The U.S. government began its first partial shutdown in 17 years, idling as many as 800,000 federal employees, closing national parks and halting some services and contract work after Congress failed to break a partisan deadlock by a midnight deadline.

Benefits adviser Bryce Curtis’ clients are government contractors for construction and service jobs. He says many of their operations will be suspended. “The uncertainty in the short-term is negative not only for clients dependent on government contracts but for their employees that are in qualified retirement plans as the market reacts to the political gridlock,” says Curtis, a partner at Williams Lloyd Employee Benefit Group in San Francisco. “On a longer term basis, the potential for another downgrade of the U.S. credit rating is a possibility further damaging employees retirement accounts.”

Mary Lee Coble is also a broker specializing in government contract work at Greene Hazel Insurance Group in Tampa, Fla. While focusing on how contractors can remain compliant with new Affordable Care Act provisions for benefits, she says the latest shutdown adds another hurdle. “With every twist and turn in politics the maze of regulations contractors have to travel through gets more complicated,” she says.

What’s next

Congressional leaders have scheduled no further negotiations on spending legislation, raising concerns among some lawmakers that the shutdown could bleed into the more consequential fight over how to raise the U.S. debt limit to avoid a first-ever default after Oct. 17.

Chances of a last-minute deal — seen so often in past fiscal fights — evaporated shortly before midnight as the House stood firm on its call to delay major parts of President Barack Obama’s Affordable Care Act for a year. Senate Democrats were equally firm in refusing to concede and planned a morning vote to reject the House’s call for formal talks.

“It is embarrassing that these people who were elected to represent the country are representing the Tea Party,” Senate Majority Leader Harry Reid, a Nevada Democrat, said after midnight. “This is an unnecessary blow to America.”

House Speaker John Boehner, speaking after 1 a.m. in Washington, called on Senate Democrats to come to the negotiating table.

“Let’s resolve our differences,” Boehner, an Ohio Republican told reporters. “The House has voted to keep the government open, but we also want basic fairness for all Americans under ‘Obamacare.’”

Lost output

A partial federal government shutdown would cost the U.S. at least $300 million a day in lost economic output at the start, according to IHS Inc. That’s a fraction of the country’s $15.7 trillion economy, and the effects probably will grow over time as skittish consumers and businesses stay on the sidelines.

“You don’t get to extract a ransom for doing your job, for doing what you’re supposed to be doing anyway or just because there’s a law there you don’t like,” Obama said at the White House yesterday. “Time’s running out.”

During the partial government shutdown, many essential government operations will cease. Internal Revenue Service call centers will close and more than 90% of Environmental Protection Agency workers will stay home. National parks and museums will be shuttered.

Other services will continue uninterrupted. Social Security and Medicare benefits will be paid. U.S. troops will remain at their posts around the world and will be paid under a bill Obama signed yesterday. Air-traffic controllers and airport security screeners will keep working.

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access