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Washington, D.C., Nov 5 -

Congressman J. Randy Forbes (VA-04) announced today that he has cosponsored the Retirement Savings Access Act, H.R. 3612, which would waive the 10% early withdrawal penalty for tax-exempt retirement plans, such as 401ks and Investment Retirement Accounts, for individuals who have received federal or state unemployment compensation for 26 consecutive weeks. Forbes sought out the legislation in direct response to requests from workers facing layoffs as a result of the Franklin International Paper Mill closure.

“The early withdrawal penalty is an IRS provision that encourages saving for retirement and planning for the future. Unfortunately, there are many individuals in our communities that have saved diligently for years, yet are now facing unemployment as a result of situations beyond their control related to the economic downturn. At times of severe financial distress when cash is gone, accessing retirement money can be a necessary financial move. Penalty free withdrawals can help families avoid foreclosures on homes, maintain healthcare payments, and prevent long-term damage to their credit,” said Forbes.  

Currently, the Internal Revenue Service levies a 10% penalty in on all early withdrawals from IRAs, or money that is taken out of an account before a beneficiary turns 59 ½ years old. Specifically, H.R. 3612 would amend the tax code to exempt individuals who have already exhausted the standard 26 weeks of unemployment benefits from the tax penalty they would normally incur from an early withdrawal.

“The federal government has been quick to bail out Wall Street and the auto industry. Yet, we have families in our own communities who are being impacted by major layoffs and plant closures. This legislation would help them access their own money during a time of great need, without a government penalty for doing so,” said Forbes.   

For more information on Congressman Forbes’ work on the economy, visit http://forbes.house.gov/issues/economy.htm.