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[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2966 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 2966
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.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
October 1, 2025
Mr. Kaine (for himself, Ms. Cortez Masto, Ms. Duckworth, Mr. Warner,
Ms. Alsobrooks, Mr. Wyden, Mr. Markey, Mrs. Shaheen, Mr. Hickenlooper,
Mr. Schatz, Mr. Blumenthal, Ms. Hirono, Mr. Van Hollen, Mr. Coons, Mr.
Durbin, Mr. Padilla, Mr. Booker, and Ms. Rosen) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
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.
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 Workers
Act of 2025''.
SEC. 2. WAIVER OF 10-PERCENT ADDITIONAL TAX ON CERTAIN FINANCIAL
HARDSHIP DISTRIBUTIONS FROM THRIFT SAVINGS PLAN.
(a) In General.--Paragraph (2) of section 72(t) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
subparagraph:
``(O) Distributions to federal employees affected
by a qualified lapse in appropriations.--
``(i) In general.--Distributions made from
the Thrift Savings Plan under subchapter III of
chapter 84 of title 5, United States Code, to
an individual who is a Federal employee and who
is on furlough or who is working without pay
due to a qualified lapse in appropriations, if
such distributions are made during the period
of such qualified lapse in appropriations
(including distributions which are in process
as of the end of such lapse).
``(ii) Limitation.--Subclause (i) shall
apply to any distributions only to the extent
the aggregate of such distributions does not
exceed $30,000 with respect to any qualified
lapse in appropriations.
``(iii) Adjustment for inflation.--In the
case of a taxable year beginning after December
31, 2025, the $30,000 amount in clause (ii)
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) 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 after adjustment under the
preceding sentence is not a multiple of $100,
such amount shall be rounded to the next lower
multiple of $100.
``(iv) Qualified lapse in appropriations.--
For purposes of this subparagraph, the term
`qualified lapse in appropriations' means a
period of continuous lapse in Federal
appropriations (including a partial lapse) of
at least 2 weeks.
``(v) Other terms.--For purposes of this
subparagraph, the terms `furlough' and `pay'
have the respective meanings given such terms
by section 7511 of title 5, United States
Code.''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions made after September 30, 2025.
SEC. 3. THRIFT SAVINGS PLAN PROVISIONS.
(a) In-Service Withdrawals.--Section 8433(h) of title 5, United
States Code, is amended by adding at the end the following:
``(5)(A) In this paragraph--
``(i) the term `applicable date', with respect to a covered
age-based withdrawal or covered hardship withdrawal made during
a qualified lapse in appropriations, means the date that is 120
days after the last day of the qualified lapse in
appropriations;
``(ii) the term `covered age-based withdrawal' means a
withdrawal under paragraph (1)(A) made during the period of a
qualified lapse in appropriations;
``(iii) the term `covered hardship withdrawal' means a
withdrawal described in subparagraph (B);
``(iv) the term `furlough' has the meaning given the term
in section 7511;
``(v) the term `pay' has the meaning given the term in
section 7511; and
``(vi) the term `qualified lapse in appropriations' has the
meaning given the term in section 72(t)(2)(O) of the Internal
Revenue Code of 1986.
``(B) The Board shall permit an employee who is on furlough or
working without pay due to a qualified lapse in appropriations to make
a withdrawal based upon financial hardship under paragraph (1)(B) if--
``(i) the withdrawal is made during the period of such
qualified lapse in appropriations (including withdrawals which
are in process as of the end of such lapse); and
``(ii) the aggregate amount of any such withdrawals during
the period described in clause (i) does not exceed $30,000,
subject to adjustments for inflation under subparagraph (E).
``(C) The Board may not limit the number of covered hardship
withdrawals that an employee may make during the period of a qualified
lapse in appropriations, subject to the dollar limitation under
subparagraph (B)(ii).
