Lawrence: Welcome to The FED Weekly for 28 December 2025 to 3 January 2026, 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 final week of 2025 brought a mix of relief and administrative
complexity regarding holiday time.
To celebrate Christmas, President Trump issued an Executive Order
excusing federal employees from duty on Wednesday, 24 December
2025, and Friday, 26 December 2025.
This executive action effectively created a five-day break for many,
excluding those required for national security, defense, or other public needs.
However, this gift of time came with a specific statutory catch
that affected both active workers with "use or lose" leave and
retirees who might be re-employed.
The Office of Personnel Management, or OPM, clarified that for
pay and leave purposes, these days were treated as holidays.
Consequently, if an employee had previously scheduled "use or lose"
annual leave for 24 December or 26 December, that leave was forfeited.
Under Title 5 of the United States Code, Section 6304(d), the law does
not permit the restoration of leave when a holiday prevents its use.
While employees could donate this excess leave to approved recipients under the
voluntary leave transfer program, the "use or lose" deadline of 10 January
2026 remained a hard stop for many.
As we transition into January, the financial reality of
healthcare costs is hitting home.
The 2026 plan year for the Federal Employees Health Benefits
program, or FEHB, has begun.
The overall average premium increase for the program is 10.2
percent.
However, the impact on your wallet is even more significant.
The average employee and retiree share of the premium has risen by 12.3
percent.
This follows a 13.5
percent increase in 2025, marking two consecutive years of double-digit hikes.
For those enrolled in the Postal Service Health Benefits program, or PSHB, the pain
is slightly less but still acute, with an average enrollee share increase of 11.3
percent.
These increases are driven by higher utilization rates and medical inflation.
For example, self-only enrollees in certain high-option plans, such as the
Aetna Open Access High Option in Northern New Jersey, are seeing premiums so
high that the governmentâs contribution covers only 27 percent of the total cost.
This is a stark reminder to check your annuity statements and
pay stubs carefully this month.
Turning to Capitol Hill, the legislative machinery is grinding
back into motion with high stakes for the federal community.
The government is currently operating under a Continuing Resolution, or CR, that
was signed into law on 12 November 2025.
This funding measure expires on 30 January 2026.
The urgency of this deadline cannot be overstated.
Congress has only a few weeks to pass the remaining nine annual
appropriations bills for fiscal year 2026.
The previous lapse in appropriations, which began on 1 October 2025, resulted
in a record-breaking 43-day shutdown.
With the House of Representatives reconvening on 3 January 2026 and the
Senate on 5 January 2026, the threat of another shutdown looms large.
There are specific legislative items you need to be aware of.
Public Law 119-21, known as the reconciliation bill enacted in
July 2025, continues to drive changes across federal agencies.
Specifically, this law prohibits the Department of Agriculture from increasing
the cost of the Thrifty Food Plan based on a reevaluation of the market
basket of goods, tying adjustments strictly to the Consumer Price Index.
This legislative constraint is altering the workload and regulatory focus for
employees at the USDA and has downstream effects on benefits administration.
Furthermore, the "Department of Government Efficiency," or DOGE,
established by Executive Order, continues to influence legislative priorities.
While not a bill itself, its recommendations are fueling the
appropriations debates, with proposals for deep cuts to foreign aid and
agency restructuring that will likely feature prominently in the negotiations
leading up to the 30 January deadline.
Finally, for this section, we must note the operating status of the
government as we closed out the week.
Despite the holiday closures, essential operations continued, and the OPM
status for the Washington, D.C.
area returned to "Open" with normal operating procedures by 4 January 2026.
As we move into the heart of winter, OPM has reminded all employees and retirees
that "unscheduled telework" and other flexibilities remain vital tools during
severe weather, a policy that interacts complexly with the new return-to-office
mandates we will discuss later.
Issues That Affect Retired Federal Workers
For our retiree listeners, the most significant news of the week concerns your
annuity payments and the Cost-of-Living Adjustment, or COLA, for 2026.
The 2026 COLA has been finalized and is effective for
payments dated 2 January 2026.
For retirees under the Civil Service Retirement System, or
CSRS, and for Social Security beneficiaries, the adjustment is 2.8
percent.
This reflects the increase in the Consumer Price Index for Urban Wage
Earners and Clerical Workers, or CPI-W, from the third quarter of
2024 to the third quarter of 2025.
