A government shutdown categorizes federal employees into excepted, exempt, or furloughed statuses, with excepted and furloughed personnel facing delayed pay, though backpay is guaranteed by law. Despite pay disruptions, federal health benefit coverage remains active, and Thrift Savings Plan (TSP) operations, including investments and withdrawals, continue normally due to their non-appropriated funding. However, retirement application processing may be delayed depending on individual agency staffing, while furloughed employees can access state unemployment benefits, potentially repayable upon receipt of backpay.
Federal News Network has compiled answers to what happens to federal pay, benefits and retirement during a government shutdown, based on agency guidance. Editor’s Note: This story was updated Oct. 2 with more information on retirement, Open Season, unemployment benefits and the deferred resignation program. If you have further questions about how the government shutdown impacts federal employees, you can get in touch with Federal News Network by filling out our website comments form, or reaching out to us on Facebook or LinkedIn. Federal employees and agencies are now in the midst of a government shutdown, after Congress failed to reach a spending agreement in time to avoid a lapse in appropriations. 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 congressional appropriations. In many cases, that affects the work, pay and benefits of federal employees. Federal News Network has compiled answers to what happens to federal pay, benefits and retirement 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. For the purposes of a government shutdown, federal employees who opted into the deferred resignation program are essentially treated the same as all other federal employees, according to OPM guidance from earlier this year. “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. But since the final official day of employment for feds who took the DRP was Sept. 30, the 154,000 employees who are now officially separated from their jobs would not see any overlapping days with the current shutdown. “Employees under a DRP agreement with a voluntary resignation or retirement date of September 30, 2025, are not affected by a lapse in appropriations commencing on October 1,” OPM wrote in September shutdown guidance. “Such employees will no longer be employed in the federal government after September 30, should not be continued on administrative leave, furloughed or placed in an excepted status upon a lapse in appropriations, and will not be entitled to any retroactive pay … after the lapse ends.” OPM’s guidance also noted that agency HR and payroll personnel who are working to off-board DRP employees and other retiring feds are allowed to continue working during the shutdown to process those applications, if their agency permits them. Submitting retirement applications to OPM can also be considered an excepted activity in the shutdown. Any other employees who were on paid administrative leave leading into the shutdown would be considered furloughed for the purposes of the shutdown, OPM added. That makes those employees entitled to receive back pay once the shutdown is over, as long as they are still technically on the government’s workforce rolls. 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 News Network has compiled a list of individual agencies’ shutdown contingency plans, detailing how many federal employees are considered furloughed, excepted or exempted at each agency. 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 said in Sept. 28 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. Enrollees in FEHB, PSHB and FEDVIP can still make changes to their plan options during Open Season, even in the case of a shutdown. This includes furloughed, excepted and exempt employees. That’s because OPM, which runs the insurance programs, finances those programs through trust funds rather than appropriations. A shutdown also doesn’t delay any changes employees may make during Open Season to their health, vision, dental or life insurance options. Those changes would still take effect on Jan. 1 — the first day of plan year 2026. This year’s Open Season will run from Nov. 10 to Dec. 8. But aside from Open Season or a qualifying life event, enrollees — as usual — cannot make changes to their health care options throughout the rest of the year. Furloughed employees will not have the opportunity to cancel or change their insurance coverage during a shutdown simply because they get furloughed, OPM said. But employees who experience a qualifying life event during a shutdown can still make changes to their enrollments. 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. 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 will continue to get their monthly annuity payments with no interruptions, OPM said. That includes annuitants in both the Federal Employees Retirement System and the Civil Service Retirement System. Feds can also still make changes or updates to their retirement benefits during the shutdown. OPM’s Retirement Services office remains open throughout a shutdown and RS employees are considered excepted personnel. 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. Although RS staff at OPM continue working during the government shutdown, OPM cannot begin processing an application until it receives the completed application from an employee’s home agency. That means during the shutdown, processing will depend 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 processing can be delayed. During the shutdown, furloughed federal employees can become eligible for unemployment compensation, but the timing depends on where the employee lives. The state law applies for wherever the employee’s last official duty station was located when the shutdown occurred. Some states require a one-week waiting period before an individual can qualify for unemployment payments. If filing for unemployment, the state will require individuals to provide their agency’s federal identification code and other documents, as described here. “Please be aware that you may be required to repay any unemployment insurance payments once an appropriations bill is enacted and you receive pay for the period of the furlough,” OPM added. More information about individual state offices and unemployment compensation for federal employees is available on the Labor Department’s website. OPM has provided further details on what happens to pay, leave, retirement, the Thrift Savings Plan and more in shutdown guidance, which was updated in late September. If you would like to contact this reporter about recent changes in the federal government, please email drew.friedman@federalnewsnetwork.com or reach out on Signal at drewfriedman.11 Copyright © 2025 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area. Drew Friedman is a workforce, pay and benefits reporter for Federal News Network. Follow @dfriedmanWFED The ongoing government shutdown has immediately segmented federal employees into excepted, exempt, or furloughed categories, with both excepted and furloughed personnel experiencing delayed compensation. A 2019 law, however, ensures these employees will receive backpay once the shutdown concludes, mitigating long-term income loss. Furthermore, federal health benefits (FEHB, PSHB) and other insurance programs (FEDVIP, FEGLI, FLTCIP) maintain continuous coverage, though premium payments for affected employees accumulate and become due after the shutdown ends. Thrift Savings Plan (TSP) operations, administered by the non-appropriated Federal Retirement Thrift Investment Board (FRTIB), continue without interruption, allowing participants to make investments, withdrawals, and loans. Similarly, OPM's Retirement Services office operates with excepted personnel, ensuring ongoing annuity payments for existing retirees and processing new applications. Nevertheless, the processing of new retirement applications may face delays depending on individual agencies' decisions regarding furloughing their HR and payroll staff. Furloughed federal employees are eligible for state-specific unemployment compensation, yet they may be required to repay these benefits upon receiving their federal backpay. The overall market sentiment related to this event is mildly negative, reflecting the general disruption to federal operations and employee financial stability. The absence of publicly accessible agency contingency plans on OMB's website adds an element of uncertainty regarding the precise operational impacts across various federal departments.
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