A new bill introduced this week by Senate Democrats looks to support federal employees who are experiencing financial struggles during a government shutdown.
Sen. Tim Kaine, D-Va., introduced the Emergency Relief for Federal Workers Act on Oct. 1, alongside several of his Democratic colleagues, after Congress failed to reach an agreement on how to extend federal funding.
Kaine explained that many federal employees turn to their Thrift Savings Plan (TSP) retirement accounts during a government shutdown to help cover bills. However, there are penalties for withdrawing these funds.
The proposed bill would ensure these federal workers do not face penalties for withdrawing from their TSP accounts if the government shutdown is prolonged. Additionally, it would allow them to recontribute funds to their TSP accounts after the shutdown ends.
“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,” Kaine said in a press release.
“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,” he explained.
Specifically, the bill would establish government shutdowns that last two weeks or longer as a covered “hardship distribution” made by TSP. It would also waive the 10% early withdrawal penalty when they withdraw funds from their TSP.
It would also allow federal employees to recontribute some or all of the funds they have withdrawn from their TSP after the shutdown to preserve their retirement savings.
The bill also would ensure federal employees can access TSP loans, suspend TSP loan payments during shutdowns, deduct outstanding loan payments from back pay provided after shutdowns, and ban missed loan payments from becoming taxable distributions during shutdowns.
During the last government shutdown in 2018-2019, Kaine secured the passage of his bill that guaranteed back pay to federal workers who had been furloughed during the partial government shutdown.
The new legislation is cosponsored by Sens. Catherine Cortez Masto, D-Nev., Angela Alsobrooks, D-Md., Richard Blumenthal, D-Conn., Chris Coons, D-Del., 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 Warner, D-Va., Dick Durbin, D-Ill., Cory Booker, D-N.J., Alex Padilla, D-Calif., Ron Wyden, D-Ore., and Jacky Rosen, D-Nev.
The bill was also introduced in the House by Rep. Suhas Subramanyam, D-Va., and it is cosponsored by Reps. Don Beyer, D-Va., Sarah Elfreth, D-Md., Steven Horsford, D-Nev., Jennifer McClellan, D-Va., Eleanor Holmes Norton, D-D.C., Eric Swalwell, D-Calif., James Walkinshaw, D-Va., and April McClain Delaney, D-Md.