Emergency Relief for Federal Workers Act of 2025
- Bill Number
- H.R. 5674
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-10-03: Referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
- Last Updated
- 2025-12-05T22:53:19Z
AI-Generated Summary
Purpose of the Legislation
The "Emergency Relief for Federal Workers Act of 2025" (H.R. 5674) aims to provide financial relief to federal employees affected by government shutdowns, known as lapses in appropriations. It does this by waiving certain tax penalties on withdrawals from the Thrift Savings Plan (TSP)—a retirement savings plan for federal workers—and by easing rules for accessing funds through withdrawals and loans during these periods.
Key Provisions
- Tax Penalty Waiver for Distributions:
- Exempts a 10% early withdrawal penalty (an extra tax on distributions before age 59½) for TSP withdrawals made by furloughed or unpaid federal employees during a "qualified lapse in appropriations" (a continuous funding gap of at least 2 weeks).
- Limits the waiver to distributions totaling up to $30,000 per lapse (adjusted annually for inflation based on cost-of-living changes).
- Applies to withdrawals processed during the lapse or still in process at its end.
- TSP Withdrawal Rules:
- Allows "in-service withdrawals" (access to funds while still employed) for financial hardship or age-based reasons (typically for those over 59½) during a qualified lapse, up to $30,000 total (inflation-adjusted).
- Removes limits on the number of hardship withdrawals during a lapse.
- Permits repayment of these withdrawals as rollover contributions (tax-deferred transfers) to the TSP within 120 days after the lapse ends, up to the withdrawn amount or $30,000 (whichever is less). Such repayments are treated as direct transfers to avoid taxes.
- The TSP Board can rely on employee self-certification for eligibility and may require federal agencies to provide lists of affected employees during shutdown planning.
- TSP Loan Provisions:
- Enables loans from the TSP during any lapse in appropriations, regardless of the lapse's length.
- Treats missed loan payments due during a qualified lapse as non-taxable; these can be repaid in full from back pay once funding resumes, without triggering a taxable distribution (where unpaid loans are treated as withdrawals subject to taxes and penalties).
- Effective Dates:
- Tax waivers and loan rules apply to actions after September 30, 2025.
- Inflation adjustments begin for tax years after December 31, 2025.
Significant Changes to Existing Law
- Internal Revenue Code (1986) Amendments:
- Adds a new exception to Section 72(t) for the 10% penalty on early TSP distributions during qualified lapses.
- Adds a new rule to Section 72(p) preventing missed TSP loan payments during lapses from being treated as taxable distributions.
- Title 5, U.S. Code Amendments (TSP Governance):
- Expands Section 8433 to allow hardship and age-based withdrawals during lapses, with repayment options and no numerical limits.
- Updates loan rules in Section 8433 to permit borrowing during any lapse and handle missed payments via back pay deductions, overriding prior restrictions tied to lapse duration.
These changes introduce targeted exceptions for shutdown scenarios, which were not previously specified in law, while preserving general TSP and tax rules outside of lapses.
Potential Impacts
- On Federal Employees: Reduces financial stress during shutdowns by allowing penalty-free access to up to $30,000 in savings for essentials like bills or food, without long-term retirement harm if repaid quickly. Prevents unexpected taxes on missed loan payments.
- On Government Agencies: Requires agencies to submit employee lists during shutdown preparations, adding minor administrative burden but aiding efficient fund distribution.
- On TSP Administration: The Federal Retirement Thrift Investment Board gains flexibility in processing requests but must implement new rules, self-certification processes, and inflation adjustments.
- On Citizens and Broader Economy: Indirectly benefits families of federal workers (over 2 million affected in past shutdowns) by stabilizing household finances; no direct impact on non-federal citizens or international relations.
- Fiscal Impact: Potential short-term revenue loss for the IRS from waived penalties, but limited by the $30,000 cap and infrequent shutdowns.
