Bill would allow penalty-free withdrawals from 401 (k) and IRAs
What would you like to know
- The distribution would be limited to amounts vested in excess of $ 1,000, with a maximum annual withdrawal of $ 1,000.
- The person must replenish the amount withdrawn before an additional emergency distribution can be made.
- Several financial services companies and advocacy groups support the bill.
Senator James Lankford, R-Okla., Introduced legislation on Tuesday that would allow pension plan members to draw on their savings in the event of an emergency.
The Enhancing Emergency and Retirement Savings Act of 2021 “would encourage participation in pension plans” by giving individuals penalty-free access to family emergency funds, Lankford said as he introduced the bill alongside Senator Michael Bennet, D-Colo., Both members of the Senate Finance Committee.
The bill would provide an “emergency distribution” option without penalty from employer-sponsored retirement accounts and IRAs.
An emergency distribution would be authorized per calendar year, and this distribution would be limited to amounts acquired greater than $ 1,000, with a maximum annual withdrawal of $ 1,000, according to the bill.
The bill “also requires the person to replenish the amount withdrawn into the plan before further emergency distribution of that same plan is authorized.” Together, this will provide flexibility while ensuring that individuals continue to save for retirement.