How a government shutdown impacts federal pay and benefits

Federal employees and agencies are bracing for a potential government shutdown, as lawmakers have just days to reach a spending agreement with no clear path in sight to avoid a shutdown.

During a government shutdown, agencies that don’t yet have their funding determined by Congress are legally required to shutter all activities that are financed by appropriations. In many cases, that affects the work, pay and benefits of federal employees.

The looming threat of a government shutdown may be a familiar feeling to many federal employees. But this year is raising additional questions about the impacts a shutdown would have, particularly for employees who have opted into the deferred resignation program.

Federal News Network has compiled answers to what happens to federal pay and benefits during a government shutdown, based on guidance from the Office of Personnel Management and other agency resources. Some of the content below is sourced from previous reporting around past government shutdowns, but still applies currently.

The deferred resignation program

For the purposes of a government shutdown, federal employees who have been accepted into the DRP are essentially treated the same as all other federal employees, according to OPM guidance from earlier this year. Despite not actively working for their agencies, DRP-ers should expect to see the same standard shutdown rules apply to their pay and benefits.

“Any government shutdown could potentially affect an employee’s pay regardless of whether he or she has accepted the deferred resignation offer,” OPM wrote earlier this year on an FAQ page for the DRP.

OPM also noted that those who have been accepted into the DRP, like other federal employees, are entitled to backpay under the Government Employee Fair Treatment Act of 2019. But notably, DRP-ers would only be owed backpay until the date of their official separation from the government, even if a shutdown continues past that effective DRP end date.

OPM has not published further guidance on DRP and government shutdowns since February this year. An OPM spokesperson said there will be no additional guidance on this topic for the time being.

Pay depends on your employment category

During a government shutdown, each federal employee generally falls into one of three categories: excepted, exempt or furloughed.

Excepted employees continue to work during a shutdown, but are not paid until after the shutdown is over. They are guaranteed backpay once a shutdown ends due to a 2019 law. Federal employees who are excepted and continue to work during a shutdown are also still able to earn premium pay for overtime hours, night hours and other types of premium pay, which is only paid out after a shutdown ends.

Exempt employees continue to work and get paid as usual during a shutdown. They are employees who work in positions financed by funds other than annual appropriations from Congress. A small number of employees working at non-appropriated fund agencies, however, are partially paid through appropriated funds, which may still lead to some furloughs.

Furloughed employees stop working entirely during a government shutdown. They do not get paid until the end of the shutdown, but they are also guaranteed backpay. Federal employees who are furloughed or excepted will be paid for hours worked during a shutdown, only once a shutdown ends.

Although agencies are responsible for updating their shutdown contingency plans to determine which employees fall into which of the three categories, no plans have been made publicly available on the Office of Management and Budget’s website this year. OMB removed all contingency plans that agencies had compiled during a 2024 threat of a government shutdown.

Federal benefits and health premiums

Even if an agency doesn’t pay health premiums on time to OPM, federal employees and other enrollees in the Federal Employees Health Benefits (FEHB) program, as well as participants in the Postal Service Health Benefits (PSHB) program, maintain coverage throughout the duration of a shutdown, OPM has said in shutdown guidance.

Those same rules apply to coverage through the Federal Employees Dental and Vision Insurance Program (FEDVIP), the Federal Employees’ Group Life Insurance (FEGLI) program and the Federal Long Term Care Insurance Program (FLTCIP).

While all FEHB and PSHB participants maintain health coverage during a shutdown, those who are excepted or furloughed are not expected to pay health premiums while a shutdown is ongoing. Enrollees, however, will have to make any payments for premiums that accumulate during a shutdown, once the shutdown ends.

Since the Federal Retirement Thrift Investment Board (FRTIB) is a non-appropriated agency, Thrift Savings Plan operations continue normally during a shutdown. That means TSP participants can still make investments, withdrawals, apply for loans and take any other standard actions.

FRTIB has also clarified that if TSP participants miss a loan payment during a shutdown, they will not be placed in a default status on their loan. Automatic paycheck deductions for loans are also paused during a shutdown, but participants can still send in direct loan payments if they choose.

Retirement processing during a government shutdown

Federal employees who are scheduled to retire either before or during a shutdown — and who submit their retirement application to their agency before a shutdown begins — should still technically be considered retired. While OPM processes their applications, retiring employees should expect to receive interim annuity payments.

Those who are already retired should continue to get their annuity payments with no interruptions, OPM has said.

But federal employees who are planning to submit their retirement applications may face a different scenario. Feds should still be able to submit their retirement application during a shutdown, but it could take longer than usual for the application to be processed.

Since OPM Retirement Services is funded through a trust fund, RS staff can continue working during a government shutdown. But OPM cannot begin processing an application until it receives the completed application from an employee’s home agency. During a shutdown, processing depends on whether an individual agency decides to furlough its own employees who work on retirements.

In instances where payroll employees at a feds’ employing agency are furloughed during a shutdown, OPM has said that processing can be delayed.

OPM has provided further details on what happens to pay, leave, retirement, the Thrift Savings Plan and more in additional shutdown guidance from January 2024.

If you would like to contact this reporter about recent changes in the federal government, please email [email protected] or reach out on Signal at drewfriedman.11

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