Lawrence: Welcome to The FED Weekly for 19-25 October 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 2026 Healthcare Cost Shock and Open Season Preparation
The most pressing financial concern facing the entire federal community
is the soaring cost of health insurance for the 2026 plan year.
While the premium rates were calculated earlier in October 2025, their immense
scale formed the essential financial backdrop against which all retirement
announcements this week were viewed.
The Office of Personnel Management confirmed that federal health
insurance premiums for 2026 will experience a sharp rise.
For participants in the Federal Employees Health Benefits (FEHB)
program, the enrolleeâs share of premiums will increase by an average of 12.3
percent.
For U.S.
Postal Service participants in the Postal Service Health Benefits
(PSHB) program, the average enrollee increase is slightly lower but
still extremely significant at 11.3
percent.
These figures confirm a difficult trajectory, as the
2026 increase follows a 13.5
percent spike in the enrollee share for 2025.
OPM attributes this steep increase to several structural factors,
including rising prescription drug and medical service costs.
Furthermore, OPM points directly to the demographics of the program participants.
The average age for the entire FEHB/PSHB enrollee population, including
retirees, is approximately 60 years.
Even among active employees, the median age stands at 47 years.
This older demographic inherently drives up utilization and overall healthcare
costs, placing a significant financial burden on the system that is now
being passed directly to participants.
This dynamic means the financial strain on the program is tied to the successful
longevity of the federal workforce, which in turn necessitates the high premium
increases that are drastically outpacing cost-of-living adjustments for annuitants.
The steep premium increase sets a high-stakes scenario for the upcoming
Federal Benefits Open Season, which OPM confirmed will run from
November 10 through December 8, 2025.
During this time, eligible federal employees and annuitants must review
their plans, compare options, and make enrollment decisions for FEHB, PSHB,
and the Federal Employees Dental and Vision Insurance Program (FEDVIP).
For 2026, the FEHB program will offer 132 plan options across 47 carriers, while
PSHB offers 75 options from 17 carriers.
However, the Open Season will require immediate action for some,
as OPM has also noted that six FEHB plans, one PSHB plan, and one FEDVIP
plan will be discontinued in 2026.
Enrollees in these specific plans must actively choose a new plan during the
November/December enrollment period.
On a positive note, some carriers are announcing benefit simplifications.
For example, FEP Blue will eliminate the requirement for prior approval
for outpatient hospice care and simplify rules for genetic testing,
provided the enrollee shows signs or symptoms of the condition being tested.
Administrative Instability and Medicare Claims
The ongoing federal government shutdown, which commenced on October 1, 2025
, continues to introduce instability into crucial federal benefit systems,
as evidenced by administrative actions taken this week regarding Medicare.
The Centers for Medicare & Medicaid Services (CMS) provided updated
guidance to its Medicare Administrative Contractors (MACs) on the temporary
holding of certain claims.
This complexity arose because various legislative payment provisions,
particularly those related to the Medicare Physician Fee Schedule and certain
expanded services previously covered under the Full-Year Continuing Appropriations
and Extensions Act, 2025 (Pub.
L.
119-4), had expired.
In a move to relieve pressure on healthcare providers, CMS directed MACs
to lift the claims hold for services provided on or after October 1, 2025,
concerning several specific areas, including ground ambulance transport
claims, Federally Qualified Health Center claims, and claims paid under
the Medicare Physician Fee Schedule.
This partial release of claims is vital for ensuring that providers continue
to serve the millions of federal beneficiaries who rely on Medicare.
However, not all services were released.
CMS explicitly instructed MACs to continue temporarily holding claims for acute
Hospital Care at Home and for certain telehealth services, specifically those
that CMS cannot confirm are definitively for behavioral and mental health services.
This highly specific claims guidance demonstrates how legislative funding
gaps, even those unrelated to the immediate shutdown debate, can immediately
affect the delivery of healthcare.
The continued hold on specific telehealth services means that beneficiaries who rely
on these non-behavioral virtual services face reduced access and uncertainty
regarding payment, highlighting the profound operational vulnerability
introduced by congressional inaction.
Issues That Affect Retired Federal Workers
The 2026 COLA Announcement: A Net Loss of Purchasing Power
On Thursday, October 24, 2025, the Social Security Administration (SSA)
formalized the 2026 Cost-of-Living Adjustment, finalizing the annual
adjustment for federal retirees.
This announcement immediately defined the financial prospects for the year ahead.
SSA announced that Social Security benefits, along with annuities
for retirees covered under the Civil Service Retirement System
(CSRS), will increase by 2.8
percent beginning in January 2026.
This adjustment reflects a moderation in inflation compared to recent years.
For Social Security recipients, this means an average retirement benefit
increase of approximately $56 per month.
