How Government Shutdowns Affect Employee Benefits

In just 10 days, the US government is on course to shut down for the 15th time since 1981. 

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As members of congress, particularly in the US House of Representatives, continue in their efforts to reach some kind of internal agreement that will enable the government to stay open at the end of September, if history is a guide, federal employees and those that depend upon the labor, cooperation, and/or output of federal employees would be wise to prepare for those services to be on hiatus beginning in less than 2 weeks.

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That said, as a result of the somewhat extensive experience the US government has gained in managing these shutdowns over the last 40 plus years, however, both the process of shutting the government down and eventually reopening it once government funding has again been secured should be more streamlined and efficient than ever before.

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Salaries and Compensation

Most federal employees will go unpaid during a government shutdown, which applies to furloughed employees - even those who continue volunteering their labor during a shutdown - as well as workers deemed essential to the protection of life and property, including many military and law enforcement personnel in addition to those federal employees responsible for shutting down federal operations. 

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A law passed to end the government shutdown of 2019, however, includes a provision to ensure that all federal employees will automatically receive back pay and any applicable overtime for earnings that would have been due during the shutdown period. 

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It’s also worth noting, that while many states enable federal employees to collect unemployment benefits during a government shutdown, the employees are typically required to pay those benefits back when the employee’s backpay is issued after the shutdown has concluded. 

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Health Care

During previous shutdowns, insurance carriers would allow the health insurance policies of furloughed federal employees to lapse if premium payments were missed for more than two pay periods. 

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That issue, however, appears to have been addressed by the Federal Employee Health Benefits Program, which will allow premiums that have accrued during the shutdown to be taken from the employees’ paychecks when the shutdown is over. 

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Further, the Office of Personnel Management updated regulation in 2020 to classify the HR staffers at federal agencies as ‘essential’ personnel in the event of a government shutdown so that federal employees can continue making adjustments to their benefits plans in light of changing life circumstances even during a government shutdown.

Retirement

Annuity payments through the Civil Service and Federal Employee Retirement Systems will continue as scheduled even in the event of government shutdown, although contributions to the Thrift Savings Program will not. 

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Leave

Any vacation or other leave of absence that has been previously scheduled to occur during a government shutdown will be canceled.

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That said, federal employees deemed essential or that are otherwise excepted from the shutdown may still request time-off during the shutdown, however, in which case those employees will be temporarily classified as furloughed during their period of leave. 

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You can read more about how a government shutdown will impact the pay and benefits of affected employees here.