H.R.329 - Expanding Penalty Free Withdrawal Act (119th Congress)
Summary
H.R. 329, the "Expanding Penalty Free Withdrawal Act," amends the Internal Revenue Code of 1986 to broaden the circumstances under which unemployed individuals can access their retirement funds without incurring early withdrawal penalties. The bill allows penalty-free distributions for individuals who have received unemployment compensation for at least 26 consecutive weeks, with certain limitations and coordination with existing provisions for health insurance premiums.
The bill aims to provide financial relief to those experiencing long-term unemployment by allowing them to tap into their retirement savings without penalty. This expansion includes specific rules for reemployment and self-employed individuals, mirroring existing provisions.
The Act sets a distribution limit, the lesser of $50,000 (reduced by prior distributions) or the greater of $10,000 or one-half of the aggregate fair market value of the individual's qualified retirement plans.
Expected Effects
The primary effect of this bill would be to provide greater access to retirement funds for individuals facing long-term unemployment. This could help them meet immediate financial needs during periods of hardship.
However, it could also reduce their retirement savings, potentially impacting their long-term financial security. The bill aims to balance immediate relief with safeguards to prevent excessive withdrawals.
Potential Benefits
- Provides immediate financial relief to unemployed individuals by allowing penalty-free access to retirement funds.
- Offers flexibility for those experiencing long-term unemployment to cover essential expenses.
- Includes provisions for reemployed and self-employed individuals, ensuring broader applicability.
- Sets a distribution limit to prevent excessive depletion of retirement savings.
- Coordinates with existing provisions for health insurance premiums, streamlining access to funds for healthcare needs.
Most Benefited Areas:
Potential Disadvantages
- Reduces retirement savings, potentially impacting long-term financial security.
- May encourage individuals to withdraw funds prematurely, even when other options are available.
- Could lead to increased reliance on government assistance in the future if retirement savings are depleted.
- The $50,000 limit might not be sufficient for individuals with significant financial needs.
- The complexity of the rules could create confusion and administrative burdens.
Most Disadvantaged Areas:
Constitutional Alignment
This bill appears to align with the general welfare clause of the Constitution (Preamble), as it aims to provide economic relief to unemployed individuals. Congress has the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States (Article I, Section 8).
However, the Constitution does not explicitly address retirement savings or unemployment benefits. The bill's alignment with the Constitution is therefore based on the interpretation of the general welfare clause and the implied powers of Congress to enact legislation related to economic policy.
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).