Special rules for use of retirement funds by Federal employees and contractors affected by a lapse in appropriations

(a)

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. (b)

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. (c)

Amount distributed may be repaid

(1)

In general

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. (2)

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. (3)

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. (d)

Special rules

(1)

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. (2)

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). (e)

Definitions

For purposes of this section— (1)

Qualified furlough distribution

(A)

In general

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— (i)after January 1, 2019, and (ii)during a covered lapse in appropriations or the 90 days immediately following a covered lapse in appropriations. (B)

Dollar limitation

(i)

In general

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— (I)$30,000, over (II)the aggregate amounts treated as qualified furlough distributions with respect to such individual for all prior taxable years. (ii)

Aggregation

Distributions received from all eligible retirement plans shall be aggregated for purposes of the dollar limitation under clause (i). (2)

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. (3)

Covered lapse in appropriations

The term covered lapse in appropriations means any lapse in appropriations that begins on or after December 22, 2018. (4)

Applicable individual

The term applicable individual means any individual— (A)who is a Federal employee furloughed due to a covered lapse in appropriations, (B)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, (C)who is an employee of a State or other Federal grantee— (i)whose compensation is advanced or reimbursed in whole or in part by the Federal Government, and (ii)who is furloughed due to a covered lapse in appropriations, or (D)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.

Such term shall include any excepted employee and any employee performing emergency work, as such terms are defined by the Office of Personnel Management, during a covered lapse in appropriations.