WEBVTT NOTE This file was generated by Descript 00:00:00.027 --> 00:00:05.599 Lawrence: Welcome to The FED Weekly for 13 - 19 July 2025, your essential 00:00:05.599 --> 00:00:09.236 weekly briefing on the policies and proposals shaping your career, 00:00:09.463 --> 00:00:11.518 your benefits, and your retirement. 00:00:11.999 --> 00:00:15.627 Whether you’re a current federal employee navigating changes in the civil service, 00:00:15.981 --> 00:00:20.681 or a retiree keeping a close watch on your hard-earned pension and healthcare, this 00:00:20.681 --> 00:00:24.818 is your source for the latest news from Capitol Hill and the executive branch. 00:00:25.416 --> 00:00:29.261 Each week, we cut through the noise to bring you the critical updates on budget 00:00:29.261 --> 00:00:34.443 negotiations, pay raises, workforce policies, and the legislative battles that 00:00:34.443 --> 00:00:36.579 directly impact the federal community. 00:00:37.207 --> 00:00:39.861 Let's get you up to speed on what happened this past week. 00:00:40.467 --> 00:00:44.303 Section 1: Issues That Affect Current and Retired Federal Workers 00:00:44.818 --> 00:00:48.590 This section addresses the overarching economic and healthcare developments 00:00:48.890 --> 00:00:52.109 that will financially impact nearly every member of the federal 00:00:52.109 --> 00:00:55.981 community, from those currently serving to those in retirement. 00:00:56.521 --> 00:01:00.040 The 2026 Economic Outlook: A Looming Financial Squeeze 00:01:00.572 --> 00:01:04.881 The financial forecast for 2026 presents a challenging picture for the federal 00:01:04.881 --> 00:01:08.754 community, where anticipated benefit adjustments are on a collision course 00:01:09.027 --> 00:01:10.990 with escalating healthcare costs. 00:01:11.572 --> 00:01:14.736 Early projections for the annual Cost-of-Living Adjustment (COLA) 00:01:15.090 --> 00:01:18.590 suggest only modest gains, which are likely to be significantly 00:01:18.590 --> 00:01:23.563 eroded, if not entirely erased, by a substantial hike in Medicare premiums. 00:01:24.154 --> 00:01:29.054 Based on the latest inflation data from June 2025, the 2026 COLA is 00:01:29.054 --> 00:01:31.863 projected to fall within a range of 2.3% 00:01:31.863 --> 00:01:32.945 to 2.7%. 00:01:33.309 --> 00:01:37.027 The National Association of Letter Carriers (NALC), using the June Consumer 00:01:37.027 --> 00:01:41.899 Price Index for Urban Wage Earners and Clerical Workers (CPI-W), projects a 2.3% 00:01:41.899 --> 00:01:45.354 COLA for annuitants under the Civil Service Retirement System (CSRS). 00:01:45.890 --> 00:01:49.045 However, this same data translates to a lower 2.0% 00:01:49.099 --> 00:01:52.136 COLA for those under the Federal Employees Retirement System (FERS). 00:01:52.436 --> 00:01:56.927 This discrepancy stems from the FERS "diet COLA" formula, which caps the adjustment. 00:01:57.372 --> 00:02:02.209 If the official CPI-W increase is between 2% and 3%, FERS retirees 00:02:02.209 --> 00:02:04.090 receive a flat 2% increase. 00:02:04.354 --> 00:02:07.227 If the increase is 3% or more, they receive the full amount 00:02:07.399 --> 00:02:08.909 minus one percentage point. 00:02:09.736 --> 00:02:12.936 Independent analysts and organizations like The Senior Citizens League 00:02:12.963 --> 00:02:16.627 (TSCL) are forecasting a slightly higher COLA, between 2.6% 00:02:16.627 --> 00:02:17.809 and 2.7%, 00:02:18.090 --> 00:02:20.900 citing persistent inflationary pressures, some of which are 00:02:20.900 --> 00:02:22.790 attributed to newly imposed tariffs. 00:02:23.421 --> 00:02:26.649 Compounding the issue of a modest COLA is a projected sharp 00:02:26.649 --> 00:02:28.385 increase in healthcare expenses. 