[Congressional Record Volume 141, Number 172 (Thursday, November 2, 1995)]
[Senate]
[Page S16625]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LAUTENBERG:
  S. 1381. A bill to amend the Internal Revenue Code of 1986 to allow 
individuals who are involuntarily unemployed to withdraw funds from 
individual retirement accounts and other qualified retirement plans 
without incurring a tax penalty; to the Committee on Finance.


               individual retirement accounts legislation

 Mr. LAUTENBERG. Mr. President, today I am introducing 
legislation to allow persons who are involuntarily unemployed to 
withdraw funds from individual retirement accounts [IRAs] and other 
retirement plans, without the tax penalty that would otherwise apply.
  Mr. President, over 7.5 million people were unemployed in September, 
which translates to an unemployment rate of 5.6 percent. Many of the 
unemployed will find themselves with no income, substantial fixed 
expenses, and severely impaired ability to make ends meet.
  In most cases, these Americans have been laid off not because they 
are poor workers, or because they do not try hard enough. They are 
simply the innocent victims of corporate down-sizing, or other forces 
larger than themselves.
  For those unlucky enough to be laid off when business slows, the 
experience is often traumatic. There is a sense of rejection and 
betrayal. There is anger. And perhaps most importantly, there is fear--
fear for oneself, and for one's family.
  The fear is understandable. While their short-term employment 
prospects are often bleak, the unemployed face enormous financial 
pressures. As mortgages and rent payments come due, and bills pile up, 
millions of American families find themselves trapped by high fixed 
expenses, and without a paycheck to make ends meet.
  Unemployment insurance can help, but it often falls far short of 
families' real needs, particularly in areas like my home State of New 
Jersey, where the costs of housing and other basic necessities are 
unusually high. Even if a family manages to survive on unemployment 
compensation, there may not be enough to overcome joblessness by 
relocating, or training for a new job. Compounding matters, the 
benefits of the long-term unemployed often expire.
  Yet in many cases, Mr. President, the unemployed do have their own 
savings in an IRA or other retirement plan. These savings can provide a 
financial life raft to get through this unexpected financial storm. 
Unfortunately, it is a life raft with a large hole, because, for those 
under age 59\1/2\, withdrawals generally trigger a stiff, 10-percent 
tax penalty.
  Mr. President, Americans do not believe in hitting people when they 
are down. And I believe there is something fundamentally wrong with 
imposing a heavy penalty on those who want to gain access to their own 
money to cope with unemployment.
  The bill I am introducing proposes to eliminate the 10-percent 
penalty for people who have been laid off and who are trying to find 
work. It is targeted to people who need it--those who have been 
eligible for unemployment compensation for at least 30 days.
  I think that is only fair.
  Mr. President, while the bill's primary purpose is to provide relief 
to the unemployed, it would also provide at least two additional 
benefits.
  First, it should increase the savings rate, by encouraging Americans 
to participate in IRA's and other retirement plans. Currently, many 
people, particularly young people, are reluctant to tie up their money 
for decades in a retirement plan. They're concerned, understandably, 
that their savings would be inaccessible in an emergency, such as an 
unexpected period of unemployment, without the imposition of a heavy 
penalty.
  Allowing greater flexibility during periods of involuntary 
unemployment, Mr. President, should reduce this concern, and that 
should lead to increased savings.
  The bill also should provide another indirect benefit. By unlocking 
savings and injecting money into the economy during periods of high 
unemployment, the legislation would provide a modest countercyclical 
stimulus. This would help revive a slow economy to the benefit of all 
Americans.
  Mr. President, the concept of allowing early withdrawals from 
retirement plans for specific compelling reasons is not new. In fact, I 
first introduced this proposal a few years ago, and it has been 
included in previous legislation adopted by the Senate.
  In sum, Mr. President, this bill would provide relief to the 
unemployed, increase our Nation's savings rate, and provide an 
automatic stimulus to the economy during slow periods.
  I urge my colleagues to support the bill, and ask unanimous consent 
that the text of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1381

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. WAIVER OF EARLY DISTRIBUTION PENALTY DURING 
                   PERIODS OF INVOLUNTARY UNEMPLOYMENT.

       (a) In General.--Paragraph (2) of section 72(t) of the 
     Internal Revenue Code of 1986 (relating to exceptions to 10-
     percent additional tax on early distributions from qualified 
     plans) is amended by adding at the end thereof the following 
     new subparagraph:
       ``(D) Distributions for persons who are involuntarily 
     unemployed.--Any distributions which are made during any 
     applicable involuntary unemployment period. For purposes of 
     this subparagraph--
       ``(i) the term `applicable involuntary unemployment period' 
     means the consecutive period beginning on the 30th day after 
     the first date on which an individual is entitled to receive 
     unemployment compensation and ending with the date on which 
     the individual begins employment which disqualifies the 
     individual from receiving such compensation (or would 
     disqualify if such compensation had not expired by reason of 
     a limitation on the number of weeks of compensation); and
       ``(ii) the term `unemployment compensation' has the meaning 
     given such term by section 85(b).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made after the date of the 
     enactment of this Act.
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