Lawrence: Welcome to The FED Weekly for 31 August - 6 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.
Section 1: Issues That Affect Current and Retired Federal Workers
The Office of Personnel Management, or OPM, announced that premiums for the
Federal Employees Health Benefits program, the FEHB, will rise by an average of 13.5
percent.
This is the largest single-year increase in almost two decades and
follows substantial hikes of 7.7
percent in 2024 and 8.7
percent in 2023.
For the average federal family, this translates to an
additional cost of about $26.10
per biweekly paycheck.
OPM attributes this steep rise to several industry-wide pressures, including price
increases from healthcare providers and suppliers, higher utilization of certain
prescription drugs, and a notable increase in spending on behavioral health services.
A significant driver of this cost increase is the mandated expansion of benefits.
Beginning in 2025, all FEHB enrollees will have access to nationwide plans
that offer comprehensive coverage for in vitro fertilization, or IVF.
Additionally, health carriers will now be required to cover at least one
GLP-1 class anti-obesity drug, such as Wegovy or Ozempic, along with two
other oral anti-obesity medications.
While these expanded benefits address critical health needs, their
high cost is being passed directly to the entire pool of enrollees.
When you place this 13.5
percent premium hike alongside the administration's proposed one percent
pay raise for 2026 and the projected 2.6
percent cost-of-living adjustment for retirees, the
financial picture becomes stark.
The cost of a core benefit is rising at a rate more than thirteen times
that of the proposed pay raise.
This effectively creates a net loss in real income for the vast majority
of the federal community, eroding purchasing power and potentially
impacting morale, recruitment, and retention efforts across government.
For retirees, there is a silver lining, but one that highlights a growing divide.
OPM is strongly encouraging FEHB plans to offer Medicare Advantage options, which
can significantly reduce or even eliminate out-of-pocket costs for annuitants who
are enrolled in Medicare Parts A and B.
However, this benefit is only available to that specific subset of retirees,
leaving those without Part B to bear the full brunt of the premium increases.
In contrast to the major FEHB hike, premiums for the Federal Employees
Dental and Vision Insurance Program, or FEDVIP, will see only modest increases.
Dental plan premiums will rise by an average of 2.97
percent, while vision plans will increase by just 0.87
percent.
In more positive financial news, the Thrift Savings Plan, the
401(k)-style retirement savings program for federal employees, has
reached a monumental milestone.
As of September 7th, 2025, the TSP officially surpassed $1 trillion
in assets under management.
This landmark achievement reflects years of steady contributions from more than 7.2
million participants, coupled with strong market performance.
According to the latest data from June 2025, the average TSP balance
across all accounts stood at $134,633.
For participants in the Federal Employees Retirement System, or FERS,
that average was significantly higher at $196,668, a figure that underscores
the long-term power of compounding and agency matching contributions.
The market rally continued through August, boosting TSP account balances.
The stock-based C Fund gained 2.03
percent, the S Fund rose by 4.08
percent, and the International I Fund was up 3.95
percent.
The bond-based F Fund also posted a positive return of 1.19
percent.
For September, the interest rate for the government securities
G Fund was set at 4.250
percent.
While this milestone solidifies the TSP's central role in federal
retirement security, it also highlights the degree to which that security
is now tied to market performance.
With the workforce now almost entirely under the FERS system, a major market
downturn would have a far more significant impact on the financial futures of
federal employees than it would have two decades ago, when a larger portion of
the workforce was covered by the more traditional CSRS defined-benefit pension.
Turning to legislation, a massive reconciliation bill signed into law on
July 4th, known as the "One Big Beautiful Bill Act of 2025," has introduced several
new tax provisions that will affect both working and retired federal employees.
Effective for the 2025 through 2028 tax years, the law creates a new
deduction specifically for seniors.
Individuals aged 65 and older will be able to claim a new $6,000 deduction, or
$12,000 for a qualifying married couple.
This is in addition to the existing standard deduction for seniors
and is aimed at providing relief to retirees on fixed incomes.
However, this deduction does phase out for individuals with a modified
adjusted gross income over $75,000, or $150,000 for joint filers.
For current employees, the law introduces new deductions for qualified tip
income and, notably, for overtime pay.
Employees can now deduct the premium portion of their overtime
compensationâfor example, the "half" in "time-and-a-half" pay.
