February 13, 2019

Cortez Masto, Wyden, Murray Introduce Bill to Protect Government Contractors During Shutdowns

Washington, D.C. – U.S. Senator Catherine Cortez Masto (D-Nev.), Senate Finance Committee Ranking Member Ron Wyden (D-Ore.), and Senate HELP Committee Ranking Member Patty Murray (D-Wash.) today introduced the Emergency Relief for Federal Contractors Act of 2019, which ensures that federal contractors affected by a government shutdown can withdraw funds from their retirement savings without being penalized.

“The last government shutdown lasted 35 days and brought stress and uncertainty to thousands of federal contractors and their families. My legislation provides a lifeline to federal contractors to withdraw funds from their retirement without penalty so that they may provide for their families. I’m proud to lead this legislation that ensures federal contractors have additional resources when facing financial hardships during a government shutdown,” said Senator Cortez Masto.

“Federal employees who missed paychecks during the Trump shutdown will eventually get their back pay, but nobody should forget about the millions of contractors and their families left uncovered after a senseless five-week shutdown,” Senator Wyden said. “When the government shuts down and contractors miss paychecks through no fault of their own, they should not be penalized for dipping temporarily into their retirement savings to make ends meet. This is a commonsense way to relieve some of the financial pressure that government shutdowns inflict on contractors, many of whom are already living paycheck to paycheck in the best of circumstances.”

“Unfortunately, following President Trump’s last government shutdown, workers across the country are still struggling to make ends meet for their families and being forced to raid their retirement savings. They absolutely deserve better,” Senator Murray said. “This bill extends relief to government contractors by helping to make sure they don’t face hurdles, penalties, or lasting damage to their retirement security as they work to recover from the paychecks they missed thanks to President Trump and Republicans.”

Senators Amy Klobuchar (D-Minn.), Dianne Feinstein (D-Calif.), Tina Smith (D-Minn.), Sherrod Brown (D-Ohio), Bob Casey (Pa.), Chris Van Hollen (D-Md.), Bob Menendez (D-N.J.), Tammy Duckworth (D-Ill.), Richard Blumenthal (D-Conn.), and Tim Kaine (D-Va.) are original cosponsors of this legislation.


The Emergency Relief for Federal Contractors Act would:

  • Waive the 10 Percent Early Distribution Penalty. Under current law, retirement savers who are age 59 ½ or younger may be subject to an additional 10 percent early withdrawal penalty for taking a hardship withdrawal from their retirement account or an early distribution from their individual retirement account (IRA). The Emergency Relief for Federal Contractors Act would waive this additional 10 percent penalty. Government contractors who take a hardship withdrawal would still be responsible for paying any other taxes that are due on the amount of withdrawal.
  • Allow for Recontribution of Qualified Shutdown Distribution. In order to restore workers’ retirement savings after the shutdown ends, the Emergency Relief for Federal Contractors Act would allow government contractors who take a hardship distribution from their retirement plans or an early distribution from their IRAs to recontribute some or all of the distribution (up to $30,000) within a three-year period.
  • Allow for Income Inclusion to be Spread over a Three-Year Period. For government contractors who choose not to recontribute their qualified shutdown distribution, this bill would allow such individuals to include the amount of their qualified shutdown distributions ratably over a three-taxable-year period.