Democrats in Congress introduced legislation that would make it easier for federal workers to tap their Thrift Savings Plans (TSPs) during a government shutdown.
The Emergency Relief for Federal Workers Act was introduced in both the House and Senate. It would classify any lapse in appropriations that lasts at least two weeks as a financial hardship. The legislation would then waive the ten percent early withdrawal penalty for federal workers ages 59 and under. Taxes would still be owed however.
“Government shutdowns are a disaster for federal employees and contractors, and for their families,” said House Sponsor Don Beyer (D-VA). “My bill would ensure feds can withdraw funds from their retirement accounts during a shutdown without penalties, and remove other barriers that increase financial hardship at this difficult time.”
In addition, the legislation suspends payments on existing TSP loans during a shutdown, ensures that loan repayments are deducted in post-shutdown back pay, and prohibits non-payment of loans during a shutdown to be classified as an early distribution.
The legislation also allows employees to put money back into their TSPs once the shutdown ends.
“If workers need to withdraw funds from their retirement accounts during a shutdown, this bill would ensure they don’t face penalties, that they can access TSP loans, and will address other problems a shutdown can create for TSP account holders,” said Senate sponsor Tim Kaine (D-VA).
TSP Tops One Trillion Dollars in Assets
Meanwhile, TSP accounts are humming along. The plan itself has a balance of over one trillion dollars. And all 16 TSP investment funds increased in value in September.
TSP will also continue normal operations during the current government shutdown. That means TSP’s more than 7.2 million participants and beneficiaries can still make investments, withdrawals, apply for loans, and take other actions on their account.
