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Democrats introduce bill to ease TSP withdrawals, loans during shutdowns
The Emergency Relief for Federal Workers Act would clarify that lapses in appropriations qualify federal workers to take a hardship withdrawal from the federal government’s 401(k)-style retirement savings program and eliminate the associated 10% penalty in those instances.
By ERICH WAGNEROCTOBER 3, 2025 05:02 PM ET
Sen. Tim Kaine, D-Va., this week introduced new legislation aimed at making it easier for federal workers to take advantage of the federal government’s 401(k)-style retirement savings program to help make ends meet during government shutdowns.
The Emergency Relief for Federal Workers Actwould clarify that lapses in appropriations that last at least two weeks are considered a financial hardship for the purposes of taking an early withdrawal from a federal employee’s Thrift Savings Plan account. It would also waive the 10% early distribution penalty that is applied when a federal employee 59 years old or younger takes money out of their TSP, though not the taxes associated with the withdrawal, and the measure would allow feds who take shutdown-related withdrawals to recontribute some or all of what they withdrew once the government reopens.
The legislation also makes tweaks to how federal workers can take out loans against their TSP savings during appropriation lapses. It ensures that federal workers can access TSP loans if a shutdown lasts at least 30 days, and it suspends the requirement that federal workers make repayments on existing loans for the duration of a shutdown, ensures that outstanding loan payments are deducted from workers’ post-shutdown back pay, and prohibits the TSP from reclassifying a loan into a taxable early distribution as a result of non-repayment during a funding lapse.
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Democrats introduce bill to ease TSP withdrawals, loans during shutdowns
The Emergency Relief for Federal Workers Act would clarify that lapses in appropriations qualify federal workers to take a hardship withdrawal from the federal government’s 401(k)-style retirement savings program and eliminate the associated 10% penalty in those instances.
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