Emergency Relief for Federal Contractors Act of 2025

This bill allows federal contractors, their employees, and certain federal grant recipients or District of Columbia government workers affected by government shutdowns to withdraw up to $30,000 (adjusted for inflation) from retirement plans without the usual 10% early withdrawal penalty. Withdrawals must be repaid within three years to avoid tax consequences, and the withdrawn amount is spread over three years for tax purposes. It specifically applies during periods of federal appropriations lapses (at least two weeks) when workers face unpaid leave or reduced pay. The bill modifies tax rules to treat these distributions as eligible for penalty-free access under defined circumstances.