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119-hr-6929119th CongressWALLET

Thrift Savings Plan Emergency Withdrawal Act of 2025

Sponsored By: Representative Norton, Eleanor Holmes [D-DC-At Large]

Introduced

Summary

Penalty-free emergency withdrawals from the Thrift Savings Plan for separated federal employees. This bill would let federal workers who leave service take limited, penalty-free distributions from their Thrift Savings Plan and give them a short window to roll the money back.

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  • Separated federal employees can take up to $100,000 from their TSP without the usual 10 percent early withdrawal tax, and those amounts are included in gross income spread evenly over 3 years.
  • Recipients may elect within 1 year to treat the payout as an eligible rollover and may repay up to the distributed amount to an eligible retirement plan during a 3-year period; repayments must be made by direct trustee-to-trustee transfer and involve specific rollover rules.
  • Tax treatment changes: the distribution avoids the 10 percent additional tax under section 72(t) but is not treated as an eligible rollover distribution for certain tax-code sections (401(a)(31), 402(f), and 3405).

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Bill Overview

Analyzed Economic Effects

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

Penalty-free Thrift Savings withdrawals for federal retirees

If enacted, this bill would let certain former federal employees take distributions from their Thrift Savings Plan without the 10% early-withdrawal tax. Up to $100,000 of such distributions could get this treatment. Unless you opt out for a taxable year, the taxable amount would be spread evenly over three tax years starting in the year of the distribution. This applies only to TSP distributions made between the date you elect an annuity after leaving federal civil service and one year after you receive your first annuity payment after OPM finalizes your annuity claim (interim payments excluded). You could elect within one year to treat the payment as an eligible rollover distribution and then repay (roll over) up to the distributed amount into an eligible retirement plan within three years. The bill says these repayments are treated as direct trustee-to-trustee transfers for timing and reporting, and it also states that these qualified distributions are not treated as eligible rollover distributions for sections 401(a)(31), 402(f), and 3405. The rule would apply to distributions made after January 20, 2025.

Sponsors & CoSponsors

Sponsor

Norton, Eleanor Holmes [D-DC-At Large]

DC • D

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

No roll call votes available for this bill.

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