This deduction is capped at $12,500 annually, or $25,000 for joint filers,
and also has income-based phase-outs.
While these provisions offer targeted tax relief, the same bill enacts
significant changes to the Supplemental Nutrition Assistance Program, or SNAP.
The law freezes the cost basis for the Thrifty Food Plan, expands work
requirements to individuals up to age 65, and tightens eligibility rules.
These changes could negatively impact low-income federal families who may
rely on SNAP to supplement their earnings, creating a situation where
some in the federal community benefit from tax cuts while others face a
reduction in essential support from the very same piece of legislation.
Finally in this section, the long-simmering conflict over the
role of unions in the federal government has erupted once again.
On August 28th, President Trump issued a new executive order, EO 14343,
which bans collective bargaining at several more federal agencies.
The list includes NASA, the U.S.
Patent and Trademark Office, and the National Weather Service, among others.
This action expands on a previous order from March that targeted
nearly 20 other agencies.
The response from federal unions was swift and forceful.
On September 3rd, the National Treasury Employees Union, or
NTEU, filed a lawsuit in the D.C.
District Court to block the order.
The lawsuit argues that the President has exceeded his statutory authority,
which permits such exclusions only when an agency's "primary function" is
intelligence or national security work.
The NTEU also alleges that the order constitutes illegal retaliation
against the union for its vocal opposition to administration policies.
The American Federation of Government Employees, AFGE, labeled the order
"immoral and abhorrent," viewing it as part of a broader plan to
dismantle government agencies.
The unions are not fighting alone.
On September 2nd, a coalition of state attorneys general filed a legal
brief in a related Ninth Circuit case, supporting the unions and arguing
that the administration's actions are likely unconstitutional retaliation
in violation of the First Amendment.
These legal battles over collective bargaining are not happening in a vacuum.
They are intrinsically linked to the administration's other major workforce
initiatives, including mass layoffs and changes to hiring and firing practices.
By removing union protections, the administration weakens a primary
source of organized resistance, making it easier to implement its broader
agenda for reshaping the civil service.
The lawsuits, therefore, represent more than a fight over contracts; they are a
fight over the fundamental structure and independence of the federal workforce.
Section 2: Issues That Affect Retired Federal Workers
First up is the closely watched projection for the 2026
Cost-of-Living Adjustment, or COLA.
Based on the latest inflation data from July, the 2026 COLA for Social
Security benefits and Civil Service Retirement System, or CSRS, annuities
is projected to be around 2.5
to 2.7
percent.
The final figure will be locked in after the September inflation
numbers are released in mid-October.
However, for retirees under the Federal Employees Retirement System,
or FERS, the story is different.
The FERS system includes what is often called a "diet COLA."
Under its formula, if the official COLA falls between 2 and 3 percent, FERS
annuitants receive a flat 2 percent.
If the COLA is 3 percent or higher, they receive the full
amount minus one percentage point.
Let's illustrate the real-world impact.
Assuming the final COLA is 2.6
percent, a CSRS retiree with a $50,000 annual pension would see
their annuity increase by $1,300.
A FERS retiree with the identical pension would receive only a 2
percent increase, amounting to $1,000.
That $300 difference may seem small, but it compounds year after year, leading
to a gradual but significant erosion of purchasing power for FERS retirees
compared to their CSRS counterparts.
This structural inequity was designed as a cost-saving measure, but in
an era of persistent inflation, it effectively shifts more of the
inflation risk from the government onto the individual FERS retiree.
Next, an important update from the Social Security Administration.
While the agency is maintaining its normal payment schedule for September,
a policy change regarding overpayments is causing significant financial
distress for some beneficiaries.
The SSA has begun aggressively recouping past overpayments by withholding
50 percent of a recipient's monthly check until the debt is repaid.
This is a dramatic increase from a temporary 10 percent cap
that was previously in place.
For retirees living on a fixed income, suddenly losing half of
their monthly Social Security benefit can be devastating.
This policy shift suggests a change in administrative priorities, moving from
minimizing beneficiary hardship to a more aggressive fiscal recoupment strategy.
This comes as the agency announced a new leadership team on September
5th, which has been noted as being "light on government experience,"
potentially signaling further operational changes ahead.