00:02:28.940 --> 00:02:33.930 The 2025 Medicare Trustees annual report forecasts a significant 11.6% 00:02:33.930 --> 00:02:37.403 increase in the standard Medicare Part B premium for 2026. 00:02:38.021 --> 00:02:41.285 This would raise the monthly premium from $185.00 00:02:41.603 --> 00:02:43.094 to $206.50, 00:02:43.394 --> 00:02:45.321 an increase of $21.50 00:02:45.321 --> 00:02:48.430 per month and the largest such jump since 2022. 00:02:49.163 --> 00:02:53.136 For a large segment of the federal retiree population, this confluence of factors 00:02:53.136 --> 00:02:55.254 makes a "net loss" year highly probable. 00:02:55.700 --> 00:03:00.000 The mechanics are straightforward: a FERS retiree with a $2,000 monthly 00:03:00.000 --> 00:03:04.272 annuity would see a 2% COLA add $40 to their gross monthly payment. 00:03:04.681 --> 00:03:07.545 However, after subtracting the $21.50 00:03:07.545 --> 00:03:11.590 Medicare Part B premium hike, the net gain shrinks to just $18.50. 00:03:12.009 --> 00:03:15.709 If Federal Employees Health Benefits (FEHB) program premiums 00:03:15.709 --> 00:03:20.809 also rise significantly, as they did in 2025 with an average 13.5% 00:03:20.854 --> 00:03:24.827 increase for non-postal workers, this small gain could be completely 00:03:24.827 --> 00:03:28.599 nullified, resulting in a decrease in real-dollar disposable income. 00:03:29.227 --> 00:03:32.281 This creates a significant financial planning challenge that goes far 00:03:32.281 --> 00:03:33.945 beyond the headline COLA number. 00:03:34.510 --> 00:03:40.119 Some relief may come from the newly signed "One Big Beautiful Bill Act" (OBBBA), 00:03:40.420 --> 00:03:42.747 which introduces a tax credit for seniors. 00:03:43.183 --> 00:03:47.147 The law provides a $6,000 credit for single filers with incomes below 00:03:47.147 --> 00:03:52.874 $75,000 and a $12,000 credit for couples with incomes below $150,000. 00:03:53.310 --> 00:03:57.047 While this could provide a meaningful offset for many middle-income retirees, 00:03:57.074 --> 00:04:01.029 it is important to note that an estimated half of all seniors do not 00:04:01.029 --> 00:04:05.138 have a federal tax liability on their Social Security benefits, meaning 00:04:05.138 --> 00:04:08.983 many of the lowest-income annuitants will not benefit from this provision. 00:04:09.630 --> 00:04:12.967 The Federal Employees Health Benefits (FEHB) Program: Navigating 00:04:12.967 --> 00:04:15.203 Costs and Changes in 2026 00:04:15.758 --> 00:04:19.821 The FEHB program, a cornerstone of federal benefits, is facing a period 00:04:19.821 --> 00:04:21.340 of transformation and tension. 00:04:21.740 --> 00:04:25.730 The Office of Personnel Management (OPM) is pushing for benefit enhancements 00:04:25.776 --> 00:04:29.658 and a more user-friendly experience, even as the program confronts the 00:04:29.658 --> 00:04:33.458 dual threats of rising premiums and potential structural changes. 00:04:34.032 --> 00:04:38.802 In its annual "call letter" to insurance carriers, a document outlining policy 00:04:38.802 --> 00:04:43.922 goals for the 2026 plan year, OPM stressed several key initiatives. 00:04:44.472 --> 00:04:47.332 It is important to note that this letter was issued under the 00:04:47.332 --> 00:04:51.432 previous administration, and its policies are subject to change. 00:04:51.472 --> 00:04:56.452 The letter directs carriers to streamline plan administration by implementing online 00:04:56.452 --> 00:05:01.512 claims submission portals by the end of 2026 and improving the accuracy and 00:05:01.512 --> 00:05:04.022 usability of online provider directories. 