Norton Introduces Bill to Allow for Penalty-Free Withdrawals from Thrift Savings Plan Accounts in Certain Emergencies

WASHINGTON, D.C. – Congresswoman Eleanor Holmes Norton (D-DC) today introduced a bill to expand the circumstances in which a recently separated federal employee can withdraw from their Thrift Savings Plan (TSP) account without being penalized.

The Thrift Savings Plan Emergency Withdrawal Act of 2025 helps former federal employees pay their bills after leaving the federal workforce by allowing them to make penalty-free withdrawals from their Thrift Savings Plan (TSP) account to make up the gap between the interim payments a retiree receives during the period the Office of Personnel Management (OPM) is calculating the retiree’s final annuity and the estimated final annuity, which is usually 20% to 40% less than the finalized net payment. The bill also allows penalty-free withdrawals if the individual is involuntarily separated from the federal government.

“During these troubling times for federal employees, this bill will help those who are separated from the federal government and in need of financial assistance,” Norton said. “This bill will allow former federal employees avoid financial hardship by allowing them to make penalty-free withdrawals from their TSP account while OPM is calculating their final annuity, or if they are involuntarily separated from federal service.”

Norton’s introductory statement follows. 

Statement of Congresswoman Eleanor Holmes Norton on the

Introduction of the Thrift Savings Plan Emergency Withdrawal Act of 2025

December 23, 2025

Today, I introduce the Thrift Savings Plan Emergency Withdrawal Act of 2025, which would expand the circumstances in which a federal employee recently separated from the federal government can take a penalty-free withdrawal from their Thrift Savings Plan (TSP) account.  This bill would help former federal employees pay their bills after separation. 

First, this bill would allow a penalty-free withdrawal to make up the gap between the interim payments a retiree receives during the period the Office of Personnel Management is calculating the retiree’s final annuity and the estimated final annuity.  A retiree’s interim payment is generally only 60% to 80% of the finalized net payment.  Second, this bill would allow a penalty-free withdrawal if an individual is involuntarily separated from the federal government.  In both cases, the maximum withdrawal would be $100,000. Individuals would be able to make a withdrawal for up to a year after separation and to repay the withdrawn amount within three years to avoid the existing early withdrawal penalty, which is a 10% additional tax.

I urge my colleagues to support this bill.

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