``(D)(i) An individual who makes 1 or more covered hardship
withdrawals or 1 or more covered age-based withdrawals during the
period of a qualified lapse in appropriations may, before the
applicable date, make 1 or more contributions to the Thrift Savings
Fund in an aggregate amount not to exceed the lesser of--
``(I) the aggregate amount of the withdrawals; or
``(II) $30,000, subject to adjustments for inflation under
subparagraph (E).
``(ii) An individual who makes a contribution to the Thrift Savings
Fund under clause (i) shall, to the extent of the contribution, be
treated as having received the covered age-based withdrawal or covered
hardship withdrawal, as applicable, in an eligible rollover
distribution (as defined in section 402(c)(4) of the Internal Revenue
Code of 1986) and as having transferred the amount to the Thrift
Savings Fund in a direct trustee to trustee transfer within 60 days of
the distribution.
``(iii) For purposes of sections 401(a)(31), 402(f), and 3405 of
the Internal Revenue Code of 1986, a covered age-based withdrawal or
covered hardship withdrawal shall not be treated as an eligible
rollover distribution.
``(E) The dollar limitation under subparagraphs (B)(ii) and
(D)(i)(II) shall be adjusted for inflation in the same manner as under
section 72(t)(2)(O)(iii) of the Internal Revenue Code of 1986.
``(F) The Board may rely on a written representation from an
employee to determine, for purposes of this paragraph, whether the
employee has been furloughed or is working without pay due to a
qualified lapse in appropriations.
``(G) The Director may require each agency affected by a qualified
lapse in appropriations, as part of the shutdown procedures of the
agency, to submit to the Executive Director a list with the name and
social security number of each employee of the agency who will be
furloughed or will work without pay due to the qualified lapse in
appropriations.''.
(b) Loans.--Section 8433(g) of title 5, United States Code, is
amended by adding at the end the following:
``(5)(A) The Board shall prescribe rules allowing loans to be made
under this subsection to employees who are furloughed or working
without pay due to a lapse in appropriations, without regard to the
period of the lapse in appropriations.
``(B) For purposes of subparagraph (A), the terms `furlough' and
`pay' have the meanings given those terms in section 7511.
``(6)(A) In this paragraph--
``(i) the term `furlough' has the meaning given the term in
section 7511;
``(ii) the term `pay' has the meaning given the term in
section 7511;
``(iii) the term `payment missed because of a shutdown'
means a payment--
``(I) on a loan under this subsection made to an
employee who is on furlough or working without pay due
to a qualified lapse in appropriations;
``(II) that is due during the qualified lapse in
appropriations; and
``(III) that was not paid by the employee; and
``(iv) the term `qualified lapse in appropriations' has the
meaning given the term in section 72(t)(2)(O) of the Internal
Revenue Code of 1986.
``(B) The Board shall prescribe rules providing that the full
amount due for outstanding payments missed because of a shutdown by an
employee shall be deducted and withheld from the pay provided to the
employee for the period of the qualified lapse in appropriations.''.
SEC. 4. MISSED LOAN PAYMENTS NOT TO BE TREATED AS TAXABLE DISTRIBUTION
DURING A QUALIFIED LAPSE IN APPROPRIATIONS.
(a) In General.--Paragraph (2) of section 72(p) of the Internal
Revenue Code of 1986 is amended by redesignating subparagraph (E) as
subparagraph (F) and by inserting after subparagraph (D) the following
new subparagraph:
``(E) Special rule for missed loan repayment during
a qualified lapse in appropriations.--Subparagraph (A)
shall not fail to apply to any loan from the Thrift
Savings Plan under subchapter III of chapter 84 of
title 5, United States Code, solely because there is a
payment missed because of a shutdown (as defined in
section 8433(g)(6)(A)(i) of title 5, United States
Code) with respect to such loan, and such loan (or any
portion of such loan) shall not be treated as a taxable
distribution solely because of such missed payment.''.
(b) Effective Date.--The amendment made by this section shall apply
to missed loan payments the due date for which is after September 30,
2025.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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