I 

117TH CONGRESS 

1ST SESSION H. R. 175 

To amend the Internal Revenue Code of 1986 to expand the availability 

of penalty-free distributions to unemployed individuals from retirement plans. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 4, 2021 

Mrs. WATSON COLEMAN (for herself, Ms. JAYAPAL, and Ms. JACKSON LEE) 

introduced the following bill; which was referred to the Committee on 

Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to expand 

the availability of penalty-free distributions to unemployed individuals from retirement plans. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Expanding Penalty 

5 Free Withdrawal Act’’. 


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1 SEC. 2. EXPANSION OF EXCEPTION FOR PENALTY ON 

2 EARLY DISTRIBUTIONS TO UNEMPLOYED IN3 DIVIDUALS FROM RETIREMENT PLANS. 

4 (a) IN GENERAL.—Section 72(t)(2) of the Internal 

5 Revenue Code of 1986 is amended by adding at the end 

6 the following new subparagraph: 

7 ‘‘(I) LONG-TERM UNEMPLOYMENT DIS8 TRIBUTIONS.— 

9 ‘‘(i) IN GENERAL.—Distributions to 

10 an individual after separation from em11 ployment— 

12 ‘‘(I) if such individual has re13 ceived unemployment compensation 

14 for 26 consecutive weeks under any 

15 Federal or State unemployment com16 pensation law by reason of such sepa17 ration (or, if less, for the maximum 

18 period for which unemployment com19 pensation is available under State law 

20 applicable to the individual), and 

21 ‘‘(II) if such distributions are 

22 made during any taxable year during 

23 which such unemployment compensa24 tion is paid or the succeeding taxable 

25 year. 


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1 ‘‘(ii) DISTRIBUTIONS AFTER REEM2 PLOYMENT; SELF-EMPLOYED INDIVID3 UALS.—Rules similar to the rules of 

4 clauses (ii) and (iii) of subparagraph (D) 

5 shall apply for purposes of this subpara6 graph. 

7 ‘‘(iii) LIMITATION.—Clause (i) shall 

8 not apply to any distribution to the extent 

9 that such distribution exceeds the lesser 

10 of— 

11 ‘‘(I) $50,000, reduced by the ag12 gregate amount of distributions which 

13 are described in clause (i) from all 

14 plans of the individual during the 1- 

15 year period ending on the day before 

16 the date on which such distribution 

17 was made, or 

18 ‘‘(II) the greater of $10,000 or 

19 one-half of the aggregate fair market 

20 value (at the time of the distribution) 

21 of the individual’s qualified retirement 

22 plans (as defined in section 4974(c)) 

23 and the nonforfeitable portion the in24 dividual’s defined contribution plans. 


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1 ‘‘(iv) COORDINATION WITH DISTRIBU2 TIONS TO UNEMPLOYED INDIVIDUALS FOR

3 HEALTH INSURANCE PREMIUMS.—Dis4 tributions shall not be taken into account 

5 under this subparagraph if such distribu6 tions are described in subparagraph (D).’’. 

7 (b) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to distributions made after Decem9 ber 31, 2020. 

Æ 


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