Lawrence: Welcome to The FED Weekly for 24-30 August 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 2025 FEHB Premium Shock: A Historic Increase Finalized
The most significant financial news impacting the entire federal community
this week is the finalization of premium rates for the 2025 Federal Employees
Health Benefits, or FEHB, program.
The Office of Personnel Management (OPM) confirmed what many had
feared: enrollees will face an average premium increase of 13.5%
for their share of the costs.
This represents the largest such hike in nearly two decades and continues
a painful trend of substantial increases, following a 7.7%
rise in 2024 and an 8.7%
rise in 2023.
For the average federal employee and retiree, this translates into
a direct hit to their budget, costing an additional $26.10
per biweekly paycheck.
While the government's contribution to premiums will also increase,
it will do so by a lesser 10.1%,
shifting a greater portion of the rising costs onto enrollees.
OPM has attributed this dramatic surge to several key factors: price
increases from healthcare providers and suppliers, a significant rise in
the utilization of certain prescription drugs, particularly GLP-1 anti-obesity
medications like Ozempic and Wegovy, and higher spending on both outpatient
procedures and behavioral health services.
The Federal Employees Dental and Vision Insurance Program, or FEDVIP, will see
more modest average increases of 2.97%
for dental plans and 0.87%
for vision plans.
The combination of these financial and policy developments will make the
upcoming Open Season, which runs from November 11 to December 9, 2024, one
of the most critical in recent memory.
All federal employees and annuitants will need to meticulously re-evaluate
their plan choices to mitigate the impact of these rising costs.
The Looming Threat of a Government Shutdown
As one fiscal year winds down, the battle over the next one begins.
With the end of fiscal year 2025 approaching on September 30, tensions
are escalating in Congress over the 12 appropriations bills needed to fund
the government for fiscal year 2026.
As of this week, none of those 12 bills have been enacted into law.
On August 29, 2025, Democratic leaders in Congress voiced growing
concern over the lack of progress and the contentious political climate,
stating that the likelihood of a government shutdown is increasing.
A shutdown would have distinct impacts on current and retired employees.
For the active workforce, all non-essential federal employees would
be placed on an unpaid furlough.
While Congress has historically passed legislation to provide back
pay after shutdowns conclude, the immediate loss of income can cause
significant financial hardship.
For federal annuitants, the situation is different.
Retirement annuity payments, which are drawn from the Civil Service Retirement
and Disability Trust Fund, are not subject to annual appropriations and
would continue to be paid on time.
The same is true for Social Security benefits.
However, a shutdown would severely disrupt agency operations.
This means that OPM and the Social Security Administration would halt
the processing of new retirement applications, changes to benefits,
and other customer service requests.
This would create significant delays and backlogs, leaving recent and
prospective retirees in a state of uncertainty until funding is restored.
Section 2: Issues That Affect Retired Federal Workers
2026 COLA Projections: A Familiar Disparity
For federal retirees, one of the most important numbers of the year is the
annual Cost-of-Living Adjustment, or COLA.
Projections for the 2026 COLA became clearer this month with the release
of the July 2025 Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W) on August 12, 2025.
Based on this data, the 2026 COLA is projected to be 2.5%
- 2.6%
for retirees under the older Civil Service Retirement System, or CSRS.
However, for the majority of federal retirees who are covered by the
Federal Employees Retirement System, or FERS, the projection is a lower 2.0%
- 2.1%
increase.
This disparity is not an anomaly; it is the result of the statutory
formula governing the FERS COLA.
When the inflation rate as measured by the CPI-W falls between 2%
and 3%, CSRS retirees receive the full amount, but the FERS COLA is
automatically capped at a flat 2%.
This is often referred to as the "diet COLA," and it has been a long-standing
point of contention for retiree advocates, who argue that it systematically
erodes the purchasing power of FERS annuities over a long retirement.
Legislation to address this, such as the Equal COLA Act, has been introduced
but has failed to gain traction.
New Legislation for Military Retirees: The FORWARD Act
There was a notable legislative development this week for military
retirees who also participate in the federal government's
401(k)-style retirement savings plan.
On August 25, 2025, a bipartisan bill was introduced in the House of
Representatives by Representative Jen Kiggans, a Republican from Virginia.
The bill is titled the "Financial Opportunities for Retirees and
Warriors Advancing Retirement Development Act," or the FORWARD Act.
If enacted, the FORWARD Act would, for the first time, allow certain veterans
to continue contributing to their Thrift Savings Plan, or TSP, accounts
after they have separated from service.
Under current law, all contributions to the TSP must cease upon leaving
federal or military employment.
This legislation would specifically extend eligibility to two groups:
military members who are entitled to retirement pay, and veterans who
have a 100% disability rating from the Department of Veterans Affairs.
These individuals would be permitted to contribute a portion of their military
retirement pay or their disability compensation directly into their existing
TSP accounts, allowing them to continue building their retirement savings within
the plan they are already familiar with.
The bill explicitly clarifies that these new contributions would not be eligible
for any government matching funds.
The legislation has been referred to the House Committee on Oversight and
Government Reform for consideration.
