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119-hr-5690119th CongressWALLET

Emergency Relief for Federal Contractors Act of 2025

Sponsored By: Representative Subramanyam, Suhas [D-VA-10]

Introduced

Summary

Creates penalty-free, tax-favored retirement withdrawals during federal government shutdowns. This bill would let eligible individuals take special "Federal Government shutdown distributions" from employer retirement plans and treat up to $30,000 per taxable year as exempt from the usual 10% early withdrawal penalty.

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  • Federal-funded workers: Federal contractors, certain employees of grantees or states paid in whole or in part by the Federal Government, and specified District of Columbia employees who are furloughed, on unpaid leave, or working without pay because of an appropriations lapse of at least two weeks could take these distributions.
  • Retirement savers: Recipients may repay distributions to an eligible retirement plan or an IRA within 3 years, repayments are treated like rollovers, and taxable amounts can be included ratably over three taxable years unless the taxpayer elects otherwise.
  • Plan sponsors and administrators: The bill exempts these shutdown distributions from certain trustee-to-trustee transfer and withholding rules and treats them as meeting plan distribution requirements under the tax code.

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Bill Overview

Analyzed Economic Effects

3 provisions identified: 1 benefits, 0 costs, 2 mixed.

Who qualifies and the $30,000 limit

If enacted, you would qualify only if you are a federal contractor or a worker paid with federal funds and you are furloughed, unpaid, or have reduced pay during a funding lapse. Certain DC government, DC Courts, and DC Public Defender workers would also qualify. The lapse must last at least two weeks, and your window ends when your unpaid or reduced-pay period ends. You could get the special tax treatment for up to $30,000 per year, across all plans of your employer and its related companies. After 2025, the $30,000 limit would rise with inflation and be rounded to the nearest $500.

Tax relief on shutdown retirement withdrawals

If enacted, you would not owe the extra 10% early withdrawal tax on a qualifying shutdown distribution. You could spread the taxable income evenly over three years unless you choose not to. You could pay the money back within three years and treat it like a rollover, which can fix taxes if you repay. These rules would only apply to eligible workers during a federal funding lapse.

Easier plan processing and withholding rules

If enacted, shutdown distributions would count as meeting certain 401(k), 403(b), and 457 plan distribution rules. Plans would be protected when they process these payouts as shutdown distributions, as long as totals stay within the yearly limit across the employer’s related plans. These payouts would not be treated as eligible rollover distributions for some tax notice, transfer, and withholding rules, which could change default withholding and transfer steps.

Sponsors & CoSponsors

Sponsor

Subramanyam, Suhas [D-VA-10]

VA • D

Cosponsors

  • Rep. Walkinshaw, James R. [D-VA-11]

    VA • D

    Sponsored 10/3/2025

  • Rep. Beyer, Donald S. [D-VA-8]

    VA • D

    Sponsored 10/3/2025

  • Rep. McClellan, Jennifer L. [D-VA-4]

    VA • D

    Sponsored 10/3/2025

  • Rep. Elfreth, Sarah [D-MD-3]

    MD • D

    Sponsored 10/3/2025

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

    DC • D

    Sponsored 10/3/2025

  • Rep. Swalwell, Eric [D-CA-14]

    CA • D

    Sponsored 10/3/2025

  • Rep. Horsford, Steven [D-NV-4]

    NV • D

    Sponsored 10/3/2025

  • Rep. Bell, Wesley [D-MO-1]

    MO • D

    Sponsored 10/8/2025

  • Rep. Larson, John B. [D-CT-1]

    CT • D

    Sponsored 10/21/2025

  • Rep. Vindman, Eugene Simon [D-VA-7]

    VA • D

    Sponsored 10/21/2025

Roll Call Votes

No roll call votes available for this bill.

View on Congress.gov
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