The Help FEDS Act amends Section 303 of the Social Security Act to force State unemployment insurance (UI) programs to accept applications and pay regular unemployment compensation to ‘‘excepted’’ federal employees who perform emergency work but are not being paid during a lapse in appropriations in fiscal years 2026 or 2027. If the employee later receives backpay under 31 U.S.C. 1341(c)(2), the bill requires repayment to the State and treats any unrepaid amounts as recoverable overpayments.
To remove state budget exposure, the bill directs the Secretary of the Treasury to reimburse States 100% of benefits paid to these excepted federal employees and reimburse related administrative expenses, with the Secretary of Labor certifying amounts. Those federal reimbursements are drawn from the Unemployment Trust Fund.
The statutory language defines which federal workers qualify and imposes mechanics for repayment and recovery.
At a Glance
What It Does
Requires State UI laws to allow excepted federal employees who perform emergency work during funding lapses in FY2026 or FY2027 to apply for and receive regular unemployment compensation. Mandates repayment if the employee later receives federal backpay and authorizes states to recover unrepaid amounts as overpayments.
Who It Affects
Excepted federal employees (as defined by 31 U.S.C. 1341(c)(1)) who perform emergency work without pay during a lapse in appropriations, State UI agencies that must process claims and recover overpayments, and federal fiscal managers at Treasury and Labor who will administer reimbursement and certification.
Why It Matters
The bill shifts short-term income continuity for furloughed emergency workers into the State UI system while preserving full federal reimbursement, creating new cross-jurisdictional interactions between federal pay law and State UI rules and tapping the federal Unemployment Trust Fund to cover shutdown-related UI costs.
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What This Bill Actually Does
The bill adds a new subsection to Section 303 of the Social Security Act requiring State unemployment compensation laws to permit ‘‘excepted Federal employees’’ to apply for and receive regular unemployment benefits for any week in which they perform emergency work but are not paid because of a lapse in Federal appropriations, and it limits that entitlement to lapses occurring in fiscal year 2026 or 2027. The threshold here is both status (an excepted employee under federal pay law) and circumstance (performing emergency work and not receiving pay during the lapse).
That combination creates a narrowly targeted entitlement for a defined cohort of federal workers who continue to work through a funding gap.
The bill builds a repayment and recovery mechanism: if the excepted employee later receives pay under 31 U.S.C. 1341(c)(2) (the statutory backpay authority), the employee must repay the unemployment compensation to the State. Any amounts not repaid are treated as overpayments under the State’s UI law and may be recovered using the State’s usual overpayment collection procedures and then deposited into the State unemployment fund.
This creates a temporary double-payment dynamic (UI benefits up front, repayment later) that is resolved through the State recovery process.To prevent states from bearing the financial burden, the bill requires the Secretary of the Treasury to pay each State an amount equal to 100% of (A) the benefits provided to these excepted federal employees and (B) any additional administrative expenses incurred by the State in relation to such compensation. The Secretary of Labor must certify the amounts to Treasury.
The statute explicitly identifies the Unemployment Trust Fund as the source for these reimbursements.Finally, the bill defines ‘‘excepted Federal employee’’ for its purposes as an employee who (1) qualifies as an excepted employee under 31 U.S.C. 1341(c)(1) and (2) is not being paid due to the lapse in appropriations. That cross-reference ties the UI eligibility to an existing federal pay-law classification rather than creating a new federal employment category, which means State agencies will need to verify federal status and pay circumstances when processing claims.
The Five Things You Need to Know
The entitlement applies only to weeks in which an excepted federal employee performs emergency work and is unpaid during a lapse in appropriations occurring in fiscal year 2026 or 2027.
If the employee later receives pay under 31 U.S.C. 1341(c)(2), the employee must repay the unemployment compensation to the State that paid it.
States must treat unrepaid repayments as overpayments and may recover them using the same methods they use for other UI overpayments; recovered funds must be deposited into the State unemployment fund.
The Secretary of the Treasury will reimburse each State 100% of the benefits paid to these employees and 100% of related administrative expenses, with amounts certified by the Secretary of Labor.
