“To allow penalty-free distributions from retirement accounts in the case of certain Federal contractors impacted by Federal Government shutdowns.”
No CRS summary available for this bill.
This section waives the 10% additional tax on early distributions from qualified retirement plans under IRC §72(t) for Federal Government shutdown distributions of up to $30,000 per taxable year (with inflation adjustment after 2025 using 2024 as the base year and rounding to the nearest $500). It defines such distributions as those from an eligible retirement plan to applicable individuals—federal contractors or employees on unpaid leave or without pay, certain federal grantee or state employees furloughed or with reduced pay whose pay is federally funded, or specified District of Columbia employees furloughed or without pay—made during a federal appropriations lapse of at least two continuous weeks (limited to the individual's affected period). Distributions may be repaid to an eligible retirement plan within three years (treated as tax-free rollovers), and income is includible ratably over three taxable years unless the taxpayer elects otherwise. (Thus, affected individuals may access retirement funds penalty-free during shutdowns while preserving tax-deferred status through repayment.)