Section 3: Issues That Affect Current Federal Workers
On August 31st, President Trump submitted his alternative pay plan to Congress.
It calls for a one percent across-the-board increase to base
pay, while freezing locality pay rates at their current 2025 levels.
However, the plan creates a significant exception for certain
law enforcement personnel.
It directs OPM to use its special salary rate authority to provide
these employees with a total pay raise of approximately 3.8
percent, aligning their increase with that of the military.
OPM will now consult with the Departments of Homeland Security,
Justice, and the Interior to identify the specific job categories that will
be eligible for this higher raise, with a focus on roles critical to border
security and immigration enforcement.
This two-tiered approach is more than just a fiscal decision;
it is a clear policy statement.
By singling out law enforcement for a substantial raise while offering a
minimal one to the rest of the civil service, the administration is using
compensation as a tool to signal its priorities and incentivize talent to flow
into its preferred sectors of government.
Federal employee unions immediately denounced the proposal.
NTEU President Doreen Greenwald called the 1 percent raise "meager and
inadequate" and demanded that the 3.8
percent increase be extended to all federal employees.
The union continues to back the FAIR Act, a bill in Congress that
calls for an average raise of 4.3
percent for 2026.
It is worth noting that during the president's first term, Congress
overruled his proposed pay freezes on multiple occasions, suggesting
a potential legislative battle over the final pay figure is likely.
Meanwhile, the Office of Personnel Management is moving forward with a
series of reforms that are fundamentally reshaping how the government
hires and manages new employees.
On September 2nd, OPM announced a new two-page resume standard for
all applications submitted through the USAJOBS website, which will
take effect on September 27th.
This change is part of the administration's broader "Merit
Hiring Plan," which also updates job announcements to include
language seeking candidates who are, quote, "passionate about the
ideals of our American republic".
In parallel, OPM has been implementing a major change to
probationary periods for new hires.
Under a new executive order, a new employee's appointment will no longer
automatically become permanent after their one- or two-year probationary period.
Instead, agencies must now affirmatively certify in writing
that the employee's continued service is in the public interest.
This shifts the default from retention to a system requiring active approval
to keep a new employee, giving managers and political appointees significantly
more power over the workforce before full civil service protections are granted.
Combined, these policies create a system that streamlines the hiring
of ideologically screened candidates and makes it easier to remove them
before they gain career tenure.
The subjective language in job announcements and the requirement for an
affirmative political sign-off at the end of probation work together to potentially
weaken the apolitical, merit-based foundation of the civil service.
These policy shifts are occurring against a backdrop of significant
turmoil in the federal headcount.
The latest jobs report from the Bureau of Labor Statistics, released on September
5th, showed that federal government employment fell by 15,000 in August alone.
Since January of 2025, the federal workforce has shrunk by 97,000 positions.
This official data reflects the ongoing mass layoffs
initiated by the administration.
The Partnership for Public Service estimates that as of late August,
nearly 200,000 federal workers have already left their jobs amid plans to
eliminate over 290,000 positions in total, largely through the Department
of Government Efficiency initiative.
Yet, this decline is not uniform.
At the same time these layoffs are proceeding, the administration
is planning to "surge hiring" in the very law enforcement
agencies targeted for higher pay.
This reveals a strategic reallocation of federal resourcesâa de facto
reorganization of government through attrition and replacement, shrinking
regulatory and service-oriented agencies while expanding
those focused on enforcement.
Finally, several bills pending in Congress illustrate the deep, competing visions
for the future of the federal workforce.
On one side is the Federal Employee Performance and Accountability Act, H.R.
201.
This bill would create a pilot program where pay for senior employees is
tied directly to performance ratings, including a mandatory 10 percent pay cut
for those rated "below expectations".
Another bill, the Federal Employee Return to Work Act, H.R.
236, would make any employee who teleworks even one day a week ineligible for annual
pay raises and locality pay adjustments.
On the other side stands the FAIR Act, which advocates for a 4.3
percent pay raise for all employees, and the Equal COLA Act, which would
ensure FERS retirees receive the same full cost-of-living adjustment
as their CSRS counterparts.
These bills represent a legislative battle over the core principles of federal
employmentâpitting a vision of control, punishment, and austerity against one of
competitive compensation and fairness.
The path these bills take will say a great deal about the future
culture of the federal workplace.
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.