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S 2964

Emergency Relief for Federal Contractors Act of 2025

119th Congress Introduced by Angela Alsobrooks and 14 co-sponsors

The Emergency Relief for Federal Contractors Act allows federal contractors to withdraw up to $30,000 penalty-free from retirement accounts during government shutdowns.

Introduced in Senate
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WeVote Research Nonpartisan
Bill Summary · S 2964

Summary of S. 2964 - Emergency Relief for Federal Contractors Act of 2025

Bill Number: S. 2964
Introduced: October 1, 2025
Status: Introduced in Senate
Primary Sponsor: Catherine Cortez Masto
Cosponsors: Includes notable senators such as Mark R. Warner, Amy Klobuchar, and Richard Blumenthal.
Related Bill: HR 5690 (companion bill)

Purpose and Intent

The Emergency Relief for Federal Contractors Act of 2025 aims to provide financial relief to federal contractors and their employees who are adversely affected by federal government shutdowns. The bill allows these individuals to access their retirement accounts without incurring penalties during periods of government appropriations lapses.

Key Provisions

  1. Penalty-Free Withdrawals:

    • The bill amends Section 72(t) of the Internal Revenue Code to exempt distributions made during a federal government shutdown from the usual penalties associated with early withdrawals from retirement accounts.

  2. Distribution Limits:

    • Individuals can withdraw up to $30,000 from their retirement accounts as penalty-free distributions during a shutdown. This amount will be adjusted for inflation in subsequent years.

  3. Repayment Options:

    • Individuals who withdraw funds can repay the amount to their retirement accounts within three years of the distribution, allowing them to restore their retirement savings.

  4. Definitions:

    • Federal Government Shutdown Distribution: Refers to any distribution received during a federal appropriations lapse.
    • Applicable Individual: Includes federal contractors, employees of federal grantees, and certain District of Columbia government employees who are furloughed or working without pay due to a shutdown.
    • Federal Appropriations Lapse: Defined as a continuous period of at least two weeks during which federal funding is not available.

  5. Controlled Group Considerations:

    • The bill includes provisions to ensure that distributions from multiple plans maintained by an employer do not exceed the specified limits.

Impact

  • Who is Affected: The legislation primarily impacts federal contractors and their employees, as well as employees of federal grantees and certain District of Columbia government employees. These individuals may face financial hardships during government shutdowns and will benefit from the ability to access their retirement funds without penalties.

  • Financial Relief: By allowing penalty-free access to retirement savings, the bill aims to alleviate immediate financial pressures on affected individuals, helping them manage expenses during periods of unpaid leave or reduced pay.

Procedural Aspects

  • The bill was introduced in the Senate on October 1, 2025, and has been referred to the Committee on Finance for further consideration.

This legislation represents a proactive approach to support federal contractors and their employees during times of government instability, ensuring they have access to necessary financial resources without the burden of penalties on their retirement savings.

Compiled from official sources — confirm details with the bill’s official record.

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