.), Chris Coons (D-Del.), Bernie Sanders (D-Vt.), Mark Warner (D-Va.), Maggie Hassan (D-N.H.), Sherrod Brown (D-Ohio), Jeanne Shaheen (D-N.H.), Mazie Hirono (D-Hawaii), Dick Durbin (D-Ill), Tina Smith (D-Minn.), Martin Heinrich (D-N.M.), Brian Schatz (D-Hawaii), Amy Klobuchar (D-Minn.), Tom Udall (D-N.M.), Joe Manchin (D-W.V.), and Rob Portman (R-Ohio).

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.