Emergency Relief for Federal Contractors Act of 2025
Summary
The Emergency Relief for Federal Contractors Act of 2025 aims to provide financial relief to federal contractors and certain other individuals affected by federal government shutdowns. It allows penalty-free withdrawals from retirement accounts during these shutdowns, up to $30,000 per year, with an option to repay the withdrawn amount within three years. The bill defines 'Federal Government shutdown distribution' and 'applicable individual' to specify eligibility.
Expected Effects
The act would provide immediate access to retirement funds for affected individuals during government shutdowns, helping them meet their financial obligations. It also includes provisions for repaying the withdrawn amounts, effectively restoring their retirement savings. The Act spreads the income inclusion over 3 years unless the taxpayer elects otherwise.
Potential Benefits
- Provides immediate financial relief to federal contractors and other affected individuals during government shutdowns.
- Allows penalty-free access to retirement funds, up to $30,000 annually.
- Offers a 3-year window to repay withdrawn funds, restoring retirement savings.
- Reduces the immediate tax burden by spreading income inclusion over three years.
- Prevents plans from being penalized for treating distributions as Federal Government shutdown distributions.
Potential Disadvantages
- May reduce retirement savings if funds are not repaid.
- Could incentivize reliance on retirement funds during shutdowns rather than advocating for stable government funding.
- The $30,000 limit may not be sufficient for all affected individuals.
- Increased complexity in tax filings due to the repayment and income spreading provisions.
- Potential for misuse or fraud in claiming eligibility for distributions.
Constitutional Alignment
The bill appears to align with the Constitution's general welfare clause (Preamble). Congress has the power to tax and spend for the general welfare, and providing relief to federal contractors during shutdowns could be argued as promoting economic stability and individual well-being. However, the specific mechanisms and eligibility criteria would need to be carefully scrutinized to ensure they are applied fairly and without violating any constitutional rights.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).