# Emergency Relief for Federal Contractors Act of 2025

When the federal government shuts down and stops paying its bills, federal contractors and their employees often get caught in the middle. They're told to stop working or work without getting paid, but they still have bills to pay at home. This bill creates a special emergency option for these workers to tap into their retirement savings without the usual tax penalties that normally apply.

Here's what the bill does: If you're a federal contractor, an employee of a federal contractor, or work for a company that gets federal funding, and you get furloughed or forced to work without pay during a government shutdown lasting at least two weeks, you can withdraw up to $30,000 from your 401(k), IRA, or other retirement account without paying the typical 10% early withdrawal penalty. The same relief applies to employees of the District of Columbia government and courts who are affected by federal funding lapses. This is a real lifeline for people who suddenly have no income but still need to pay rent, buy groceries, or cover other essential expenses.

The bill also gives you flexibility in how you handle the taxes. Instead of paying all the taxes on the withdrawal in one year, you can spread the tax bill over three years, making it easier to manage. Even better, you have three years to put the money back into a retirement account if your situation improves, which lets you restore your retirement savings without the usual restrictions on how much you can contribute. The $30,000 limit will increase over time to keep up with inflation, so it won't become outdated as years go by.