Section 3: Issues That Affect Current Federal Workers
The 2026 Federal Pay Raise: A Shift from Freeze to 1%
For months, the active federal workforce has been bracing for a potential pay
freeze in 2026, a prospect first raised in President Trump's initial budget proposal.
However, on Friday, August 28, 2025, the administration submitted
its formal alternative pay plan to Congress, revealing a different path.
The plan calls for an average pay raise of 1.0%
for civilian federal employees, with locality pay being
frozen at current levels.
By law, the president must issue such a plan by the end of August to prevent
a much larger, automatic pay increase from taking effect under the Federal
Employees Pay Comparability Act of 1990.
In his letter to Congress, President Trump stated that without this
alternative plan, the automatic formula would have triggered a 3.3%
across-the-board increase plus an average locality pay hike of 18.88%.
A key component of the administration's plan is a targeted pay raise of 3.8%
for "certain categories of law enforcement personnel".
This move is designed to create pay parity with the 3.8%
raise planned for uniformed military service members in 2026.
The Office of Personnel Management has been tasked with determining which
specific law enforcement job series will qualify for this larger increase.
The reaction from federal employee unions was swift and critical.
Doreen Greenwald, president of the National Treasury Employees Union,
called the 1% figure inadequate, particularly in light of the massive FEHB
premium hikes, and argued that the 3.8%
raise for law enforcement and the military should be extended
to all federal employees.
Unions are now urging Congress to intervene and legislate a higher pay
raise, as it has done in the past to override presidential pay plans.
They continue to advocate for the 4.3%
average raise proposed in the FAIR Act.
To finalize the 1% raise, the President must issue a formal
executive order in December.
OPM Overhauls Performance Awards to Reward Top Performers
The administration is also moving to change how federal employees
are rewarded for their work.
In a government-wide memorandum issued on August 11, 2025, OPM Director
Scott Kupor unveiled new guidance aimed at fundamentally overhauling the
distribution of performance awards.
The stated goal is to move away from a system where award money is spread
thinly across the workforce and instead concentrate larger bonuses
on a smaller group of top performers.
Under the new policy, agencies are directed to "normalize" their performance
ratings and are required to designate at least 60% of their available bonus
pools for employees who receive the highest ratings, typically a Level
4 or Level 5 on a five-tier system.
The guidance also encourages managers to make greater use of non-monetary
recognition, such as time-off awards and Quality Step Increases, as well
as "special act" awards to recognize specific accomplishments in real time.
The policy is even more stringent for the government's top leaders.
For the Senior Executive Service, or SES, the guidance establishes a hard cap,
which will become mandatory in fiscal year 2026, stipulating that no more than
30% of an agency's executives can receive one of the top two performance ratings.
All federal agencies are required to submit their plans for complying
with this new awards philosophy to OPM by September 8, 2025.
Agency and Administrative Roundup
In other news from across the government this week, the Internal
Revenue Service has reversed course on planned workforce reductions.
In a report from August 22, 2025, it was confirmed that the IRS has canceled
its plans for widespread layoffs.
The agency, which has seen its staffing levels shrink by about
a quarter, will now focus on strategic hiring and reassignments
to fill mission-critical roles.
It will also rescind some of the deferred resignation offers that
were part of the administration's earlier "Fork in the Road" program.
The Office of Personnel Management also made several administrative announcements.
In August 2025, the agency issued updated guidance and new Q&As to clarify
policies related to President Trump's executive order on "Strengthening
Probationary Periods in the Federal Service," which makes it easier for
agencies to remove employees during their initial one- or two-year trial periods.
On August 20, 2025, OPM officially announced that the 2025 Federal
Employee Viewpoint Survey, or FEVS, has been canceled.
The flagship survey on employee morale, which had already been
delayed for months, will be retooled and is expected to return in 2026.
Finally, on August 28, 2025, OPM announced that it is centralizing its guidance
memorandums for Chief Human Capital Officers by moving them from a separate
website directly onto the main OPM.gov
portal to improve accessibility.
Legislative Watch: Key Bills Remain in Committee
Finally, we are tracking two House bills of interest to federal employees
that saw no new action this week but remain pending in committee.
First is H.R.
1522, the Federal Retirement Fairness Act.
Introduced in February 2025, this bill would be a significant benefit
for employees who started their careers in temporary positions.
It would allow them to make retroactive retirement contributions to receive FERS
credit for temporary or non-deduction service performed after December 31,
1988, essentially allowing them to "buy back" that time toward their pension.
Second is H.R.
201, the Federal Employee Performance and Accountability Act of 2025.
Introduced in January 2025, this bill proposes a five-year pilot
program that would radically alter the pay system for some employees.
It would tie pay adjustments directly to performance for a select group of
employees at the GS-11 level and above.
Under the pilot, employees who significantly exceed performance metrics
could receive a pay increase of up to 10%, but those who are rated below expectations
would see their pay cut by 10%.
Participants in the pilot would not be eligible for the standard annual
across-the-board and locality pay raises.
Both bills remain in the House Committee on Oversight and Government Reform.
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.