00:05:04.892 --> 00:05:08.542 On the benefits side, OPM is mandating coverage for fertility 00:05:08.542 --> 00:05:13.202 preservation for individuals at risk of iatrogenic infertility (e.g., 00:05:13.202 --> 00:05:17.282 from chemotherapy) and is strongly encouraging carriers to expand 00:05:17.282 --> 00:05:20.602 their mental health provider networks to reduce appointment wait 00:05:20.602 --> 00:05:22.742 times and improve access to care. 00:05:23.354 --> 00:05:26.599 While these benefit enhancements are welcome, the premium outlook 00:05:26.599 --> 00:05:28.254 remains a significant concern. 00:05:28.717 --> 00:05:32.226 In a sign of broad pressure on the health insurance market, insurers 00:05:32.226 --> 00:05:36.372 participating in the Affordable Care Act (ACA) Marketplace are requesting 00:05:36.372 --> 00:05:42.081 a median premium increase of 15% for 2026, the largest hike since 2018. 00:05:42.599 --> 00:05:45.708 While not a direct corollary, this trend signals an environment 00:05:45.708 --> 00:05:48.754 of rapidly growing healthcare costs that will almost certainly 00:05:48.754 --> 00:05:51.754 impact FEHB premium negotiations. 00:05:52.563 --> 00:05:55.326 This follows the substantial average premium increase of 13.5% 00:05:55.326 --> 00:06:00.781 for non-postal FEHB enrollees in 2025, an increase driven largely by major carriers. 00:06:01.423 --> 00:06:03.195 The program is at a crossroads. 00:06:03.814 --> 00:06:08.214 OPM is pursuing a vision for a more comprehensive and modern FEHB program, 00:06:08.532 --> 00:06:10.368 with a focus on high-demand services. 00:06:10.868 --> 00:06:13.350 At the same time, the financial underpinnings of the program are 00:06:13.350 --> 00:06:16.477 facing significant pressure from market-driven premium inflation. 00:06:17.259 --> 00:06:21.468 This is exacerbated by an undercurrent of political discussion around proposals to 00:06:21.468 --> 00:06:26.459 fundamentally alter FEHB, such as shifting to a voucher-based system or reducing 00:06:26.459 --> 00:06:31.523 the government's premium contribution from its current level of 72% to 75%. 00:06:32.150 --> 00:06:36.496 This creates a fundamental tension that may force employees and retirees into 00:06:36.496 --> 00:06:40.286 a difficult trade-off between plans with better services and plans they 00:06:40.286 --> 00:06:44.332 can afford, potentially undermining the program's core value proposition. 00:06:44.950 --> 00:06:47.895 Thrift Savings Plan (TSP) Updates for All Participants 00:06:48.415 --> 00:06:52.579 The Thrift Savings Plan (TSP) announced several administrative and structural 00:06:52.579 --> 00:06:54.634 changes relevant to all participants. 00:06:55.325 --> 00:07:01.034 As of June 30, 2025, the L 2025 Fund, having reached its target date, 00:07:01.279 --> 00:07:03.306 was rolled into the L Income Fund. 00:07:03.725 --> 00:07:07.870 Concurrently, a new L 2075 Fund was established to cater to participants 00:07:07.870 --> 00:07:11.943 with a longer investment horizon, such as those born after 2009 or planning 00:07:11.943 --> 00:07:14.306 to withdraw funds in 2073 or later. 00:07:14.899 --> 00:07:18.399 Participants should also note that their second quarter 2025 statements, 00:07:18.790 --> 00:07:23.190 covering account activity from April 1 through June 30, will be made available 00:07:23.190 --> 00:07:25.772 online in My Account by the end of July. 00:07:27.281 --> 00:07:31.535 In a broader move toward modernization, the TSP began delivering annual 00:07:31.535 --> 00:07:36.390 statements electronically by default in 2025 for all participants who have an 00:07:36.390 --> 00:07:38.499 email address on file with the agency. 