IN THE SENATE OF THE UNITED STATES
February 14, 2019
Mr. Cassidy (for himself and Mr. Warner) introduced the following bill; which was read twice and referred to the Committee on Finance
To waive the penalty for withdrawals from retirement plans for certain Federal employees and contractors affected by a lapse in appropriations, and for other purposes.
Special rules for use of retirement funds by Federal employees and contractors affected by a lapse in appropriations
Waiver of 10 percent tax on early distributions
Section 72(t) of the Internal Revenue Code of 1986 shall not apply to any qualified furlough distribution.
Income inclusion spread over 2-Year period
In the case of any qualified furlough distribution, unless the taxpayer elects not to have this subsection apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 2-taxable-year period beginning with such taxable year.
Amount distributed may be repaid
Any individual who receives a qualified furlough distribution may, at any time during the 1-year period beginning on the day after the date on which such distribution was received, make 1 or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16) of the Internal Revenue Code of 1986, as the case may be.
Treatment of repayments of distributions from eligible retirement plans other than IRAs
For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to paragraph (1) with respect to a qualified furlough distribution from an eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the qualified furlough distribution in an eligible rollover distribution (as defined in section 402(c)(4) of such Code) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
Treatment of repayments for distributions from IRAs
For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to paragraph (1) with respect to a qualified furlough distribution from an individual retirement plan (as defined by section 7701(a)(37) of such Code), then, to the extent of the amount of the contribution, the qualified furlough distribution shall be treated as a distribution described in section 408(d)(3) of such Code and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
Qualified furlough distributions treated as meeting plan distribution requirements
For purposes of the Internal Revenue Code of 1986, a qualified furlough distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A) of such Code, whichever is applicable.
Reliance on representation
An eligible retirement plan may rely on an individual’s written representation that the individual is an applicable individual who has not received previous qualified furlough distributions in excess of the dollar limitation under subsection (e)(1)(B).
For purposes of this section—
Qualified furlough distribution
Except as provided in subparagraph (B), the term qualified furlough distribution means any distribution from an eligible retirement plan to an applicable individual if the distribution is made—
after January 1, 2019, and
during a covered lapse in appropriations or the 90 days immediately following a covered lapse in appropriations.
The aggregate amount of distributions received by an individual which may be treated as qualified furlough distributions for any taxable year shall not exceed the excess (if any) of—
the aggregate amounts treated as qualified furlough distributions with respect to such individual for all prior taxable years.
Distributions received from all eligible retirement plans shall be aggregated for purposes of the dollar limitation under clause (i).
Eligible retirement plan
The term eligible retirement plan has the meaning given such term by section 402(c)(8)(B) of the Internal Revenue Code of 1986.
Covered lapse in appropriations
The term covered lapse in appropriations means any lapse in appropriations that begins on or after December 22, 2018.
The term applicable individual means any individual—
who is a Federal employee furloughed due to a covered lapse in appropriations,
who is placed on unpaid leave as a Federal contractor, or as an employee of a Federal contractor, due to a covered lapse in appropriations, and whose sole source of earned income (as defined in section 32(c)(2) of the Internal Revenue Code of 1986) is (but for such lapse) remuneration as such a contractor or employee thereof,
who is an employee of a State or other Federal grantee—
whose compensation is advanced or reimbursed in whole or in part by the Federal Government, and
who is furloughed due to a covered lapse in appropriations, or
who is an employee of the District of Columbia Courts, the Public Defender Service for the District of Columbia, or the District of Columbia government and is furloughed due to a covered lapse in appropriations.