Democratic lawmakers, led by Sen. Tim Kaine (D-VA) and Rep. Don Beyer (D-VA), have introduced the Emergency Relief for Federal Workers Act, a bill designed to make it easier for federal employees to access their Thrift Savings Plan (TSP) funds during government shutdowns.
Under current rules, employees facing a lapse in pay during a shutdown must certify a financial hardship under penalty of perjury to withdraw TSP funds, and may face a 10% early-withdrawal penalty if under age 59½. The proposed legislation would automatically treat any shutdown lasting at least two weeks as a “financial hardship,” allowing affected employees to withdraw funds without penalties (though income taxes would still apply). It would also allow employees to recontribute withdrawn amounts once government operations resume.
The bill targets several barriers around TSP loans as well. Currently, participants cannot take a loan if the shutdown is expected to last 30 days or longer, and missed repayments can be reclassified as taxable distributions. The new measure would override those restrictions, allowing loans even during extended shutdowns, suspending repayments while pay is halted, and preventing those missed payments from being treated as taxable income. Once employees receive back pay, repayments would automatically resume.
Supporters say the changes would give federal workers much-needed flexibility to manage financial strain during funding lapses, while opponents caution that borrowing or withdrawing from retirement accounts can hinder long-term growth. The bill has drawn support from more than a dozen Senate Democrats and reflects broader efforts to shield federal employees from the recurring financial fallout of government shutdowns.
In another effort to protect federal employees from shutdown-related financial strain, Rep. Steven Horsford (D-NV) introduced H.R. 5758, the Pay Workers What They’ve Earned Act, to address economic hardships faced by federal workers and contractors during government shutdowns. The bipartisan bill reimburses out-of-pocket costs like late fees, interest, and fines on missed payments (e.g., mortgages, credit cards) incurred due to unpaid wages, extending relief to federal employees, contractors, states, and tribal governments. It also establishes a streamlined Treasury claims process and mandates shutdown preparedness guidance from the Office of Personnel Management.
The legislation, cosponsored by 15 representatives including Reps. Don Bacon (R-NE) and Josh Gottheimer (D-NJ), has a 25% chance of enactment per GovTrack, with a Senate companion bill expected soon.
