Lawrence: Welcome to The FED Weekly for 21-27 September 2025, your essential
weekly briefing on the policies and proposals shaping your career,
your benefits, and your retirement.
Whether youâre a current federal employee navigating changes in the civil service,
or a retiree keeping a close watch on your hard-earned pension and healthcare, this
is your source for the latest news from Capitol Hill and the executive branch.
Each week, we cut through the noise to bring you the critical updates on budget
negotiations, pay raises, workforce policies, and the legislative battles that
directly impact the federal community.
Let's get you up to speed on what happened this past week.
Issues That Affect Current and Retired Federal Workers
The Imminent Government Shutdown Crisis
The most urgent news dominating the week ending 27 September 2025
was the dramatic escalation of the government funding crisis.
With the fiscal year set to expire on September 30, Congress must
pass a continuing resolution (CR) or full appropriations bills
to avoid a lapse in funding.
This week saw the breakdown of stopgap negotiations.
On Friday, 26 September 2025, a House-passed bill, intended to fund
the federal government for seven weeks, failed to pass in the Senate.
This legislative rejection immediately intensified the
threat of a government shutdown.
The political confrontation intensified further when Republican leaders reportedly
canceled scheduled votes for September 29 and September 30, an action intended
to pressure the Senate to agree to their continuing resolution proposal
without further bipartisan negotiation.
The failure to pass a short-term CR signals a critical breakdown
in cross-chamber negotiations over funding specifics, elevating the risk
beyond a typical temporary lapse.
This situation imposes severe stress on active workers, potentially
resulting in furloughs, and creates uncertainty regarding timely back pay.
For annuitants, while annuity checks from the Civil Service Retirement
System (CSRS) and the Federal Employees Retirement System (FERS) are generally
protected, a shutdown severely jeopardizes the administrative functions of the
Office of Personnel Management (OPM).
A protracted funding lapse could delay the processing of new retirement applications,
postpone benefit enrollment changes, and disrupt crucial communication and guidance
from OPM, placing both current employees and applicants in a state of high alert.
In response to this imminent threat, organizations like the National
Treasury Employees Union (NTEU) urgently called upon Congress to find
a bipartisan solution to prevent a shutdown and ensure adequate funding.
Furthermore, the union proactively reminded members to seek information
from OPM regarding pay and benefits in the event of a shutdown, and
noted the availability of hardship loans through the Federal Employee
Education and Assistance Fund.
The Crucial FEHB Premium and Benefit Watch
The latter half of September is typically the period when OPM releases
the average Federal Employees Health Benefits (FEHB) program premium rates
for the forthcoming Open Season.
As of the end of this reporting period, 27 September 2025, OPM had not
yet announced the final average rate increases for the 2026 plan year, creating
considerable suspense for the nearly 8.3
million federal employees and retirees enrolled in the program.
This anticipation is heightened by the dramatic increase seen in the prior year.
For the 2025 plan year, OPM announced that the average enrollee
share of FEHB premiums increased by an unprecedented 13.5%.
This figure represented the largest price hike in recent memory, nearly
doubling the previous yearâs increase.
While the overall program-wide weighted average premium increase was 11.2%,
the governmentâs average contribution increased by 10.1%,
demonstrating that the financial burden of rising healthcare costs
was disproportionately absorbed by the enrollees themselves.
The high premium increase for 2025 is directly correlated with OPMâs successful
negotiation to expand coverage mandates.
For the 2025 plan year, all FEHB enrollees, both active
and retired, gained access to comprehensive coverage expansions.
These expansions include fertility benefits, requiring multiple nationwide
plans to offer comprehensive in vitro fertilization (IVF) coverage.
Furthermore, OPM mandated that all FEHB carriers cover at least one
GLP-1 class anti-obesity drug, such as Wegovy or Ozempic, along with
two additional oral anti-obesity medications, often coupled with required
comprehensive behavioral therapy.
Plan carriers are also now required to reimburse behavioral health services
offered in primary care settings.