Concurrently, SSA noted that the maximum amount of earnings subject to
the Social Security tax (the taxable maximum) is slated to rise to $184,500 in
January 2026, up from $176,100 in 2025.
Critically, retirees under the Federal Employees Retirement System (FERS)
will receive a lower increase of 2.0
percent.
This disparity, where CSRS retirees receive 0.8
percent more than their FERS counterparts, represents the continuation of a
long-standing financial penalty built into the FERS COLA formula.
The overwhelming conclusion reached by analysts immediately following the October
24, 2025, COLA announcement is that both CSRS and FERS retirees face a guaranteed
net loss of purchasing power in 2026.
The 2.8
percent (CSRS) or 2.0
percent (FERS) COLA fails to compensate for the average 12.3
percent increase in the enrollee share of FEHB premiums.
Legislative Efforts to Achieve FERS COLA Parity
The announcement of the reduced 2.0
percent COLA for FERS retirees relative to the 2.8
percent CSRS increase reignited the debate over FERS benefit parity.
The disparity is triggered by the statutory FERS COLA calculation mechanism:
when the annual inflation rate, as measured by the CPI-W, falls between 2.01
percent and 3.0
percent, the FERS COLA is capped at 2.0
percent.
Since the 2026 inflation rate fell into this range, FERS
retirees receive the lower rate.
Federal employee organizations argue that this disparity imposes an arbitrary
penalty that compounds over time, noting that FERS retirees who retired
just four years ago have already lost over $1,000 to rising costs
due to these compounded reductions.
To combat this, the Equal COLA Act (H.R.
866 in the House and S.
3194 in the Senate), championed by Representative Gerry Connolly
and Senator Alex Padilla, has gained renewed support this week.
Endorsed by organizations like the National Treasury Employees Union (NTEU)
and the American Federation of Government Employees (AFGE), the Equal COLA Act is
specifically designed to eliminate this disparity, ensuring that FERS annuitants
receive the same adjustment as CSRS retirees when inflation exceeds 2 percent.
The legislative push following the October 24, 2025, announcement provides concrete
evidence of the financial detriment caused by the current formula, thereby maximizing
the political urgency for the bill.
Ongoing Implementation of the Social Security Fairness Act
In other news relevant to federal annuitants, the Social Security
Administration provided implicit confirmation this week that implementation
efforts continue for the Social Security Fairness Act, which was
signed into law on January 5, 2025.
This landmark legislation ended the Windfall Elimination Provision (WEP)
and the Government Pension Offset (GPO), two policies that historically
reduced or eliminated Social Security benefits for individuals who received
a non-covered pension, such as many former federal employees under the CSRS.
SSA confirmed that it began adjusting monthly benefit payments for individuals
affected by WEP and GPO starting in February 2025 and is continuing the
process of delivering additional accrued benefits resulting from the Act.
While the law benefits many former public workers, SSA emphasizes that
only individuals receiving a pension based on work not covered by Social
Securityâwhich includes certain CSRS federal retireesâwill see benefit
increases due to this repeal.
Issues That Affect Current Federal Workers
The Shutdown Gridlock: Failure of Emergency Pay Legislation
The ongoing government shutdown since October 1, 2025 , remains
the most immediate threat to the active federal workforce.
On Wednesday, October 23, 2025, the Senate attempted to pass three
competing bills aimed at ensuring federal employees and contractors would
be paid during the funding lapse, but all three efforts failed to advance.
The failure highlighted the political gridlock over defining
who constitutes an essential recipient of pay during a shutdown:
1.
The Shutdown Fairness Act (S.
3012)
Introduced by Senator Ron Johnson (R-WI), this bill proposed to pay only
the "excepted" federal employeesâthose mandated to report to work during the
shutdownâalong with specific contractors and active duty military members.
Crucially, S.
3012 explicitly excluded furloughed employees from immediate payment.
The bill failed to pass the Senate by a vote of 54-45.
Its rejection stemmed from legislative concerns that the bill would grant
the President undue authority to selectively determine which
employees receive compensation, disregarding the financial hardship
faced by the furloughed workforce.
2.
The True Shutdown Fairness Act (S.
3039)
Senator Chris Van Hollen (D-MD) introduced S.
3039, a comprehensive measure that sought to pay all federal employeesâboth
those working ("excepted") and those placed on furloughâin addition to
servicemembers and federal contractors.
This bill also contained specific provisions designed to prevent the
administration from attempting mass firings, or Reduction in Force (RIFs),
while the government remained shut down.
This protective language directly corresponds to legal actions occurring
during this period, including a court order issued around October 20, 2025,
that halted an administrationâs attempt at mass firings related to shutdown RIFs.
S.
3039 failed when Senator Johnson objected to a request for Unanimous
Consent (UC), preventing its passage.
3.