00:07:39.075 --> 00:07:42.075 Section 2: Issues That Affect Current Federal Workers 00:07:42.632 --> 00:07:46.168 This section details the profound and rapid changes to job security, 00:07:46.477 --> 00:07:50.277 employment rights, compensation, and the very nature of the civil 00:07:50.277 --> 00:07:51.932 service that unfolded this week. 00:07:52.565 --> 00:07:56.119 The Unraveling of Civil Service Protections: A Multi-Front Assault 00:07:56.645 --> 00:08:00.354 The long-standing framework of merit-based civil service protections, 00:08:00.636 --> 00:08:03.881 designed to ensure a professional and non-partisan government 00:08:03.881 --> 00:08:08.454 workforce, faced an unprecedented and coordinated challenge this week from 00:08:08.481 --> 00:08:10.126 all three branches of government. 00:08:10.714 --> 00:08:12.977 The most immediate blow came from the judiciary. 00:08:13.259 --> 00:08:18.468 On July 8, 2025, the Supreme Court struck down a lower court injunction 00:08:18.696 --> 00:08:22.059 that had barred the administration from conducting mass layoffs, known 00:08:22.059 --> 00:08:23.814 as Reductions in Force (RIFs). 00:08:24.259 --> 00:08:27.632 This ruling was widely seen as a "major reversal" of the conventional 00:08:27.632 --> 00:08:31.286 wisdom that federal workers enjoy significant job protections. 00:08:31.396 --> 00:08:35.232 It effectively gives the executive branch a powerful tool to reshape 00:08:35.232 --> 00:08:39.486 the workforce and allows dozens of previously stalled RIF actions 00:08:39.486 --> 00:08:40.895 to proceed across the government. 00:08:41.604 --> 00:08:46.164 Just nine days later, on July 17, the executive branch advanced 00:08:46.164 --> 00:08:47.764 a radical new legal theory. 00:08:48.274 --> 00:08:52.074 Justice Department attorneys formally argued before an administrative judge at 00:08:52.074 --> 00:08:57.544 the Merit Systems Protection Board (MSPB) that the Constitution grants the President 00:08:57.544 --> 00:09:02.834 the authority to fire many career federal employees "at any time for any reason". 00:09:03.424 --> 00:09:07.814 This "at-will" employment argument seeks to dismantle decades of precedent and 00:09:07.814 --> 00:09:13.314 federal law, most notably the Civil Service Reform Act of 1978, which requires 00:09:13.314 --> 00:09:18.594 that agencies provide cause, notice, and an opportunity for employees to respond 00:09:18.594 --> 00:09:20.684 before a termination can take place. 00:09:21.262 --> 00:09:24.707 On the same day, the President signed an Executive Order creating 00:09:24.707 --> 00:09:29.108 a new category of federal employee, "Schedule G," in the excepted service. 00:09:29.962 --> 00:09:33.607 This new schedule is designed for noncareer positions of a "policy-making 00:09:33.607 --> 00:09:37.308 or policy-advocating character" that are normally subject to change 00:09:37.308 --> 00:09:38.780 with a presidential transition. 00:09:39.053 --> 00:09:43.526 Critically, the order specifies that removals from Schedule G positions are 00:09:43.526 --> 00:09:47.289 not subject to standard Civil Service Rules and Regulations, effectively making 00:09:47.289 --> 00:09:51.480 them at-will appointments who serve at the pleasure of the administration. 00:09:52.075 --> 00:09:54.993 These events do not appear to be random or disconnected. 00:09:55.357 --> 00:09:59.111 Rather, they represent a systematic effort to increase executive control 00:09:59.111 --> 00:10:02.448 over the federal bureaucracy and weaken the merit-based system. 00:10:03.157 --> 00:10:07.257 The legal argument for at-will employment establishes the ideological foundation. 00:10:07.720 --> 00:10:11.057 The Supreme Court's ruling on RIFs provides the legal tool for large-scale 00:10:11.057 --> 00:10:13.320 removals of existing career staff. 