II 

116TH CONGRESS 

1ST SESSION S. 486 

To waive the penalty for withdrawals from retirement plans for certain Federal employees and contractors affected by a lapse in appropriations, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 14, 2019 

Mr. CASSIDY (for himself and Mr. WARNER) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To waive the penalty for withdrawals from retirement plans 

for certain Federal employees and contractors affected 

by a lapse in appropriations, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SPECIAL RULES FOR USE OF RETIREMENT 

4 FUNDS BY FEDERAL EMPLOYEES AND CON5 TRACTORS AFFECTED BY A LAPSE IN APPRO6 PRIATIONS. 

7 (a) WAIVER OF 10 PERCENT TAX ON EARLY DIS8 TRIBUTIONS.—Section 72(t) of the Internal Revenue Code 


kjohnson on DSK79L0C42 with BILLS
2 

•S 486 IS

1 of 1986 shall not apply to any qualified furlough distribu2 tion. 

3 (b) INCOME INCLUSION SPREAD OVER 2-YEAR PE4 RIOD.—In the case of any qualified furlough distribution, 

5 unless the taxpayer elects not to have this subsection apply 

6 for any taxable year, any amount required to be included 

7 in gross income for such taxable year shall be so included 

8 ratably over the 2-taxable-year period beginning with such 

9 taxable year. 

10 (c) AMOUNT DISTRIBUTED MAY BE REPAID.— 

11 (1) IN GENERAL.—Any individual who receives 

12 a qualified furlough distribution may, at any time 

13 during the 1-year period beginning on the day after 

14 the date on which such distribution was received, 

15 make 1 or more contributions in an aggregate 

16 amount not to exceed the amount of such distribu17 tion to an eligible retirement plan of which such in18 dividual is a beneficiary and to which a rollover con19 tribution of such distribution could be made under 

20 section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 

21 457(e)(16) of the Internal Revenue Code of 1986, as 

22 the case may be. 

23 (2) TREATMENT OF REPAYMENTS OF DISTRIBU24 TIONS FROM ELIGIBLE RETIREMENT PLANS OTHER

25 THAN IRAS.—For purposes of the Internal Revenue 


kjohnson on DSK79L0C42 with BILLS
3 

•S 486 IS

1 Code of 1986, if a contribution is made pursuant to 

2 paragraph (1) with respect to a qualified furlough 

3 distribution from an eligible retirement plan other 

4 than an individual retirement plan, then the tax5 payer shall, to the extent of the amount of the con6 tribution, be treated as having received the qualified 

7 furlough distribution in an eligible rollover distribu8 tion (as defined in section 402(c)(4) of such Code) 

9 and as having transferred the amount to the eligible 

10 retirement plan in a direct trustee to trustee trans11 fer within 60 days of the distribution. 

12 (3) TREATMENT OF REPAYMENTS FOR DIS13 TRIBUTIONS FROM IRAS.—For purposes of the Inter14 nal Revenue Code of 1986, if a contribution is made 

15 pursuant to paragraph (1) with respect to a quali16 fied furlough distribution from an individual retire17 ment plan (as defined by section 7701(a)(37) of 

18 such Code), then, to the extent of the amount of the 

19 contribution, the qualified furlough distribution shall 

20 be treated as a distribution described in section 

21 408(d)(3) of such Code and as having been trans22 ferred to the eligible retirement plan in a direct 

23 trustee to trustee transfer within 60 days of the dis24 tribution. 

25 (d) SPECIAL RULES.— 


kjohnson on DSK79L0C42 with BILLS
4 

•S 486 IS

1 (1) QUALIFIED FURLOUGH DISTRIBUTIONS

2 TREATED AS MEETING PLAN DISTRIBUTION RE3 QUIREMENTS.—For purposes of the Internal Rev4 enue Code of 1986, a qualified furlough distribution 

5 shall be treated as meeting the requirements of sec6 tions 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), 

7 and 457(d)(1)(A) of such Code, whichever is applica8 ble. 

9 (2) RELIANCE ON REPRESENTATION.—An eligi10 ble retirement plan may rely on an individual’s writ11 ten representation that the individual is an applica12 ble individual who has not received previous qualified 

13 furlough distributions in excess of the dollar limita14 tion under subsection (e)(1)(B). 

15 (e) DEFINITIONS.—For purposes of this section— 

16 (1) QUALIFIED FURLOUGH DISTRIBUTION.— 

17 (A) IN GENERAL.—Except as provided in 

18 subparagraph (B), the term ‘‘qualified furlough 

19 distribution’’ means any distribution from an 

20 eligible retirement plan to an applicable indi21 vidual if the distribution is made— 

22 (i) after January 1, 2019, and 

23 (ii) during a covered lapse in appro24 priations or the 90 days immediately fol25 lowing a covered lapse in appropriations. 


kjohnson on DSK79L0C42 with BILLS
5 

•S 486 IS

1 (B) DOLLAR LIMITATION.— 

2 (i) IN GENERAL.—The aggregate 

3 amount of distributions received by an in4 dividual which may be treated as qualified 

5 furlough distributions for any taxable year 

6 shall not exceed the excess (if any) of— 

7 (I) $30,000, over 

8 (II) the aggregate amounts treat9 ed as qualified furlough distributions 

10 with respect to such individual for all 

11 prior taxable years. 

12 (ii) AGGREGATION.—Distributions re13 ceived from all eligible retirement plans 

14 shall be aggregated for purposes of the dol15 lar limitation under clause (i). 

16 (2) ELIGIBLE RETIREMENT PLAN.—The term 

17 ‘‘eligible retirement plan’’ has the meaning given 

18 such term by section 402(c)(8)(B) of the Internal 

19 Revenue Code of 1986. 

20 (3) COVERED LAPSE IN APPROPRIATIONS.—The 

21 term ‘‘covered lapse in appropriations’’ means any 

22 lapse in appropriations that begins on or after De23 cember 22, 2018. 

24 (4) APPLICABLE INDIVIDUAL.—The term ‘‘ap25 plicable individual’’ means any individual— 


kjohnson on DSK79L0C42 with BILLS
6 

•S 486 IS

1 (A) who is a Federal employee furloughed 

2 due to a covered lapse in appropriations, 

3 (B) who is placed on unpaid leave as a 

4 Federal contractor, or as an employee of a Fed5 eral contractor, due to a covered lapse in appro6 priations, and whose sole source of earned in7 come (as defined in section 32(c)(2) of the In8 ternal Revenue Code of 1986) is (but for such 

9 lapse) remuneration as such a contractor or em10 ployee thereof, 

11 (C) who is an employee of a State or other 

12 Federal grantee— 

13 (i) whose compensation is advanced or 

14 reimbursed in whole or in part by the Fed15 eral Government, and 

16 (ii) who is furloughed due to a covered 

17 lapse in appropriations, or 

18 (D) who is an employee of the District of 

19 Columbia Courts, the Public Defender Service 

20 for the District of Columbia, or the District of 

21 Columbia government and is furloughed due to 

22 a covered lapse in appropriations. 

23 Such term shall include any excepted employee and 

24 any employee performing emergency work, as such 


kjohnson on DSK79L0C42 with BILLS
7 

•S 486 IS

1 terms are defined by the Office of Personnel Man2 agement, during a covered lapse in appropriations. 

Æ 


kjohnson on DSK79L0C42 with BILLS