Reimbursements to States are drawn from the federal Unemployment Trust Fund established under section 904(a) of the Social Security Act.
Section-by-Section Breakdown
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Short title
Designates the Act as the 'Help Federal Employees During Shutdowns Act' or the 'Help FEDS Act.' This is purely nominal but signals congressional intent to address federal worker hardship during funding lapses.
State obligation to provide UI to excepted federal employees
Imposes a mandatory requirement on State unemployment compensation laws to allow excepted federal employees to apply for and receive regular UI for any week they perform emergency work while not being paid because of a lapse in appropriations (limited to FY2026 and FY2027). Practically, State UI agencies will have to accept these claims, verify federal employment status and pay suspension, and adjudicate benefit entitlement under their existing rules despite the federal connection.
Repayment, overpayment treatment, and fund deposit
Requires employees who later receive statutory backpay to repay the UI benefits to the State; any amounts not repaid are treated as overpayments and recovered under the State's standard procedures. States must deposit recovered sums into their unemployment funds. This creates a procedural pathway for recouping temporary UI payments and keeps recovered dollars within the State UI ecosystem.
Federal reimbursement mechanics and funding source
Directs Treasury to pay each State an amount equal to 100% of benefits paid to these excepted employees plus administrative expenses, with Labor certifying amounts to Treasury. The statute specifies the Unemployment Trust Fund as the funding source. The certification and payment steps require coordination between Labor and Treasury and create a federal backstop for State expenditures.
Definition of 'excepted Federal employee'
Defines the covered population by cross-reference to 31 U.S.C. 1341(c)(1) (the federal excepted employee class) and adds the condition that the employee is not being paid because of the lapse in appropriations. This ties eligibility to federal pay-law categories and focuses the benefit on emergency workers who continue to work without pay.
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Explore Employment in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Excepted federal employees who perform emergency work without pay — they get short-term income continuity through State UI while working during a funding lapse.
- Households of excepted employees — immediate access to UI reduces near-term financial stress for families facing unpaid work during shutdowns.
- State UI agencies — while they take on processing, they receive full reimbursement for benefits and administrative expenses, protecting state budgets from the direct cost of payments.
Who Bears the Cost
- The federal Unemployment Trust Fund — it supplies the reimbursements and will see outflows corresponding to benefits and administrative reimbursements under this bill.
- State UI agencies operationally — states must verify federal status, process claims, handle recoveries, and manage cash flow timing even if ultimately reimbursed.
- Excepted federal employees — they bear the risk of later repayment and overpayment recovery, which can create financial uncertainty or collection actions if backpay arrives and repayment is not timely.
Key Issues
The Core Tension
The bill balances immediate income support for unpaid emergency federal workers against the administrative complexity and fiscal impact of routing shutdown-related pay interruptions through State UI systems and the federal Unemployment Trust Fund; it solves short-term hardship for employees but shifts operational burdens and potential fiscal exposure into different public systems without resolving timing and verification frictions.
The bill creates a temporary entitlement tied to a narrow set of fiscal years (2026 and 2027) and to a specific federal classification. That temporal and definitional narrowness simplifies congressional drafting but invites operational friction: State UI programs vary in eligibility rules, documentation standards, and adjudicatory procedures, so applying a federal pay-law cross-reference could produce inconsistent outcomes across States and increase appeals.
States must determine what constitutes adequate proof that an employee was both an ‘‘excepted’’ employee and unpaid because of the lapse, which could require coordination with federal employers and generate delays.
Although Treasury reimburses 100% of benefits and administrative expenses, the bill relies on Labor’s certification and on timely payments from the Unemployment Trust Fund. Those certification and payment processes introduce timing risk: States may front benefits and administrative costs and face temporary cash-flow pressure pending federal reimbursement.
The repayment requirement resolves double-payment concerns on paper but can create real hardship for employees who must repay benefits once backpay arrives, and for States that must undertake collections. Finally, channeling these payments through the Unemployment Trust Fund raises longer-term fiscal questions: if multiple shutdowns occur and are covered under similar rules, the Trust Fund could experience repeated draws, and Congress has not specified replenishment mechanisms in this bill.
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