U.S. Rep. Don Beyer introduced legislation Friday that would allow federal employees to withdraw up to $30,000 from their retirement accounts without penalties during the ongoing government shutdown, offering potential relief to thousands of Northern Virginia workers facing missed paychecks.
The Emergency Relief for Federal Workers Act would waive the 10% early withdrawal penalty that federal workers under age 59 currently face when making hardship withdrawals from their Thrift Savings Plan accounts. The bill would also allow employees to restore withdrawn funds to their retirement savings later.
“Government shutdowns are a disaster for federal employees and contractors, and for their families,” Beyer said in a statement. “My bill would ensure feds can withdraw funds from their retirement accounts during a shutdown without penalties, and remove other barriers that increase financial hardship at this difficult time.”
Beyer represents Virginia’s 8th Congressional District, which includes parts of Arlington, Alexandria, and Fairfax County and has one of the highest concentrations of federal workers in the country.
Under current law, federal employees can make hardship withdrawals from their TSP accounts, but they must certify under penalty of perjury that they face a financial hardship. Beyer’s legislation would automatically designate government shutdowns lasting two weeks or longer as qualifying financial difficulties, thereby eliminating the need for additional documentation.
Workers would remain responsible for paying taxes on withdrawn amounts, according to a summary of the bill. The qualified shutdown distribution window would extend from the start of a shutdown lasting at least two weeks until 120 days after it ends, with the $30,000 cap adjusted for inflation in future years.
The bill would also address problems federal employees face with existing TSP loans during shutdowns. Current law makes TSP loans unavailable if a shutdown is expected to last more than 30 days. The legislation would ensure loans remain accessible to federal employees who miss paychecks during a shutdown.
Additionally, the measure would automatically suspend TSP loan payments — which are typically made through payroll deductions — until the government reopens. Outstanding loan payments would then be deducted from workers’ back pay once funding resumes.
Under current rules, federal employees who miss more than two and a half loan payments may have their unpaid loan balance become taxable and potentially be subject to a 10% early withdrawal penalty. The bill would prevent missed loan payments from being treated as taxable distributions during shutdowns.
Sen. Tim Kaine introduced companion legislation in the Senate this week. Rep. Suhas Subramanyam, who represents Virginia’s 10th Congressional District, introduced similar legislation to help federal contractors.
Beyer previously helped pass legislation guaranteeing back pay for federal workers and is cosponsoring related bills to provide back pay to contractors and unemployment benefits to furloughed employees.
