Furloughs, federal benefits, and an update on the annual pay raise for feds.
At the time of this writing, the impending government shutdown isn’t official but the likelihood is increasing by the second. The chance of a stop-gap going through at the last minute is shrinking. This is not great news for the whole country, which relies on its governmental services, but it is really upsetting news for the federal workforce. Feds will be divided by OMB into two main buckets: essential and furloughed, but regardless, federal employees will not be getting a paycheck until Congress can fund their agency.
“Excepted” work is considered essential to the functioning of the government and/or the safety of citizens. These Feds include those at the DOJ, DHS, DOT, and other jobs that are deemed crucial. For the rest of the federal workforce, if their agency is funded by these appropriation bills on Capitol Hill, then they are not allowed to give their work any attention until they’ve received the thumbs up from the legislative branch.
Federal Employees: make sure your financial plan is as robust and shutdown-proof as possible. Attend our next webinar for feds:
During the previous shutdown, which was the longest in the country’s history, running from December 2018 to February 2019, employees from around the government had to struggle with putting food on the table, paying bills, and then for some, like at the FAA and TSA, still had to find a way to go to a job for which they weren’t getting a paycheck. Thanks to legislation that was passed back in 2019, all feds (both furloughed and essential) will receive backpay but should the shutdown last beyond a week, the financial struggles of federal workers will get worse while waiting for their retroactive pay.
Retired FERS and CSRS annuitants will still receive their pension income. If your retirement application is currently being processed by OPM, retirement services will still be processing claims. However, if your retirement packet has any errors that requires OPM to communicate with your employing agency, this could cause your retirement claim to be delayed even more than it would’ve been normally due to the error. FEHB, FEGLI, and FLTCIP coverage is not impacted any shutdown, and same goes for the Thrift Savings Plan (TSP) – meaning many feds may have to take a loan or a hardship withdraw from their TSP account should the shutdown drag on longer than a few days.
Will a Shutdown Mean a Bigger Federal Pay Raise?
During the previous shutdown, there were two silver linings that emerged around the very dark storm cloud looming over the country. The first was The Furlough Cheesecake, a company that was started by two furloughed feds and is still running strong, came into existence. And they make some high-quality (and delicious) cheesecake. The second was that federal employees received a retroactive pay raise that was considerably better than what they were set to receive prior to that shutdown commenced a few days before Christmas 2018. While a pay freeze had been announced by the Trump administration, the shutdown’s impact on feds was a major factor in retroactively including a 1.9% federal raise when the government reopened more than a month and a half later. So, although Biden has already announced a 5.2% raise for the 2024 pay raise, Congress in theory could implement a larger raise for feds in whatever budgetary measure eventually allows the federal government to fund its agencies. As well, the President still needs to sign an executive order that makes the 5.2% official and therefore, could also decide before the end of the year to implement a raise that is even bigger, perhaps as a consolidation to furloughed feds.
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Until Next Time,
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**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