00:10:13.957 --> 00:10:17.311 Finally, the creation of Schedule G provides the mechanism for 00:10:17.311 --> 00:10:21.020 backfilling influential positions with political appointees who lack 00:10:21.020 --> 00:10:22.820 traditional civil service protections. 00:10:23.429 --> 00:10:28.229 The combined effect is a "pincer movement" that fundamentally alters the relationship 00:10:28.229 --> 00:10:32.538 between political leadership and the career workforce, creating a more pliable 00:10:32.538 --> 00:10:34.593 and politicized government apparatus. 00:10:35.184 --> 00:10:38.457 Workforce Reductions in Action: RIFs and Buyouts Accelerate 00:10:38.980 --> 00:10:43.489 With legal barriers removed, several agencies moved swiftly to implement 00:10:43.489 --> 00:10:45.617 previously announced workforce reductions. 00:10:46.362 --> 00:10:49.644 Immediately following the Supreme Court's decision, the Department 00:10:49.644 --> 00:10:52.862 of Education was cleared to proceed with the termination of approximately 00:10:52.862 --> 00:10:57.662 1,300 employees, which constitutes roughly one-third of its workforce. 00:10:58.407 --> 00:11:01.344 These employees had been on paid administrative leave since the 00:11:01.344 --> 00:11:03.217 RIF was first announced in March. 00:11:03.280 --> 00:11:08.453 The Department of State began issuing termination notices to over 1,300 civil 00:11:08.453 --> 00:11:11.062 and foreign service employees on July 11. 00:11:11.671 --> 00:11:16.453 The Internal Revenue Service (IRS) has reportedly fired between 6,000 and 00:11:16.453 --> 00:11:21.817 7,000 probationary employees, including 120 from the critical Large Business 00:11:21.871 --> 00:11:26.198 and International division that audits high-asset individuals and corporations. 00:11:26.235 --> 00:11:30.453 The IRS is reportedly aiming to cut its overall headcount by 20% 00:11:30.453 --> 00:11:34.344 to 50% through a combination of layoffs, attrition, and buyouts. 00:11:34.889 --> 00:11:37.989 Other agencies, including the Environmental Protection Agency 00:11:38.017 --> 00:11:41.680 (EPA) and the Department of Veterans Affairs (VA), are also proceeding 00:11:41.680 --> 00:11:43.235 with significant staff cuts. 00:11:43.807 --> 00:11:46.989 In parallel with these involuntary actions, agencies have been 00:11:46.989 --> 00:11:50.280 aggressively using "voluntary" measures to reduce headcount. 00:11:51.217 --> 00:11:54.471 Widespread offers of Voluntary Early Retirement Authority (VERA) 00:11:54.680 --> 00:11:57.998 and Voluntary Separation Incentive Payments (VSIP) are being used 00:11:57.998 --> 00:11:59.626 to encourage employees to leave. 00:12:00.198 --> 00:12:03.962 The Social Security Administration (SSA), for example, offered VERA 00:12:03.962 --> 00:12:08.607 and VSIP to all its employees, with financial incentives of up to $25,000, 00:12:08.653 --> 00:12:12.835 though the window to accept was tight, closing on April 19, 2025. 00:12:13.280 --> 00:12:17.853 Similarly, the Department of the Interior (DOI) offered VERA/VSIP packages with a 00:12:17.853 --> 00:12:22.807 maximum payout of $25,000, although many positions were excluded from the offer. 00:12:23.544 --> 00:12:26.217 The Future of Federal Pay and the Work Environment 00:12:26.726 --> 00:12:30.717 The climate of uncertainty extends to federal compensation and the work 00:12:30.717 --> 00:12:34.235 environment, with new legislative proposals threatening to alter 00:12:34.235 --> 00:12:35.853 pay structures and benefits. 00:12:36.589 --> 00:12:40.617 The debate over the 2026 federal pay raise is already taking shape. 00:12:41.171 --> 00:12:44.844 The administration's Office of Management and Budget (OMB) has advised agencies 00:12:44.844 --> 00:12:47.135 to plan for a 3% average pay raise. 