This dynamic presents a benefits-cost conundrum: OPM successfully secured
medically advanced and highly desired benefits, but the implementation of
these high-cost treatments translated immediately into significant
inflationary pressure on premium rates, underscoring the challenge
OPM faces in balancing expanded access with affordability for 2026.
OPM confirmed that carriers have been developing their 2026 proposals since
January 2025, with continued emphasis on prior year initiatives such as fertility
benefits and the prevention and treatment of obesity, alongside goals to ease
administrative burdens on enrollees.
Issues That Affect Retired Federal Workers
Final 2026 COLA Projections
The annual Cost-of-Living Adjustment is calculated based on the increase in the
average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The final rate is determined by comparing the average CPI-W of the third quarter
of the current year (July, August, and September) against the average of the
third quarter of the preceding year.
As of 27 September 2025, the official calculation is nearly complete,
requiring only the September CPI-W figure, which is scheduled for release
on Wednesday, October 15, 2025.
However, the August 2025 CPI-W figure (317.306)
released earlier in September provides the definitive pre-announcement projection.
This August data indicates that the CPI-W is 2.78
percent higher than the average third-quarter 2024 baseline (308.729).
Based on this 2.78
percent inflationary index change, the 2026 COLA projections are highly certain
and largely beneficial, though disparities between retirement systems remain.
Projected 2026 Annuity Increases
CSRS Annuitants: The COLA for Civil Service Retirement System (CSRS)
annuities, military retirement annuities, and Social Security benefits is determined
directly by the calculated CPI-W change.
The projected 2026 COLA for this group is 2.8
percent.
FERS Annuitants: Federal Employees Retirement System (FERS) annuitants
receive a COLA subject to statutory caps when inflation is moderate or high.
Under current law, if the CPI-W increase is between 2 percent and 3 percent,
the FERS COLA is capped at 2 percent.
Since the projected CPI-W increase is 2.8
percent, the projected 2026 COLA for FERS annuitants is capped at 2.0
percent.
FECA Benefits: Individuals receiving benefits under the Federal
Employees Compensation Act (FECA) will see a projected COLA of 2.7
percent.
The FECA adjustment is calculated differently, based on the
percentage change in the CPI-W from December to December.
Issues That Affect Current Federal Workers
The 2026 Pay Raise Proposal and Strategic Pay Targeting
The compensation structure for the upcoming calendar year remains a major
point of contention following the issuance of the Presidentâs Alternative
Pay Plan to Congress on August 28, 2025.
This plan announced the President's decision regarding January 2026 pay
adjustments: a modest 1 percent base increase for General Schedule (GS)
employees and a complete freeze of 2026 locality rates at their 2025 levels.
This proposal has drawn immediate and strong criticism from
federal employee organizations.
The National Treasury Employees Union (NTEU) characterized the
proposed pay increase as "meager" and "inadequate," arguing that it fails
to address the widening gap between federal and private sector salaries.
This disparity, which the Federal Salary Council previously
reported had increased to 27.54
percent, persists due to administrations frequently overriding the Federal
Employees Pay Comparability Act (FEPCA) formula, which would
otherwise dictate a higher increase.
Significantly, the Alternative Pay Plan includes a highly
targeted compensation strategy.
The President simultaneously directed OPM to leverage its special
salary rate authority to implement an additional approximately 2.8
percent pay increase for certain law enforcement officials.
This special adjustment would grant targeted law enforcement
personnel a total pay increase of 3.8
percent in January 2026, aligning their compensation increase with
the planned military pay increase.
OPM is consulting with affected agencies to determine which specific front-line
law enforcement employees, particularly those deemed critical to border security
and immigration enforcement, will receive this accelerated compensation.
This targeted approach fundamentally alters the traditional principle
of uniform civilian pay increases.
By providing a low 1 percent increase for the majority of the GS workforce
while granting a substantially larger, strategically focused raise to a
specific cadre of law enforcement, the Administration is utilizing the pay system
to prioritize specific mission-critical functions while actively suppressing
general civilian workforce compensation.
