What Is the DOL’s Plan If the Government Shuts Down?

Like most organs of the federal government, the Labor Department maintains an explicit policy for government shutdowns as a consequence of their frequency.



Most of the federal government is only legally funded through the end of this week.

Senate Democrats have introduced a continuing resolution that would keep the government funded until December 16. If a new budget or resolution is not passed by this Friday, the government would shut down and nonessential services without other sources of funding would be paused.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Attached to the continuing resolution is a provision that makes it easier for energy projects to receive environmental approval, and would lead to the approval of the Mountain Valley Pipeline, a 300-mile-long natural gas pipeline project in West Virginia and Virginia.

This provision is the product of a deal reached by Senator Chuck Schumer, D-New York, and Senator Joe Manchin, D-West Virginia, to secure Manchin’s decisive vote earlier this year on the Inflation Reduction Act.

It is unclear if the resolution can pass with the rider or if it will be dropped for the time being. It has already attracted opposition from Senator Bernie Sanders, I-Vermont, who circulated a “Dear Colleague” letter last Friday that describes the rider as a “disastrous side deal introduced by Senator Manchin” and highlights the negative effect it would have on the climate and environment.

In the absence of the resolution, however, many government services would cease to operate.

The Department of Labor, like other departments of the federal government, maintains a contingency plan in case of government shutdowns as a result of their increasing frequency. The plan is called a “Plan for the Continuation of Limited Activities During a Lapse in Appropriations.

The document outlines the services that the DOL would continue to provide, either because they are essential or because they receive funding from a source outside of Congressional budgets.

One such example of a DOL organ that has alternate funding is the Pension Benefit Guaranty Corporation, which is funded by insurance premiums paid by sponsors of defined benefit pension plans as well as by the assets the PBGC controls when it takes over a failed pension. The purpose of the PBGC is to continue pension payments to beneficiaries of private DB plans whose plan has failed. Since its funding does not require a new annual appropriation, the PBGC can continue to function as normal, similar to how programs such as Social Security continue to function since they have alternate funding.

Because of statutory requirements, the DOL would also administer policies essential to the protection of life and property from imminent threat, such as monitoring and responding to unsafe working conditions and child labor reports, as well as investigations and inspections of high-hazard industries.

The Employee Benefits Security Administration would see most of its services close during a shutdown. However, it would still be able to pursue criminal action under the Employee Retirement Income Security Act, and could pursue civil actions that are necessary to protect life, such as an action to restore “retirement benefits necessary for the purchase of life-sustaining necessities.”

Bradford Campbell, a partner at Faegre Drinker Biddle & Reath, and head of EBSA from 2006 to 2009, says that EBSA could also take actions necessary to meet judicial deadlines that were set prior to the shutdown.

EBSA would also be able to bring actions under the No Surprises Act, which is funded by supplemental appropriations and was established to prevent certain surprise medical bills from out-of-network providers and ambulances.

The DOL would suspend nonessential services that do not have independent funding. This includes the Bureau of Labor Statistics, the Office of Disability Employment Policy, the Women’s Bureau and the Veterans Employment and Training Service, among others.

Analysis of American Workers Shows Retirement Plan Type Influences Spending Habits

A study of government employees reported that those with defined benefit retirement plans typically spend a higher percentage of their income than those with a defined contribution or hybrid plan.



A new report by the Public Retirement Research Lab and JP Morgan demonstrated that public-sector workers whose primary retirement account is a defined benefit account tend to spend a higher ratio of their earnings than those with a defined contribution account.

The PRRL is a collaboration of the Employee Benefit Research Institute and National Association of Government Defined Contribution Administrators. They combined their datasets on public employees with defined contribution, defined benefit, and hybrid plans with JP Morgan’s data on their customer’s income and savings collected by monitoring cash flows in and out of their JP Morgan accounts.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

When they limited their combined data to household participants aged 25 to 64, so they could focus in on those of working age, they ended up with 36,690 households. Members of the household measured had to have a JP Morgan bank account to be included in the study, so if one member of the household had an account, but other members banked elsewhere, the total household size would be counted as one.

The study, written by Craig Copeland of EBRI; Kelly Hahn, of J.P. Morgan Asset Management; and Matt Petersen of NAGDCA, found that across all income quartiles, defined benefit plan participants spend a higher ratio of their income than defined contribution or hybrid plans. At the lowest quartile, defined benefit participants spent 117% of their income vs 108% for non-defined benefit, and at the highest quartile, defined benefit participants spent 90%, vs 83% for non-defined benefit participants.

Spending-to-Net-Income Ratio, by Income and Primary Defined Benefit (DB) Status

120

Primary DB

117.3%

Primary Non-DB

108.5%

108.1%

100.0%

100

101.0%

97.0%

90.4%

82.7%

80

Lowest Quartel

2nd Quartel

3rd Quartel

Highest Quartel

Source: PRRL Database and Select Chase Data

The authors speculated that this gap is likely because workers with a defined benefit plan have a retirement that is based on a formula, rather than market performance, and is perceived as lower risk. This reduced risk makes them feel more comfortable spending larger percentages of their total income.

The study found essentially no differences in the spending habits between the two categories concerning what they spent their money on exactly. However, since spending data came from bank account usage, the researchers do not know what cash and checks were spent on.

Additionally, the study noted that some state and local government employers are exempt from Social Security if they offer a retirement plan that is at least as generous as Social Security itself. They tested if Social Security coverage affected worker spending between the two categories, and found that it did not.

The main finding of the study was that public-sector employees who have a defined benefit pension fund tend to spend a higher ratio of their total earnings than their non-defined benefit counterparts.

«