How federal workers can prepare financially under threat of a government shutdown, layoffs

Congress has until midnight on Tuesday to pass a funding bill and avoid a shutdown of the federal government. If lawmakers can’t agree, hundreds of thousands of federal employees could be without a paycheck — or worse.

While federal workers are typically put on unpaid leave during a shutdown, President Donald Trump has threatened mass firings if a budget deal isn’t reached.

If your paycheck is at risk, now is the time to plan for delayed or lost income.

Government shutdowns have historically been short, with many lasting just a few days. But if you’re living paycheck to paycheck, any pay gap is challenging, especially as everyday costs increase.

“The last time we had something like this, it wasn’t the entire government, but it was 35 days, and that went up to close to three paychecks for people,” said John Hatton, staff vice president for policy and programs at the National Active and Retired Federal Employees Association.

Start with a vigorous accounting of expenses: “Three things you really need to focus on … cash flow, cash flow and cash flow,” said Mary Clements Evans, a certified financial planner and owner of Evans Wealth Strategies in Emmaus, Pennsylvania.

Many people don’t have an understanding of their monthly expenses beyond the large essentials such as rent or mortgage and car payments, she said. Automatic payments and debit or credit card swipes can also make it harder to gauge discretionary spending.

“We’re in a world where we’re disconnected from our spending habits,” Evans said.

Once you have a handle on expenses, plan for reduced income. This may mean determining which savings to tap and adjusting your budget.

Figuring out where to cut back is easier while you still have a paycheck coming in.

“It sounds like that’s a financial equation, but it’s not. It’s often emotional and psychological, because they feel they’re losing their identity and their status,” said Evans, who is also the author of “Emotionally Invested.”

Reach out to your lenders. Financial institutions may offer payment deferrals, loan modifications and other forms of hardship assistance. For example, some credit unions are preparing to offer zero-interest loans for federal workers whose pay is affected in a shutdown.

The Trump administration’s plan for a “reduction in force,” or RIF, in the event of a shutdown is a new wrinkle for federal workers.

“We are in uncharted territory,” Hatton said.

During a shutdown, a majority of employees at government agencies funded through the annual appropriations process are typically put on furlough, or unpaid leave, if the agency hasn’t received funding. Those whose work is necessary to protect life or property, or to deliver mandated benefits, are considered essential and required to work, according to the Office of Personnel Management.Employees are promised back pay when the government reopens.

“This is always a difficult situation for federal employees,” Hatton said, “whether they’re working or furloughed or now, adding this new option of receiving a RIF notice, for possible permanent loss of their employment.”

It’s unclear how a massive RIF would be carried out under a government shutdown, experts say.

There are legal requirements for an RIF: Agencies must provide justification for the layoffs, give written notice to employees 60 days before a layoff and offer an appeals process. During a shutdown, only “essential” functions are supposed to be carried out, and experts say it’s uncertain if carrying out mass layoffs would fit that definition.

To prepare for a possible layoff, federal employees should research unemployment benefits and determine when their health coverage might end.

Research health insurance costs, too. Workers may be able to extend theirfederal workplace plan for up to 18 months through the Temporary Continuation of Coverage option — but they still must shoulder the full cost of premiums.

For now, a more affordable option could be marketplace coverage under the Affordable Care Act.

“You can go and you can get insurance through them, and that is based on your income,” Evans said.

However, the enhanced subsidies that have kept premiums low are set to expire at the end of the year, unless Congress acts.

The subsidies are a key sticking point in the current government funding debate. Democrats say they want to extend them as part of the current budget negotiations, while Republicans say they want to debate the policy only after averting a shutdown.

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Correction: This story has been revised to reflect that enhanced Affordable Care Act subsidies are set to expire at the end of the year. A previous version misstated how the subsidies would change.