00:12:47.380 --> 00:12:49.689 This stands in contrast to the 4.3% 00:12:49.689 --> 00:12:52.526 average raise—composed of a 3.3% 00:12:52.526 --> 00:12:56.780 across-the-board increase and a 1% average boost to locality pay—proposed in the 00:12:57.329 --> 00:13:00.857 Federal Adjustment of Income Rates (FAIR) Act, a bill introduced 00:13:00.857 --> 00:13:02.402 by Democrats in Congress. 00:13:03.147 --> 00:13:05.948 Proponents of the higher raise point to Federal Salary Council 00:13:05.948 --> 00:13:10.829 data from 2024 showing that federal employees earned 24.72% 00:13:10.857 --> 00:13:13.675 less on average than their private-sector counterparts. 00:13:14.217 --> 00:13:17.571 Meanwhile, several bills introduced in Congress could have a direct 00:13:17.571 --> 00:13:19.653 and negative impact on federal pay. 00:13:20.389 --> 00:13:20.735 H.R. 00:13:20.735 --> 00:13:25.298 201, the Federal Employee Performance and Accountability Act of 2025, 00:13:25.689 --> 00:13:30.135 proposes a five-year pilot program for employees at the GS-11 level and above. 00:13:30.835 --> 00:13:34.708 Under this program, pay would be tied directly to performance: those exceeding 00:13:34.708 --> 00:13:39.298 metrics could receive up to a 10% raise, but those merely meeting metrics would 00:13:39.298 --> 00:13:43.435 get no raise, and those rated below expectations would face a 10% pay cut. 00:13:44.162 --> 00:13:46.744 Participants would be ineligible for standard annual and 00:13:46.744 --> 00:13:48.235 locality pay adjustments. 00:13:48.889 --> 00:13:49.517 Another bill, S. 00:13:49.517 --> 00:13:54.575 27, the Federal Employee Return to Work Act, would strip locality pay from 00:13:54.629 --> 00:13:58.829 any federal employee who teleworks at least one day per week, reverting their 00:13:58.829 --> 00:14:01.011 salary to the much lower "Rest of U.S." 00:14:01.011 --> 00:14:01.793 pay scale. 00:14:02.457 --> 00:14:06.266 Additionally, the newly passed OBBBA permanently eliminates the tax-free 00:14:06.266 --> 00:14:09.238 status of employer reimbursements for bicycle commuting and moving 00:14:09.238 --> 00:14:13.257 expenses, effectively turning these benefits into taxable income. 00:14:13.829 --> 00:14:16.575 Evidence of growing financial stress among the workforce is 00:14:16.575 --> 00:14:18.166 already apparent in official data. 00:14:18.747 --> 00:14:22.793 The Federal Retirement Thrift Investment Board's 2024 annual report revealed 00:14:22.793 --> 00:14:27.029 a concerning increase in both TSP plan loans and hardship withdrawals. 00:14:27.520 --> 00:14:29.547 Loan usage rose to 8.6% 00:14:29.547 --> 00:14:32.057 of participants, while hardship withdrawals reached 00:14:32.057 --> 00:14:34.311 a five-year high of 3.9%. 00:14:35.002 --> 00:14:38.247 This trend was particularly acute among mid-career and lower-paid 00:14:38.247 --> 00:14:41.466 workers, with the second-lowest salary quintile reporting a 00:14:41.466 --> 00:14:44.338 hardship withdrawal rate of 8.47%. 00:14:44.926 --> 00:14:48.898 This combination of aggressive workforce reductions, attacks on pay 00:14:48.898 --> 00:14:52.717 and protections, and a hostile work environment is creating the conditions 00:14:52.717 --> 00:14:56.408 for a significant "brain drain" and loss of institutional knowledge. 00:14:56.907 --> 00:15:00.535 Experienced employees who are eligible are taking VERA and VSIP 00:15:00.589 --> 00:15:02.462 offers to escape the uncertainty. 00:15:03.244 --> 00:15:07.735 Mid-career employees, who are the backbone of agency operations, are facing extreme 00:15:07.735 --> 00:15:11.526 financial pressure and the threat of pay cuts, making them more likely to seek 00:15:11.526 --> 00:15:13.389 stable employment in the private sector. 