Shutdown Escalates: OMB Orders Agencies to Begin Layoffs

Every shutdown has pain points.

But this one just crossed a line no one expected.

Instead of temporary furloughs, the Office of Management and Budget (OMB) is now directing agencies to begin Reduction in Force (RIF) procedures — meaning potential permanent job cuts for some federal workers.

For long-time employees, that’s not just alarming. It’s unprecedented.

From Furlough to RIF: What’s Different This Time

Traditionally, shutdowns bring furloughs.

Those are unpaid but temporary.

Once Congress restores funding, workers return — and the 2019 Government Employee Fair Treatment Act guarantees back pay.

This time, OMB has reportedly told several agencies to prepare formal RIF plans in “extended lapse” programs — effectively turning a shutdown into a workforce reduction.

Early reports suggest smaller and independent agencies (HUD, Education, EPA, and certain commissions) are most at risk.

Why It’s Causing Legal Shockwaves

Unions including AFGE and NTEU have already signaled potential lawsuits.

Their argument: you can’t use a funding lapse to sidestep federal personnel law.

Under the Civil Service Reform Act, RIFs must follow strict procedures — justification, notice periods, and review rights.

None of those steps align with the speed of these OMB orders.

Expect court filings as soon as this week.

What Happens to Your TSP and Benefits

If you are furloughed, TSP loans and balances remain intact.

The TSP automatically pauses repayments and will not mark loans delinquent.

But if your separation becomes official under a RIF:

• You’ll be eligible for TSP separation withdrawals — taxable, and possibly penalized if you’re under 59½.

• You could roll your balance into an IRA to keep it tax-deferred.

• You will lose automatic payroll contributions until reemployment.

Insurance coverage (FEHB, FEGLI, FEDVIP) continues for now, but back pay recovery could depend on how Congress classifies RIFed workers.

For decades, shutdowns have been frustrating — but temporary.

If these RIFs proceed, that precedent breaks.

Federal service has always promised stability in exchange for service.

If stability goes, it’s more than a payroll delay — it’s a breach of trust.

Best,
—FWR