Expanding Penalty Free Withdrawal Act

Plain-English summary

Expanding Penalty Free Withdrawal Act This bill allows an individual who is unemployed for a certain period of time to take early distributions from a qualified retirement plan without paying an additional tax on such distributions, subject to limitations. Under current law, a 10% additional tax is imposed on early distributions from a qualified retirement plan unless an exception applies. This bill expands the list of exceptions to include distributions from a qualified retirement plan made (1) to an individual who is unemployed and receives federal or state unemployment compensation for 26 consecutive weeks (or the maximum number of weeks allowed under state law) and (2) in the same tax year that the unemployment compensation is paid or the following tax year. However, under the bill, the 10% additional tax applies to distributions from a qualified retirement plan made after an individual is employed for at least 60 days following a period of unemployment.

Deterministically condensed from the official CRS summary; verify details in the official record.