Kaine Introduces Bill to Support Federal Employees Experiencing Financial Hardship During Shutdown

WASHINGTON, D.C. - Today, U.S. Senator Tim Kaine (D-VA) introduced the Emergency Relief for Federal Workers Act, legislation to support federal employees who are experiencing financial hardship during a government shutdown. During past shutdowns, many federal employees 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 if the government shutdown is prolonged, while ensuring that funds could be recontributed later on.

"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 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 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bill would allow federal employees who withdraw funds from their TSP to recontribute some or all of the funds they have withdrawn from their TSP in order to preserve retirement savings.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.

During the 2018-19 shutdown, Kaine objected to the Senate going out of session and successfully secured passage of his bill to guarantee back pay for all federal employees. In 2023, Kaine introduced the End Shutdowns Act, legislation to prevent government shutdowns by initiating an automatic continuing resolution or short-term funding bill on October 1 if no appropriations bill is passed by that date. Kaine has also introduced the Modernizing the Federal Calendar Act to reduce the use of harmful stopgap funding bills and the risk of government shutdowns by changing the annual government funding deadline from October 1 to January 1 to better align with when Congress passes year-long funding bills.

The legislation is cosponsored by U.S. Senators Catherine Cortez Masto (D-NV), Angela Alsobrooks (D-MD), Richard Blumenthal (D-CT), Chris Coons (D-DE), Tammy Duckworth (D-IL), John Hickenlooper (D-CO), Mazie Hirono (D-HI), Amy Klobuchar (D-MN), Edward J. Markey (D-MA), Brian Schatz (D-HI), Jeanne Shaheen (D-NH), Chris Van Hollen (D-MD), Mark R. Warner (D-VA), Dick Durbin (D-IL), Cory Booker (D-NJ), Alex Padilla (D-CA), Ron Wyden (D-OR), and Jacky Rosen (D-NV).

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

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