Emergency Relief for Federal Workers Act of 2025
Summary
The Emergency Relief for Federal Workers Act of 2025 aims to provide financial relief to federal employees affected by government shutdowns. It amends the Internal Revenue Code and Title 5 of the US Code to waive certain penalties on Thrift Savings Plan (TSP) distributions and provide more flexible loan options during lapses in appropriations. The bill also allows for the re-contribution of withdrawn funds and ensures missed loan payments during shutdowns are not treated as taxable distributions.
Expected Effects
This act will allow federal employees facing financial hardship due to government shutdowns to access their TSP funds without penalty. It also provides a mechanism for restoring those funds once the shutdown ends. The changes to loan rules will give affected employees more flexibility in managing their finances during these periods.
Potential Benefits
- Waives the 10% penalty on early withdrawals from the Thrift Savings Plan (TSP) for affected federal employees during qualified lapses in appropriations.
- Allows employees to re-contribute withdrawn funds to their TSP within 120 days after the lapse in appropriations ends, treating the withdrawal as an eligible rollover.
- Permits more flexible loan options for federal employees furloughed or working without pay during government shutdowns.
- Ensures missed loan payments during qualified lapses in appropriations are not treated as taxable distributions.
- Provides a mechanism for agencies to identify and assist affected employees.
Potential Disadvantages
- The $30,000 limit on penalty-free withdrawals might not be sufficient for all affected employees, especially those in high-cost areas or with significant financial obligations.
- The act could incentivize withdrawals from retirement savings, potentially impacting long-term financial security.
- The complexity of the re-contribution process could create administrative burdens for both employees and the Thrift Savings Plan Board.
- There might be potential for abuse if the verification process for furlough status is not robust.
- The act does not address the root cause of government shutdowns, which could lead to repeated reliance on these emergency measures.
Constitutional Alignment
The bill appears to align with the general welfare clause of the Constitution (Preamble), as it aims to provide relief to federal employees facing hardship due to circumstances beyond their control. It does not appear to infringe upon any specific constitutional rights or limitations. The bill operates within the powers granted to Congress under Article I, Section 8, which includes the power to lay and collect taxes, duties, imposts, and excises, and to make all laws which shall be necessary and proper for carrying into execution the foregoing powers.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).