Lawmakers in Washington D.C. started to consider a bill on Tuesday that would allow federal employees and some contractors caught in the shut down to pull money out of their retirement accounts without a penalty.
The bill, called Financial Relief for Feds Act, was introduced with the help of U.S. Rep. Ed Perlmutter (D-CO-07).
"Missing paychecks puts a terrible strain on households, and we cannot let this continued shutdown jeopardize the livelihoods of these federal workers and their families," Perlmutter said in a statement.
The bill would allow furloughed federal employees, federal employees working without pay, and contractors whose sole source of money is their federal contract, to pull up to $4,000 a pay period.
They wouldn't have to pay the 10 percent penalty for withdrawing money early and their contributions and matching wouldn't be penalized either. They would still have to pay state and federal taxes, but would have three years to put that money back into their retirement accounts.
Rep. Perlmutter said a constituent, Pam Logan from Lakewood, mentioned the idea to him and he decided to move ahead with it.
Logan's husband works for the United States Geological Survey and has been furloughed for about three weeks. Logan said he turned down a higher paying job to work for the federal government.
"He decided to be a federal employee because he wanted to be patriotic and do something for the public," Logan said. "To treat somebody whose made that kind of decision, no work, no pay, no sign when it will end - it's just not right."
Financial expert Tom Stefaniak with Pinnacle Wealth Management said while he appreciates the sentiment behind the bill, he is nervous it will set a bad precedent.
"Quite frankly as a nation we are horrible at saving for retirement and most Americans have under saved," he said.
Stefaniak has clients who are federal employees and have now missed a paycheck. In spite of that, he said the timeline is a big worrisome.
"There is a roll over rule," Stefaniak said. "You have 60 days to pull the money out. If you replace it in 60 days you pay no tax. That's a dangerous game. How long is this shut down going to last?"
Stefaniak said the same concern goes for taking money out of an IRA or 401k account and temporarily not investing that chunk of money.
Rep. Perlmutter said these are valid concerns.
"But I think in this instance, this furlough is as a result of the government, we're making people work or furloughing them and not paying them. It's a very unusual circumstance."
Perlmutter said even if the government opens before this bill, which has bipartisan sponsorship, is voted on, he will still try to move it forward out of fear employees could end up in a similar situation again.