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Expanding Penalty Free Withdrawal Act
To amend the Internal Revenue Code of 1986 to expand the availability of penalty-free distributions to unemployed individuals from retirement plans.
Summary
This bill amends tax law to allow unemployed individuals to withdraw money from their retirement accounts without incurring early withdrawal penalties. To qualify, an individual must have received unemployment compensation for 26 consecutive weeks due to job separation and make the withdrawal during the year they receive unemployment benefits or the following year. The withdrawal amount is limited to the lesser of $50,000 (adjusted for other similar withdrawals in the prior year) or half the fair market value of the individual's retirement accounts, with a minimum of $10,000. The change applies to withdrawals made after December 31, 2024.
AI-generated plain-language summary of the bill text — neutral, and may be imperfect. See the full text below for the exact wording.
Sponsor (1)
3 cosponsors
Money behind the sponsor
Top reported contributors to Bonnie Watson Coleman’s campaign committee (2024 cycle) — who funds the bill’s sponsor, not a claim about this bill. Data from FEC.
- BEIGENE $13,400
- PRINCETON UNIVERSITY $11,150
- WINNING STRATEGIES WASHINGTON $8,600
- NEW JERSEY DEPT. OF HEALTH $7,600
- GHO VENTURES, LLC $7,600
Organizations whose employees gave the most — itemized individual contributions grouped by the donor’s reported employer (FEC Schedule A). Full finance for Bonnie Watson Coleman → · Outside spending →
Actions (2)
- Jan 9, 2025 Referred to the House Committee on Ways and Means. · house
- Jan 9, 2025 Introduced in House
More bills on these subjects (8)
Other bills that carry the most legislative subjects in common with this one (topical discovery — distinct from the procedural related bills above).
Similar bills (6)
Bills with similar text or summary — includes reintroductions across Congresses. Ranked by semantic similarity of the bill text (computed locally); a neutral discovery aid, not a claim the bills are duplicates.
Text versions (1)
Bills are re-published as they move (Introduced → Reported → Engrossed → Enrolled …). Each stage below is a separate text; pick two to see what changed. Data from Congress.gov.
Full text
IN THE HOUSE OF REPRESENTATIVES
January 9, 2025
Mrs. Watson Coleman (for herself, Mrs. Cherfilus-McCormick, and Ms. Norton) introduced the following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to expand the availability of penalty-free distributions to unemployed individuals from retirement plans.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the “Expanding Penalty Free Withdrawal Act”.
SEC. 2. EXPANSION OF EXCEPTION FOR PENALTY ON EARLY DISTRIBUTIONS TO UNEMPLOYED INDIVIDUALS FROM RETIREMENT PLANS.
(a) In General.—Section 72(t)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
“(N) Long-term unemployment distributions.—
“(i) In general.—Distributions to an individual after separation from employment—
“(I) if such individual has received unemployment compensation for 26 consecutive weeks under any Federal or State unemployment compensation law by reason of such separation (or, if less, for the maximum period for which unemployment compensation is available under State law applicable to the individual), and
“(II) if such distributions are made during any taxable year during which such unemployment compensation is paid or the succeeding taxable year.
“(ii) Distributions after reemployment; self-employed individuals.—Rules similar to the rules of clauses (ii) and (iii) of subparagraph (D) shall apply for purposes of this subparagraph.
“(iii) Limitation.—Clause (i) shall not apply to any distribution to the extent that such distribution exceeds the lesser of—
“(I) $50,000, reduced by the aggregate amount of distributions which are described in clause (i) from all plans of the individual during the 1- year period ending on the day before the date on which such distribution was made, or
“(II) the greater of $10,000 or one-half of the aggregate fair market value (at the time of the distribution) of the individual’s qualified retirement plans (as defined in section 4974(c)) and the nonforfeitable portion the individual’s defined contribution plans.
“(iv) Coordination with distributions to unemployed individuals for health insurance premiums.—Distributions shall not be taken into account under this subparagraph if such distributions are described in subparagraph
(D).”.
(b) Effective Date.—The amendments made by this section shall apply to distributions made after December 31, 2024. <all>
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