In a bipartisan move, Sen. James Lankford (R-Okla.) and Sen. Michael Bennet (D-Colo.) this week unveiled a bill that would provide a penalty-free emergency withdrawal of $1,000 annually from employer-sponsored retirement accounts and IRAs.
The Enhancing Emergency and Retirement Savings Act of 2021 would allow for one emergency distribution per calendar year, and that distribution would be limited to vested amounts over $1,000. The bill also would require participants to pay back the withdrawn amount to the plan before any additional emergency distribution can be allowed from that same plan.
“Our common-sense 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," the senators said in prepared statement. “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."
Lankford said he has heard from his constituents who experience unexpected emergencies that they need flexibility to access their money. Oklahoma employers have also told him that some workers do not participate in their plans because they cannot afford to save for retirement and build up their savings, Lankford said in the release. “So many Oklahomans live paycheck to paycheck. They want to start saving for retirement, but they can’t take the risk of losing access to their money in case of an emergency,” he said.
Noting that nearly four in 10 Americans are unable to afford a $400 emergency expense, Bennet said the bipartisan legislation will help provide the flexibility workers need to foot the bill for an unexpected expense. It also will help deter families from turning to predatory loans, the average of which is $375, often with an interest rate of more than 150%, he said.
“I hear all the time from Coloradans who get hit with an unexpected car repair they can’t afford and then lose their job because they can’t make it to work. Millions of families are trapped in this cycle of economic insecurity—one emergency away from everything falling apart,” Bennet said.
The supporters of the bill include the ERISA Industry Committee, Nationwide Retirement Solutions, the American Retirement Association, the American Benefits Council, State Street Global Advisors and LPL Financial, according to the press release.