What to Expect if the US Government Shuts Down

The U.S. government will shut down on Wednesday if Congress does not agree on a budget resolution by midnight, disrupting various government functions, including those of the Department of Labor.

While the dispute between the parties primarily revolves around health care, a government shutdown would lead to delays that impact plan sponsors and fiduciaries.

The DOL recently published a “contingency plan” outlining the limited activities that would be maintained if a government shutdown occurs. To prevent such a shutdown, the Senate must secure a minimum of 60 votes in favor of a stopgap spending measure, necessitating bipartisan cooperation to pass the short-term funding bill that the House approved earlier this month.

According to the DOL, in the event of a shutdown, “compliance assistance, regulatory, policy, research, advisories, responding to inquiries, most oversight, hearing preparation, and cooperative activities will cease.”

Additionally, the agency stated that only 3,141 of its 12,916 employees would continue working through a shutdown—as more than 75% of the department’s staff would be furloughed.

According to the DOL’s contingency plan, the Employee Benefits Security Administration, the main governing body overseeing the Employee Retirement Income Security Act, would maintain 164 of 668 of its employees.

However, the Office of Management and Budget has instructed agencies to terminate, rather than simply furlough, employees engaged in programs, projects or activities that meet the following criteria: discretionary funding has lapsed, no alternative funding source is available, and these programs, policies or activities are not aligned with President Donald Trump’s priorities, according to a memo first reported by Politico.

It is unclear whether the directive would affect DOL and, if so, how many terminated staff members would be EBSA employees.

Limited staffing at agencies that already had budgets cut would hinder the few activities they could maintain during a shutdown. Despite this, critical requirements like Form 5500 filings will remain in effect with unchanged deadlines, but the department’s staffing constraints would delay processing times.

While most activities, such as audits and investigations, will be paused, essential guidance subject to statutory deadlines normally could continue. This is particularly true for appointed employees, such as the new head of EBSA, Daniel Aronowitz, who would remain on duty during a shutdown.

Additionally, the Pension Benefit Guaranty Corporation is not funded through the appropriations process, allowing it to operate normally during a shutdown.

The IRS also announced that it will continue regular operations for the first five days of any funding lapse, utilizing resources from the Inflation Reduction Act of 2022.

Meanwhile, the Social Security Administration would see only a slight decrease in staffing if the government shuts down. Of 51,825 employees, only 6,197 would be furloughed, according to the agency’s contingency plan released on September 24.

The most recent government shutdown, which was also the longest on record, occurred from December 2018 to January 2019, lasting 35 days.