00:15:14.553 --> 00:15:18.553 The risk of this talent exodus is not merely theoretical; the administration 00:15:18.553 --> 00:15:22.280 has already had to rehire some "critical" employees it had previously laid off, 00:15:22.735 --> 00:15:26.353 demonstrating a lack of strategic foresight in the reduction process. 00:15:27.071 --> 00:15:31.398 This exodus will inevitably degrade agency performance, delay critical public 00:15:31.398 --> 00:15:36.017 services, and weaken national security and public health functions as expertise 00:15:36.017 --> 00:15:38.144 built over decades walks out the door. 00:15:38.695 --> 00:15:41.704 Section 3: Issues That Affect Retired Federal Workers 00:15:42.235 --> 00:15:45.553 This section distills the most critical financial and healthcare 00:15:45.553 --> 00:15:49.698 news for federal annuitants, providing a clear-eyed view of the challenges 00:15:49.698 --> 00:15:51.671 and opportunities on the horizon. 00:15:52.271 --> 00:15:54.807 Your 2026 Bottom Line: The COLA vs. 00:15:54.807 --> 00:15:56.144 Healthcare Cost Collision 00:15:56.671 --> 00:16:00.426 For federal retirees, the financial outlook for 2026 is dominated by 00:16:00.426 --> 00:16:04.198 the collision between a modest COLA and sharply rising healthcare costs. 00:16:04.717 --> 00:16:09.371 As detailed previously, the projected 2026 COLA of approximately 2.3% 00:16:09.371 --> 00:16:10.453 to 2.7% 00:16:10.762 --> 00:16:14.498 is on a direct path to be consumed by a projected 11.6% 00:16:14.498 --> 00:16:16.517 increase in Medicare Part B premiums. 00:16:17.093 --> 00:16:20.311 The practical impact of this collision will not be felt equally. 00:16:20.847 --> 00:16:24.602 Because FERS retirees will likely receive a COLA capped at 2.0%, 00:16:24.993 --> 00:16:26.275 the $21.50 00:16:26.275 --> 00:16:29.848 monthly Medicare hike will consume a much larger portion of their adjustment 00:16:30.111 --> 00:16:34.657 compared to their CSRS counterparts, who will receive the full, uncapped COLA. 00:16:35.175 --> 00:16:38.211 This dynamic widens the already existing gap in retirement 00:16:38.211 --> 00:16:39.948 outcomes between the two systems. 00:16:40.475 --> 00:16:43.929 The FERS "diet COLA" mechanism, designed in a different economic era, 00:16:43.957 --> 00:16:47.284 is proving inadequate in the current volatile inflationary environment. 00:16:48.038 --> 00:16:52.348 It provides less inflation protection precisely when it is needed most, leading 00:16:52.348 --> 00:16:56.638 to a faster erosion of purchasing power for FERS annuitants and testing the 00:16:56.638 --> 00:17:01.111 long-term financial viability of the system to provide a secure retirement. 00:17:01.784 --> 00:17:05.957 It is therefore imperative that all retirees plan their 2026 budgets 00:17:05.957 --> 00:17:10.522 based on their anticipated net income after these mandatory deductions, 00:17:10.758 --> 00:17:12.458 not on the headline COLA figure. 00:17:13.037 --> 00:17:15.491 Navigating Your Health Benefits in Retirement 00:17:16.022 --> 00:17:20.349 Maintaining health coverage is a primary concern for annuitants, and navigating 00:17:20.349 --> 00:17:22.886 the FEHB program requires diligence. 00:17:23.458 --> 00:17:27.731 A critical and non-negotiable requirement is the "5-Year Rule," which stipulates 00:17:27.731 --> 00:17:31.849 that an individual must have been continuously enrolled in an FEHB plan 00:17:32.058 --> 00:17:36.077 for the five years immediately preceding their retirement date to be eligible 00:17:36.077 --> 00:17:38.286 to carry that coverage into retirement. 