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[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2964 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 2964
To allow penalty-free distributions from retirement accounts in the
case of certain Federal contractors impacted by Federal Government
shutdowns.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
October 1, 2025
Ms. Cortez Masto (for herself, Mr. Kaine, Mr. Wyden, Ms. Alsobrooks,
Ms. Klobuchar, Mr. Markey, Mrs. Shaheen, Mr. Van Hollen, Mr. Warner,
Mr. Blumenthal, Ms. Rosen, Ms. Hirono, Mr. Durbin, Mr. Padilla, and Mr.
Booker) introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To allow penalty-free distributions from retirement accounts in the
case of certain Federal contractors impacted by Federal Government
shutdowns.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Emergency Relief for Federal
Contractors Act of 2025''.
SEC. 2. TAX-FAVORED WITHDRAWALS FROM RETIREMENT PLANS.
(a) In General.--Section 72(t) of the Internal Revenue Code of 1986
shall not apply to any Federal Government shutdown distribution.
(b) Aggregate Dollar Limitation.--
(1) In general.--
(A) Limitation.--For purposes of this section, the
aggregate amount of distributions received by an
individual which may be treated as Federal Government
shutdown distributions for any taxable year shall not
exceed $30,000.
(B) Inflation adjustment.--In the case of any
taxable year beginning after 2025, the $30,000 amount
under subparagraph (A) shall be increased by an amount
equal to--
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment
determined under section 1(f)(3) of the
Internal Revenue Code of 1986 for the calendar
year in which the taxable year begins,
determined by substituting ``calendar year
2024'' for ``calendar year 2016'' in
subparagraph (A)(ii) thereof.
If any amount as adjusted under the preceding sentence
is not a multiple of $500, such amount shall be rounded
to the nearest multiple of $500.
(2) Treatment of plan distributions.--If a distribution to
an individual would (without regard to paragraph (1)) be a
Federal Government shutdown distribution, a plan shall not be
treated as violating any provision of law merely because the
plan treats such distribution as a Federal Government shutdown
distribution, unless the aggregate amount of such distributions
from all plans maintained by the employer (and any member of
any controlled group which includes the employer) to such
individual for any taxable year exceeds the dollar amount in
effect under paragraph (1)(A).
(3) Controlled group.--For purposes of paragraph (2), the
term ``controlled group'' means any group treated as a single
employer under subsection (b), (c), (m), or (o) of section 414
of the Internal Revenue Code of 1986.
(c) Amount Distributed May Be Repaid.--
(1) In general.--Any individual who receives a Federal
Government shutdown distribution may, at any time during the 3-
year period beginning on the day after the date on which such
distribution was received, make 1 or more contributions in an
aggregate amount not to exceed the amount of such distribution
to an eligible retirement plan of which such individual is a
beneficiary and to which a rollover contribution of such
distribution could be made under section 402(c), 403(a)(4),
403(b)(8), 408(d)(3), or 457(e)(16) of the Internal Revenue
Code of 1986, as the case may be.
(2) Treatment of repayments of distributions from eligible
retirement plans other than iras.--For purposes of the Internal
Revenue Code of 1986, if a contribution is made pursuant to
paragraph (1) with respect to a Federal Government shutdown
distribution from an eligible retirement plan other than an
individual retirement plan, then the taxpayer shall, to the
extent of the amount of the contribution, be treated as having
received the Federal Government shutdown distribution in an
eligible rollover distribution (as defined in section 402(c)(4)
of such Code) and as having transferred the amount to the
eligible retirement plan in a direct trustee-to-trustee
transfer within 60 days of the distribution.
(3) Treatment of repayments of distributions from iras.--
For purposes of the Internal Revenue Code of 1986, if a
contribution is made pursuant to paragraph (1) with respect to
a Federal Government shutdown distribution from an individual
retirement plan (as defined by section 7701(a)(37) of such
Code), then, to the extent of the amount of the contribution,
the Federal Government shutdown distribution shall be treated
as a distribution described in section 408(d)(3) of such Code
and as having been transferred to the eligible retirement plan
in a direct trustee-to-trustee transfer within 60 days of the
distribution.
(d) Definitions.--For purposes of this section--
(1) Federal government shutdown distribution.--The term
``Federal Government shutdown distribution'' means any
distribution which is--
(A) received by an applicable individual from an
eligible retirement plan, and
(B) made during a Federal appropriations lapse with
respect to such individual.
(2) Applicable individual.--The term ``applicable
individual'' means any individual--
(A) who--
(i) is a Federal contractor or an employee
of a Federal contractor, and
(ii) is placed on unpaid leave or working
without pay due to a Federal appropriations
lapse,
(B) who--
(i) is an employee of a Federal grantee or
of a State,
(ii) whose compensation is advanced or
reimbursed in whole or in part by the Federal
Government, and
(iii) is furloughed, working without pay,
or working with a decrease in pay due to a
Federal appropriations lapse, or
(C) who--
(i) is an employee of--
(I) the District of Columbia
Courts,
(II) the Public Defender Service
for the District of Columbia, or
(III) the District of Columbia
government, and
(ii) is furloughed or working without pay
due to a Federal appropriations lapse.
(3) Federal appropriations lapse.--
(A) In general.--The term ``Federal appropriations
lapse'' means any continuous period of at least 2 weeks
during which there is a lapse in Federal appropriations
(including a partial lapse).
(B) Period of lapse.--A period of lapse in Federal
appropriations shall not be a Federal appropriations
lapse with respect to an individual for longer than the
period during which the individual is furloughed, on
unpaid leave, or performing work without pay (or
working with a decrease in pay in the case of an
applicable individual described in paragraph
(2)(B)(iii)) due to such lapse.
(4) Eligible retirement plan.--The term ``eligible
retirement plan'' has the meaning given such term by section
402(c)(8)(B) of the Internal Revenue Code of 1986.
(e) Income Inclusion Spread Over 3-Year Period.--
(1) In general.--Unless the taxpayer elects not to have
this paragraph apply for any taxable year, any amount required
to be included in gross income for such taxable year with
respect to any Federal Government shutdown distribution shall
be so included ratably over the 3-taxable-year period beginning
with such taxable year.
(2) Special rule.--For purposes of paragraph (1), rules
similar to the rules of subparagraph (E) of section 408A(d)(3)
of the Internal Revenue Code of 1986 shall apply.
(f) Special Rules.--
(1) Exemption of distributions from trustee-to-trustee
transfer and withholding rules.--For purposes of sections
401(a)(31), 402(f), and 3405 of the Internal Revenue Code of
1986, a Federal Government shutdown distribution shall not be
treated as an eligible rollover distribution.
(2) Federal government shutdown distributions treated as
meeting plan distribution requirements.--For purposes of the
Internal Revenue Code of 1986, a Federal Government shutdown
distribution shall be treated as meeting the requirements of
sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and
457(d)(1)(A) of such Code.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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