Title: 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.
Policy area: Taxation

Summary:
This bill allows certain employees who are not paid during a lapse in federal appropriations to make penalty-free withdrawals from retirement accounts. The bill applies to employees of the federal government, federal contractors, federal grantees, and the District of Columbia.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 486 Introduced in Senate (IS)]

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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.

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

SECTION 1. SPECIAL RULES FOR USE OF RETIREMENT FUNDS BY FEDERAL 
              EMPLOYEES AND CONTRACTORS AFFECTED BY A LAPSE IN 
              APPROPRIATIONS.

    (a) Waiver of 10 Percent Tax on Early Distributions.--Section 72(t) 
of the Internal Revenue Code of 1986 shall not apply to any qualified 
furlough distribution.
    (b) Income Inclusion Spread Over 2-Year Period.--In the case of any 
qualified furlough distribution, unless the taxpayer elects not to have 
this subsection apply for any taxable year, any amount required to be 
included in gross income for such taxable year shall be so included 
ratably over the 2-taxable-year period beginning with such taxable 
year.
    (c) Amount Distributed May Be Repaid.--
            (1) In general.--Any individual who receives a qualified 
        furlough distribution may, at any time during the 1-year period 
        beginning on the day after the date on which such distribution 
        was received, make 1 or more contributions in an aggregate 
        amount not to exceed the amount of such distribution to an 
        eligible retirement plan of which such individual is a 
        beneficiary and to which a rollover contribution of such 
        distribution could be made under section 402(c), 403(a)(4), 
        403(b)(8), 408(d)(3), or 457(e)(16) of the Internal Revenue 
        Code of 1986, as the case may be.
            (2) Treatment of repayments of distributions from eligible 
        retirement plans other than iras.--For purposes of the Internal 
        Revenue Code of 1986, if a contribution is made pursuant to 
        paragraph (1) with respect to a qualified furlough distribution 
        from an eligible retirement plan other than an individual 
        retirement plan, then the taxpayer shall, to the extent of the 
        amount of the contribution, be treated as having received the 
        qualified furlough distribution in an eligible rollover 
        distribution (as defined in section 402(c)(4) of such Code) and 
        as having transferred the amount to the eligible retirement 
        plan in a direct trustee to trustee transfer within 60 days of 
        the distribution.
            (3) Treatment of repayments for distributions from iras.--
        For purposes of the Internal Revenue Code of 1986, if a 
        contribution is made pursuant to paragraph (1) with respect to 
        a qualified furlough distribution from an individual retirement 
        plan (as defined by section 7701(a)(37) of such Code), then, to 
        the extent of the amount of the contribution, the qualified 
        furlough distribution shall be treated as a distribution 
        described in section 408(d)(3) of such Code and as having been 
        transferred to the eligible retirement plan in a direct trustee 
        to trustee transfer within 60 days of the distribution.
    (d) Special Rules.--
            (1) Qualified furlough distributions treated as meeting 
        plan distribution requirements.--For purposes of the Internal 
        Revenue Code of 1986, a qualified furlough distribution shall 
        be treated as meeting the requirements of sections 
        401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A) 
        of such Code, whichever is applicable.
            (2) Reliance on representation.--An eligible retirement 
        plan may rely on an individual's written representation that 
        the individual is an applicable individual who has not received 
        previous qualified furlough distributions in excess of the 
        dollar limitation under subsection (e)(1)(B).
    (e) Definitions.--For purposes of this section--
            (1) Qualified furlough distribution.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``qualified furlough distribution'' means 
                any distribution from an eligible retirement plan to an 
                applicable individual if the distribution is made--
                            (i) after January 1, 2019, and
                            (ii) during a covered lapse in 
                        appropriations or the 90 days immediately 
                        following a covered lapse in appropriations.
                    (B) Dollar limitation.--
                            (i) In general.--The aggregate amount of 
                        distributions received by an individual which 
                        may be treated as qualified furlough 
                        distributions for any taxable year shall not 
                        exceed the excess (if any) of--
                                    (I) $30,000, over
                                    (II) the aggregate amounts treated 
                                as qualified furlough distributions 
                                with respect to such individual for all 
                                prior taxable years.
                            (ii) Aggregation.--Distributions received 
                        from all eligible retirement plans shall be 
                        aggregated for purposes of the dollar 
                        limitation under clause (i).
            (2) Eligible retirement plan.--The term ``eligible 
        retirement plan'' has the meaning given such term by section 
        402(c)(8)(B) of the Internal Revenue Code of 1986.
            (3) Covered lapse in appropriations.--The term ``covered 
        lapse in appropriations'' means any lapse in appropriations 
        that begins on or after December 22, 2018.
            (4) Applicable individual.--The term ``applicable 
        individual'' means any individual--
                    (A) who is a Federal employee furloughed due to a 
                covered lapse in appropriations,
                    (B) who is placed on unpaid leave as a Federal 
                contractor, or as an employee of a Federal contractor, 
                due to a covered lapse in appropriations, and whose 
                sole source of earned income (as defined in section 
                32(c)(2) of the Internal Revenue Code of 1986) is (but 
                for such lapse) remuneration as such a contractor or 
                employee thereof,
                    (C) who is an employee of a State or other Federal 
                grantee--
                            (i) whose compensation is advanced or 
                        reimbursed in whole or in part by the Federal 
                        Government, and
                            (ii) who is furloughed due to a covered 
                        lapse in appropriations, or
                    (D) who is an employee of the District of Columbia 
                Courts, the Public Defender Service for the District of 
                Columbia, or the District of Columbia government and is 
                furloughed due to a covered lapse in appropriations.
        Such term shall include any excepted employee and any employee 
        performing emergency work, as such terms are defined by the 
        Office of Personnel Management, during a covered lapse in 
        appropriations.
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