The Military and Federal Employee Protection Act (S.
3043)
A third bill, S.
3043, introduced by Senator Gary Peters (D-MI), also sought to pay
all employees and military personnel.
However, its pay provisions were limited, only covering the duration from October
1st up to the date the bill was enacted.
This bill also failed after Senator Johnson objected to the
UC request, blocking the measure.
The failure of all three proposals on October 23, 2025, demonstrated that
ensuring basic pay for the federal workforce remains a legislative
commodity rather than an automatic obligation during a funding impasse.
Union leaders continue to cite these failures as evidence that
federal employees are being improperly used as bargaining
tools in political budget debates.
OPMâs Digital Transformation: Consolidating 119 Human Capital Systems
On Monday, October 20, 2025, OPM Director Scott Kupor announced a
massive, multi-year technological initiative intended to fundamentally
transform the governmentâs approach to talent management.
This plan, described by Kupor as a "big package," aims to solve deep-rooted
administrative inefficiencies that affect the workforce from the day they
are hired until the day they retire.
The problem, as outlined by OPM, is the current existence of 119 distinct
core Human Capital Management (HCM) systems across the federal government.
These systems do not integrate, leading to an "inordinate amount of money"
spent by taxpayers and a complete lack of a single, reliable source of
truth for basic employee information.
Consequently, OPM cannot easily track metrics such as accurate payroll data
by sub-department, the true count of positions in an organization,
or managerial span of control.
The fragmentation severely impacts the retirement process.
OPM currently spends excessive time and resources coordinating with multiple
agency HR staff to manually assemble a retiring employeeâs complete work
historyâoften called the "golden file."
This manual process is error-prone, costly, and directly contributes
to long, frustrating delays for new annuitants awaiting their benefits.
The solution proposed by OPM is the development of a single,
pan-government core HCM system.
This consolidation is projected to drive significant per-user cost savings
and provide the government with full, real-time visibility into its workforce.
By replacing the duplicative, outdated technology, OPM aims to
free the approximately 44,000 HR professionals (who cost about $5.5
billion annually) to focus on talent development and
performance management, rather than navigating technological thickets.
The agency immediately launched a process to invite industry proposals on how to
achieve this government-wide objective.
This shift, while focused on active employees, holds profound long-term
implications for future retirees by promising to automate and
accelerate the currently agonizing retirement processing timeline.
Legislative Debate: Traditional Pay Raise vs.
Performance-Based Pay
The discussion around compensation for 2026 for active federal workers is
currently split between a union-backed push for a standard increase and
a radical legislative proposal to tie pay entirely to performance.
The FAIR Act and Pay Parity
Federal employee organizations, including AFGE and NTEU, continue to
advocate for the Federal Adjustment of Income Rates (FAIR) Act.
This endorsed legislation would grant federal employees an
average pay adjustment of 4.3
percent in 2026.
The rationale behind this push stems from evidence suggesting that federal
salaries lag private sector salaries for similar jobs by an average of
27 percent, a gap that severely hinders recruitment and retention
efforts across government agencies.
The Federal Employee Performance and Accountability Act of 2025 (H.R.
201)
In sharp contrast to the FAIR Act, the House bill H.R.
201 proposes a five-year pilot program that completely upends the
traditional General Schedule (GS) compensation model for certain employees.
This program, titled the Federal Employee Performance and Accountability Act of
2025, mandates participation from 1% to 10% of eligible employees (GS-11
and above) whose positions feature clearly measurable performance criteria.
A key provision dictates that participants in this pilot are made ineligible
for the annual across-the-board and locality-based pay increases
authorized under current law.
Under the H.R.
201 structure, pay changes are rigidly tied to the employee's performance
rating from the preceding year:
Significantly Exceeded Performance Metrics: The employeeâs pay must
be increased by up to 10 percent.
Met Performance Metrics: The employeeâs pay may not be increased.
Below Expectations: The employeeâs pay must be reduced by 10 percent.
This proposed legislation introduces high financial risk, where a successful
employee could rapidly advance, but an employee rated as simply "Meets
Expectations" would receive zero inflationary adjustment, and an
underperforming employee would face a mandatory 10 percent reduction.
The administrative viability of H.R.
201 is implicitly linked to the success of OPMâs concurrent
HCM consolidation announcement.
For H.R.
201 to succeed, agencies must establish and track "clearly measurable performance
criteria" and productivity metrics.
Given OPM Director Kuporâs finding that the government currently operates
119 fragmented systems and lacks a single source of truth for workforce
data , the effective implementation of a high-stakes, performance-based
pay system would be nearly impossible without the simultaneous overhaul
of the underlying IT infrastructure announced just days earlier.
The proposed legislative reform, therefore, demands a massive technological
investment simply to be administrable.
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.