PRIA Logo™
119-hr-329119th CongressWALLET

Expanding Penalty Free Withdrawal Act

Sponsored By: Representative Watson Coleman, Bonnie [D-NJ-12]

Introduced

Summary

Penalty-free early withdrawals for the long-term unemployed. This bill would let people who receive federal or state unemployment benefits for 26 consecutive weeks take early distributions from qualified retirement plans without the usual 10% additional tax, in the same tax year as the unemployment payments or the following year, and it would apply to distributions made after December 31, 2024.

Show full summary
  • Unemployed individuals: People receiving 26 consecutive weeks of unemployment compensation could take penalty-free withdrawals capped at the lesser of $50,000 in a 1-year period or the greater of $10,000 or half the fair market value of their qualified retirement accounts.
  • Reemployed and self-employed people: Withdrawals made after a person is employed for at least 60 days following the unemployment period would again be subject to the 10% additional tax. The bill applies timing rules similar to existing reemployment rules to self-employed individuals.

Personalized for You

How does this bill affect your finances?

Personalize government policy and PRIA will tell you what this bill means for your household, plus every other piece of legislation we track. PRIA reads each provision against your financial profile to show you exactly what matters to your wallet.

Free to download

Bill Overview

Analyzed Economic Effects

1 provisions identified: 1 benefits, 0 costs, 0 mixed.

Penalty-free retirement withdrawals for long-term unemployed

If enacted, long-term unemployed workers could take retirement money without the 10% early-withdrawal penalty. You would need 26 straight weeks of unemployment pay (or your state's shorter max) after losing that job. You could withdraw in the year you get those benefits or the next year. The penalty-free limit would be the smaller of $50,000 minus similar withdrawals in the past year, or the larger of $10,000 or half of your combined qualified and defined-contribution balances at the time. Similar rules would apply after you return to work and for self-employed people, and health-premium withdrawals would not count toward this new limit; this would start for withdrawals made after December 31, 2024.

Sponsors & CoSponsors

Sponsor

Watson Coleman, Bonnie [D-NJ-12]

NJ • D

Cosponsors

  • Rep. Cherfilus-McCormick, Sheila [D-FL-20]

    FL • D

    Sponsored 1/9/2025

  • Del. Norton, Eleanor Holmes [D-DC-At Large]

    DC • D

    Sponsored 1/9/2025

  • Rep. Olszewski, Johnny [D-MD-2]

    MD • D

    Sponsored 2/5/2025

Roll Call Votes

No roll call votes available for this bill.

View on Congress.gov
Back to Legislation