Sponsors (39)
The bill gives furloughed or no-pay federal employees faster access to retirement-account liquidity and protections from immediate tax consequences during shutdowns, at the cost of reduced long-term retirement savings for some workers, modest lost federal revenue, and added administrative complexity.
Federal employees furloughed or working without pay can access immediate liquidity—up to $30,000 (indexed) in penalty-free TSP withdrawals and may take age-based/hardship withdrawals or loans during a shutdown—so they can cover living expenses when pay stops.
Federal employees with TSP loans who miss payments because of a shutdown will not have those missed payments treated as taxable distributions, avoiding immediate tax liabilities and penalties.
Federal employees who take distributions during a shutdown can recontribute up to $30,000 (indexed) by a specified date, allowing many workers to restore retirement savings and avoid permanent losses.
Federal employees who withdraw or borrow from their TSP during shutdowns risk permanently lower retirement account balances if they cannot fully recontribute, reducing future retirement income for those workers and middle-class families.
Taxpayers may face modest fiscal costs because waived 10% early-withdrawal penalties and delayed taxation on loan defaults reduce Treasury receipts.
Treasury/IRS, agencies, and plan administrators will face new implementation, verification, indexing, and processing responsibilities (definitions, timing rules, in-process distributions), raising operational and compliance costs and risk of delays or errors.
Based on analysis of 4 sections of legislative text.
Waives the 10% early‑withdrawal tax and allows special TSP withdrawal/loan protections for furloughed or no‑pay federal employees, up to $30,000 per lapse (indexed).
Official title: To amend the Internal Revenue Code of 1986 to waive certain penalties for affected Federal employees receiving a distribution from the Thrift Savings Plan during a lapse in appropriations, and for other purposes.
Introduced October 3, 2025 by Donald Sternoff Beyer · Last progress October 3, 2025
Allows furloughed or unpaid federal employees affected by a shutdown of at least two weeks to access Thrift Savings Plan (TSP) funds and loans with special tax and repayment protections. It waives the 10% additional tax on early TSP distributions up to $30,000 per lapse (indexed), creates temporary in‑service withdrawal and loan rules for affected employees, and prevents missed TSP loan payments caused by a shutdown from automatically becoming taxable distributions.