A bipartisan bill that would provide a penalty-free distribution option in the event of an emergency from employer-sponsored retirement accounts and individual retirement accounts has been introduced in the Senate.
The Enhancing Emergency and Retirement Savings Act of 2021, introduced May 27 and unveiled Tuesday by Sens. James Lankford, R-Okla., and Michael Bennet, D-Colo., would permit one emergency distribution a calendar year. The bill aims to encourage participation in retirement plans by giving individuals additional flexibility and penalty-free access to funds should a family emergency hit, according to a news release.
The distributions would be limited to vested amounts over $1,000, with an annual maximum withdrawal of $1,000. Moreover, the bill requires that the individual replenish the withdrawn amount back to the plan before an additional emergency distribution from that same plan is allowed.
"Our commonsense bill provides Americans the flexibility to save for retirement now, knowing they have access to some of their money for an emergency, and be able to pay that money back into their retirement plan," Mr. Lankford said in the news release. "Adding that flexibility will help encourage workers, who might not otherwise feel comfortable participating in their personal or companies' retirement savings program, to put money in those accounts with a little more peace of mind."
Supporters of the bill include Nationwide Retirement Solutions, the American Retirement Association, the American Benefits Council, the ERISA Industry Committee, State Street Global Advisors and LPL Financial.
David Ireland, global head of defined contribution at State Street said in a letter to the senators that if "low- and middle-income individuals know that they can access their retirement savings without a penalty in the case of an emergency, they will feel comfortable contributing more."
He added, "The bill would enhance both emergency savings and retirement savings."