Congress retains the ability to override this alternative pay plan through the
final appropriations bills, a process that continues through December.
Legislative Threats to Workforce Stability and Pay Structure
Two pieces of legislation introduced in the House of Representatives, H.R.
200 and H.R.
201, represent fundamental threats to the current structure, stability, and
compensation of the civilian merit system.
Both bills were introduced in January 2025 and remain active, posing a
significant risk to current employees.
H.R.
200, known as the Federal Freeze Act, proposes a strategy of retrenchment
aimed at shrinking the size and cost of the federal government.
The bill was referred to the House Committee on Oversight
and Government Reform.
Pay and Hiring Freeze: Upon enactment, the bill mandates a one-year
prohibition on increasing the basic pay of any federal employee.
Additionally, for the same period, agencies are prohibited
from increasing their number of employees beyond the headcount
present on the date of enactment.
Narrow exceptions are made only for appointments related to law enforcement,
public safety, or national security.
Mandatory Reduction in Force (RIF): The most impactful provision is the
mandatory workforce reduction requirement.
The bill mandates reductions in force such that within three years of its
enactment, the number of employees at each agency must be 5 percent lower than the
number employed on the date of enactment.
If enacted, H.R.
200 would impose legislative controls that effectively suspend agency hiring
and compensation adjustments, compelling agencies to undergo deep, mandatory
staff reductions across the board, moving beyond typical hiring slowdowns to force
a structural reduction in government size.
H.R.
201 proposes a strategy of restructuring the civil service by replacing
traditional pay progression with a performance-based pilot program.
The bill aims to implement a 5-year pilot program establishing
a performance-based pay structure for certain federal employees.
Performance-Based Compensation: The bill dictates a tiered pay outcome
tied to yearly performance metrics:
Employees who significantly exceeded established performance
metrics must receive a pay increase of up to 10 percent.
Employees who merely met established performance metrics are explicitly
prohibited from receiving a pay increase.
Employees who rate below expectations must receive a 10 percent reduction in pay.
Ineligibility for Standard Increases: Crucially, employees participating in
this pilot program are made ineligible for annual or locality-based pay increases
otherwise authorized under current law.
H.R.
201 represents a direct challenge to the predictability and stability
of the General Schedule system.
By making compensation contingent on potentially subjective metrics and
eliminating guaranteed annual and locality increases, the bill would fundamentally
shift career financial outcomes away from tenure and standardized locality-based
needs, eroding the core principles of the merit system and the economic stability
long afforded to federal workers.
Administrative and Policy Updates
Beyond the major conflicts over funding and legislative structure,
current employees should be aware of two key administrative updates.
First, OPM issued a final rule pertaining to the Federal Wage System (FWS) that
will become effective on October 1, 2025.
This rule changes the regulatory criteria used to define FWS wage
area boundaries for the appropriated fund system, impacting approximately
10 percent of the FWS workforce.
The purpose of this change is to align the FWS wage area criteria more
closely with the General Schedule (GS) locality pay area criteria,
aiming to simplify pay administration and harmonize pay boundaries across
different major federal systems.
Second, OPM continues to focus on the implementation of the
Presidential Memorandum mandating the "Return to In-Person Work".
OPM maintains centralized guidance, confirming that any previous telework
policies inconsistent with the Presidential directive are rescinded.
The agency reminds all federal organizations of the legal requirements
under the Telework Enhancement Act of 2010 to integrate telework into Continuity
of Operations (COOP) planning, ensure policy compliance, and designate Telework
Managing Officers to manage the strategic implementation of telework programs.
And thatâs a wrap on this weekâs Federal Workforce Roundup.
The landscape for federal employees and retirees is constantly shifting,
with major decisions being made about everything from pay and job security
to retirement benefits and the very structure of the civil service.
Staying informed is your best tool.
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Thanks for tuning in.
Weâll be back next week to track the latest developments
and what they mean for you.
Until then, stay engaged and be well.