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 unem-
ployed individuals from retirement plans. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Expanding Penalty 
Free Withdrawal Act’’. 
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SEC. 2. EXPANSION OF EXCEPTION FOR PENALTY ON 
EARLY DISTRIBUTIONS TO UNEMPLOYED IN-
DIVIDUALS FROM RETIREMENT PLANS. 
(a) IN GENERAL.—Section 72(t)(2) of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following new subparagraph: 
‘‘(I) LONG-TERM
UNEMPLOYMENT
DIS-
TRIBUTIONS.— 
‘‘(i) IN
GENERAL.—Distributions to 
an individual after separation from em-
ployment— 
‘‘(I) if such individual has re-
ceived unemployment compensation 
for 26 consecutive weeks under any 
Federal or State unemployment com-
pensation law by reason of such sepa-
ration (or, if less, for the maximum 
period for which unemployment com-
pensation is available under State law 
applicable to the individual), and 
‘‘(II) if such distributions are 
made during any taxable year during 
which such unemployment compensa-
tion is paid or the succeeding taxable 
year. 
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‘‘(ii) DISTRIBUTIONS
AFTER
REEM-
PLOYMENT; 
SELF-EMPLOYED
INDIVID-
UALS.—Rules similar to the rules of 
clauses (ii) and (iii) of subparagraph (D) 
shall apply for purposes of this subpara-
graph. 
‘‘(iii) LIMITATION.—Clause (i) shall 
not apply to any distribution to the extent 
that such distribution exceeds the lesser 
of— 
‘‘(I) $50,000, reduced by the ag-
gregate amount of distributions which 
are described in clause (i) from all 
plans of the individual during the 1- 
year period ending on the day before 
the date on which such distribution 
was made, or 
‘‘(II) the greater of $10,000 or 
one-half of the aggregate fair market 
value (at the time of the distribution) 
of the individual’s qualified retirement 
plans (as defined in section 4974(c)) 
and the nonforfeitable portion the in-
dividual’s defined contribution plans. 
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‘‘(iv) COORDINATION WITH DISTRIBU-
TIONS TO UNEMPLOYED INDIVIDUALS FOR 
HEALTH
INSURANCE
PREMIUMS.—Dis-
tributions shall not be taken into account 
under this subparagraph if such distribu-
tions are described in subparagraph (D).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions made after Decem-
ber 31, 2020. 
Æ 
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