00:17:38.984 --> 00:17:41.584 Furthermore, the annual Open Season will be a more critical 00:17:41.584 --> 00:17:42.875 decision point than ever. 00:17:43.448 --> 00:17:47.011 With OPM pushing for changes in coverage for mental health, fertility, and 00:17:47.011 --> 00:17:50.238 obesity care, and with the likelihood of another round of significant 00:17:50.238 --> 00:17:54.129 premium increases, retirees must carefully reassess their plans. 00:17:54.648 --> 00:17:58.184 A plan that was suitable one year may become financially untenable 00:17:58.357 --> 00:18:00.329 or medically inadequate the next. 00:18:01.020 --> 00:18:05.111 New retirees must also remember that FEHB premiums, which are paid 00:18:05.111 --> 00:18:09.357 with pre-tax dollars during active employment, are paid with after-tax 00:18:09.357 --> 00:18:13.284 dollars in retirement, increasing the effective cost of the insurance. 00:18:13.855 --> 00:18:17.418 New Financial Relief for Annuitants: The OBBBA Senior Tax Credit 00:18:18.024 --> 00:18:22.687 The "One Big Beautiful Bill Act" offers a new form of financial relief that could 00:18:22.687 --> 00:18:24.842 benefit many middle-income retirees. 00:18:25.487 --> 00:18:30.815 The law establishes a tax credit of $6,000 for single filers and $12,000 00:18:30.815 --> 00:18:36.542 for couples, provided their incomes are below $75,000 and $150,000, respectively. 00:18:37.269 --> 00:18:40.887 This credit could help offset some of the rising healthcare costs for annuitants 00:18:40.978 --> 00:18:42.642 who have a federal tax liability. 00:18:43.206 --> 00:18:47.433 However, it is important to recognize its limitations: the credit will not 00:18:47.433 --> 00:18:51.769 benefit the lowest-income retirees who already have no federal income tax burden. 00:18:52.551 --> 00:18:55.751 Annuitants should consult with a qualified tax professional to 00:18:55.751 --> 00:19:00.088 understand how this new credit applies to their specific financial situation. 00:19:00.713 --> 00:19:04.340 The complexity and volatility of the current environment—with interacting 00:19:04.340 --> 00:19:09.122 variables like COLA calculations, Medicare premiums, FEHB plan changes, 00:19:09.313 --> 00:19:13.286 and new tax laws—mean that retirees can no longer afford to be passive 00:19:13.286 --> 00:19:14.640 recipients of their benefits. 00:19:15.031 --> 00:19:18.858 A high degree of financial literacy and proactivity has become essential. 00:19:19.440 --> 00:19:23.395 Annuitants must understand the nuances of their specific COLA, track how 00:19:23.395 --> 00:19:26.558 rising premiums will affect their net income, and investigate their 00:19:26.558 --> 00:19:28.513 eligibility for new tax provisions. 00:19:29.513 --> 00:19:33.840 This transforms retirement planning from a one-time event into an ongoing process 00:19:33.840 --> 00:19:38.349 of active financial management, making advocacy and informational organizations 00:19:38.349 --> 00:19:40.240 more critical resources than ever. 00:19:40.746 --> 00:19:43.727 And that’s a wrap on this week’s Federal Workforce Roundup. 00:19:44.255 --> 00:19:48.264 The landscape for federal employees and retirees is constantly shifting, 00:19:48.582 --> 00:19:52.364 with major decisions being made about everything from pay and job security 00:19:52.482 --> 00:19:56.028 to retirement benefits and the very structure of the civil service. 00:19:56.482 --> 00:19:58.537 Staying informed is your best tool. 00:19:58.955 --> 00:20:03.109 Be sure to subscribe wherever you get your podcasts, so you never miss an update. 00:20:03.620 --> 00:20:04.666 Thanks for tuning in. 00:20:04.957 --> 00:20:07.538 We’ll be back next week to track the latest developments 00:20:07.738 --> 00:20:08.838 and what they mean for you. 00:20:09.093 --> 00:20:11.647 Until then, stay engaged and be well.