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The Emergency Relief for Federal Contractors Act would allow federal contractors to withdraw funds from their retirement plans without paying a penalty.
"A government shutdown disrupts $14.5 billion per week in federal contracts, including $3.6 billion for small businesses," Sen. Catherine Cortez Masto, D-Nev., said in introducing the legislation Oct. 1. "Unlike directly-employed federal workers, federal contractors do not receive automatic back pay for their work during a government shutdown."
Cortez Mastro also co-sponsored legislation introduced by Sen. Tim Kaine, D-Va., to allow federal workers to withdraw funds from their Thrift Savings Plan retirement accounts without penalties during a government shutdown.
Rep. Don Beyer, D-Va., introduced companion legislation, H.R 5690, on Oct. 3.
The bill would remove the 10% penalty on all hardship withdrawals for federal employees 59 or younger while establishing government shutdowns that last two weeks or longer as financial hardships, Beyer said in a statement. Workers would still be taxed on the withdrawals.
The bill "would also allow workers withdrawing such funds to restore them to their retirement accounts later," Beyer said.
TSP loans would also be available to affected federal employees who need to access those funds during a shutdown that causes such employees to miss a paycheck, and the bill would automatically suspend loan payments until the government reopens. Once that happens, the outstanding loan payments would be deducted from federal employees’ back pay.
The bill would also prohibit any missed loan payments from becoming a taxable distribution that could be subject to the 10% withdrawal penalty.
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