To amend the Internal Revenue Code of 1986 to expand the availability of penalty-free distributions to unemployed individuals from retirement plans.
2/6/2025, 9:05 AMSummary of Bill HR 329
Bill 119 HR 329, also known as the "Unemployment Benefit Extension Act," aims to make changes to the Internal Revenue Code of 1986 in order to provide more options for unemployed individuals to access their retirement funds without facing penalties.The bill proposes expanding the availability of penalty-free distributions from retirement plans for individuals who are currently unemployed. This means that individuals who are facing financial hardship due to job loss will be able to withdraw funds from their retirement accounts without incurring the usual penalties that are associated with early withdrawals.
By allowing unemployed individuals to access their retirement funds penalty-free, the bill seeks to provide much-needed financial relief to those who are struggling to make ends meet during periods of unemployment. This could help individuals cover essential expenses such as rent, mortgage payments, and medical bills while they search for new employment opportunities. Overall, Bill 119 HR 329 aims to provide a safety net for unemployed individuals by giving them more flexibility and options when it comes to accessing their retirement savings. This could potentially help alleviate some of the financial stress and uncertainty that comes with being unemployed, ultimately providing a much-needed lifeline for those who are facing economic hardship.
Congressional Summary of HR 329
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.
The bill limits the amount that may be distributed to an unemployed individual from a qualified retirement plan free from the 10% additional tax to the lesser of (1) $50,000 in distributions from all of an individual’s qualified plans over a one-year period, or (2) the greater of $10,000 or half the fair market value of an individual’s qualified retirement plans and the nonforfeitable portion of an individual's defined contribution plans.
