The Emergency Relief for Federal Contractors Act of 2025 allows federal contractors, federal grantees, and certain District of Columbia employees who are furloughed or placed on unpaid leave during a government shutdown to withdraw up to $30,000 from their retirement accounts without facing the usual tax penalties. The bill applies to any shutdown lasting at least two weeks and affects federal contractors and their employees, workers at federally funded organizations, and D.C. government workers whose pay is disrupted. Importantly, individuals have up to three years to repay these withdrawals back into their retirement accounts, and any income taxes on the distributions can be spread over three years rather than due all at once. The $30,000 limit will be adjusted annually for inflation after 2025.
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