New proposals in Congress aim to limit credit damage and ease access to cash for federal employees and contractors affected by government shutdowns. These federal shutdown financial relief bills seek to help Feds and contractors manage funding lapses while protecting their long-term finances.
Here’s what’s in the proposed legislation, and what it could mean for you if it advances.
Bill #1: Shutdown Guidance for Financial Institutions Act (H.R. 5689)
The Shutdown Guidance for Financial Institutions Act directs federal regulators like the Federal Reserve, the Consumer Financial Protection Bureau (CFPB), and the National Credit Union Administration (NCUA) to issue shutdown-specific guidance. That guidance would encourage banks and credit unions to work with affected consumers and businesses by modifying loan terms, extending credit, or delaying payments.
The bill also pushes regulators to ensure that borrowers aren’t hit with negative credit reporting tied directly to a funding lapse. Modeled on a 2019 House-passed version, it would require agencies to publicize this guidance promptly, so both lenders and borrowers know what relief options are available.
If enacted, the practical impact could be significant. Clearer direction from regulators would give banks and credit unions more confidence to offer temporary relief, such as skipped payments or short-term forbearance, without fearing compliance issues or credit score harm for customers affected by a shutdown.
Bill #2: Emergency Relief for Federal Contractors Act (H.R. 5690)
For federal contractors, the Emergency Relief for Federal Contractors Act would open the door to penalty-free access to retirement savings during a shutdown. It would let contractors withdraw up to $30,000 from their retirement accounts without triggering the usual 10% early-withdrawal penalty.
The bill gives contractors room to recover once work resumes. They can repay some or all of the money within three years or, if they keep the funds, report the income over that same period. Contractors who miss paychecks during a funding lapse can use these options to cover expenses now and still protect their long-term retirement savings.
If this becomes law, it would effectively create a Thrift Savings Plan (TSP) penalty waiver equivalent for private-sector contractors, helping them bridge income gaps without permanently depleting retirement balances.
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Related Proposal: Emergency Relief for Federal Workers Act
A companion proposal, the Emergency Relief for Federal Workers Act of 2025, targets federal employees directly. It would treat shutdowns as automatic financial hardships under the Thrift Savings Plan, triggering the same kinds of protections discussed for contractors.
Under the bill, affected Feds could take early withdrawals without the 10% penalty, re-contribute those funds later, and maintain loan access during the shutdown. Loan repayments would also pause automatically without creating a taxable distribution. The measure, still in its early stages, mirrors many features of the contractor bill while focusing on federal workers and their TSP accounts.
If passed, this would make TSP penalty waiver relief a built-in protection during any future funding lapse, ensuring faster, more predictable access to cash.
What to Do While Legislation Moves
While Congress deliberates, take proactive steps. Document any shutdown-related credit or payment issues in case lender guidance evolves under H.R. 5689. Contractors should carefully model how much cash they might need, keeping the $30,000 withdrawal limit in mind if H.R. 5690 advances.
Federal employees should review existing TSP hardship withdrawal rules and monitor the employee-focused proposal closely. Avoid major, irreversible withdrawals that could limit your ability to re-contribute if new relief rules arrive.
It’s also wise to coordinate with your HR or benefits office and talk to your bank or credit union about existing hardship programs. Even without new laws in place, some institutions already offer temporary relief or forbearance options during shutdowns.
Staying Ready, Staying Resilient
These federal shutdown financial relief bills won’t solve every challenge tied to missed paychecks, but they aim to protect credit and open penalty-free access to emergency funds. Track their progress, document your situation, and use available tools now to manage through the uncertainty.
If you’re unsure how these proposals could fit into your broader financial plan — or whether temporary withdrawals make sense for you — reach out to the team at Serving Those Who Serve at [email protected] for guidance tailored to your situation.
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