Main Stakeholders Affected
- Federal Employees: Primarily furloughed or unpaid workers (e.g., non-essential staff during shutdowns) who participate in the TSP, including civilians in executive agencies.
- TSP Participants and Administrators: The Federal Retirement Thrift Investment Board, which manages the TSP, and its participants (about 600,000 active withdrawals/loans annually under normal rules).
- Federal Agencies: All executive branch agencies, required to coordinate employee data during lapses.
- Internal Revenue Service (IRS): Handles tax exemptions and reporting for affected distributions and loans.
- Congress: Sponsors (bipartisan group including Rep. Beyer and others) focused on worker protections; referred to House Committees on Ways and Means and Oversight and Government Reform.
Notable Legal, Constitutional, or Political Implications
- Legal Implications: Strengthens worker protections under federal employment law (Title 5) by aligning TSP access with shutdown realities, without altering core tax or retirement principles. Uses defined terms like "furlough" (temporary unpaid leave) and "pay" from existing statutes for clarity, reducing litigation risk over eligibility.
- Constitutional Implications: None significant; supports Article I's appropriations clause by mitigating shutdown effects without infringing on Congress's spending power.
- Political Implications: Addresses recurring shutdown vulnerabilities (e.g., 2018–2019 event affected 800,000 workers), promoting bipartisanship on employee relief. Could set precedent for future fiscal crisis measures but faces debate over encouraging withdrawals versus building emergency savings. Neutral on broader budget politics, focusing solely on individual relief.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Beyer, Donald S. [D-VA-8]
Cosponsors (38)
Rep. Elfreth, Sarah [D-MD-3], Del. Norton, Eleanor Holmes [D-DC-At Large], Rep. Subramanyam, Suhas [D-VA-10], Rep. McClellan, Jennifer L. [D-VA-4], Rep. Walkinshaw, James R. [D-VA-11], Rep. Moulton, Seth [D-MA-6], Rep. Velázquez, Nydia M. [D-NY-7], Rep. Whitesides, George [D-CA-27], Rep. Jackson, Jonathan L. [D-IL-1], Rep. Nadler, Jerrold [D-NY-12], Rep. McIver, LaMonica [D-NJ-10], Rep. Watson Coleman, Bonnie [D-NJ-12], Rep. Carter, Troy A. [D-LA-2], Rep. Tlaib, Rashida [D-MI-12], Rep. Johnson, Henry C. "Hank" [D-GA-4], Rep. Schneider, Bradley Scott [D-IL-10], Rep. Goldman, Daniel S. [D-NY-10], Rep. Frankel, Lois [D-FL-22], Rep. Moore, Gwen [D-WI-4], Rep. Thanedar, Shri [D-MI-13], Rep. Costa, Jim [D-CA-21], Rep. McClain Delaney, April [D-MD-6], Rep. Lieu, Ted [D-CA-36], Rep. Sewell, Terri A. [D-AL-7], Rep. Bell, Wesley [D-MO-1], Rep. Swalwell, Eric [D-CA-14], Rep. Beatty, Joyce [D-OH-3], Rep. Huffman, Jared [D-CA-2], Rep. Soto, Darren [D-FL-9], Rep. Davids, Sharice [D-KS-3], Rep. Pou, Nellie [D-NJ-9], Rep. Sánchez, Linda T. [D-CA-38], Rep. Vindman, Eugene Simon [D-VA-7], Rep. Randall, Emily [D-WA-6], Rep. Kelly, Robin L. [D-IL-2], Rep. DeGette, Diana [D-CO-1], Rep. Williams, Nikema [D-GA-5], Rep. Chu, Judy [D-CA-28]
Recent Actions
- 2025-10-03: Referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
- 2025-10-03: Referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
- 2025-10-03: Introduced in House
- 2025-10-03: Introduced in House
Bill Versions
- Emergency Relief for Federal Workers Act of 2025 — issued 2025-10-03 — PDF (9 pages)