However, for those retired under the Federal Employees Retirement
System, or FERS, the adjustment is 2.0
percent.
This discrepancy arises from the statutory formula governing FERS COLAs.
When the CPI-W increase falls between 2.0
percent and 3.0
percent, FERS retirees receive a flat 2.0
percent.
This "diet COLA" means that FERS retirees are effectively losing 0.8
percent in purchasing power relative to inflation this year.
We must also address a technical issue that arose this week.
NARFE has reported that some federal annuitants received annuity
statements dated 1 December 2025 that contained errors regarding
the January 2026 COLA amounts.
If your statement shows a COLA that does not align with the 2.8
percent or 2.0
percent figures we just discussed, do not be alarmed.
This appears to be a reporting error on the statement itself,
and the actual electronic payments processed by the Treasury should
reflect the correct amounts.
If you do notice a discrepancy in your actual bank deposit, NARFE
advises contacting OPM immediately, though be prepared for wait times
given current staffing levels.
On the legislative front, there is activity regarding Social Security that
is relevant to many federal retirees, particularly those with "mixed" service.
Between 28 December 2025 and 3 January 2026, the House of
Representatives advanced several bills aimed at improving the Social
Security Administration's services.
These bills focus on enhancing protections for identity theft victims and improving
processes for replacing lost or stolen Social Security cards for children.
While these are not the sweeping repeals of the Windfall Elimination
Provision or the Government Pension Offset that many are hoping for,
they represent a bipartisan effort to fix the administrative plumbing
of the Social Security system.
Additionally, for those managing their healthcare costs, it is important to
note the changes to Medicare Part D.
With the new plan year, the cap on out-of-pocket prescription
drug costs is in full effect.
For retirees who have paired their FEHB coverage with Medicare Part
D, this provides a significant safeguard against high drug prices.
NARFE has highlighted that recent improvements have made Medicare Part
D a more viable option for federal annuitants, potentially offering savings
over standard FEHB drug coverage alone.
We also want to highlight a reminder regarding the "Windfall
Elimination Provision."
A law passed late in 2024 repealed this provision for many, and 2026 marks
a full year of its implementation.
This means that for eligible retirees, your Social Security benefits
based on private sector work are no longer reduced simply because
you receive a federal pension.
This is a massive victory that continues to pay dividends in
your monthly checks this year.
Finally, for those who retired in the calendar year 2025, remember
that your COLA for 2026 is prorated.
You will not receive the full 2.8
percent or 2.0
percent.
Instead, you will receive one-twelfth of the applicable increase for each
month you were on the retirement rolls before 1 December 2025.
If you retired late in the year, your increase will be minimal, but you will
be eligible for the full COLA in 2027.
Issues That Affect Current Federal Workers
If you are currently on the payroll, you are navigating one
of the most turbulent periods in the history of the civil service.
The news from 28 December 2025 to 3 January 2026 has brought clarity
on pay, but considerable anxiety regarding telework and job security.
First, the paycheck.
The 2026 pay raise is official.
On 18 December 2025, President Trump signed the Executive Order
finalizing the pay schedules.
For the vast majority of the General Schedule workforce, the raise is a 1.0
percent across-the-board increase to base pay.
Crucially, locality pay percentages have been frozen at 2025 levels.
This means the "locality adjustment" on your pay stub will not change, resulting
in a net average increase of just 1.0
percent.
This is significantly lower than the increases seen in 2024 and 2025 and
effectively represents a decline in real wages when adjusted for inflation.
However, there is a major exception for law enforcement.
On 31 December 2025, OPM Director Scott Kupor issued a memorandum approving
special salary rates for certain federal civilian law enforcement personnel.
This directive, stemming from the President's Executive Order, provides an
additional increase of approximately 2.8
percent for eligible officers, bringing their total raise to roughly 3.8
percent.
This applies to specific job series in agencies like Customs and Border
Protection and is intended to align civilian law enforcement pay with
the 2026 military pay increase.
OPM has posted these new special rate tables, L001
through L133, on their website.
The most explosive news of the week, however, concerns telework.
On Wednesday, 31 December 2025, OPM issued a new "Guide to Telework and
Remote Work in the Federal Government".
This guidance serves as the implementation blueprint for the President's memorandum
titled "Return to In-Person Work".
The guidance is blunt: agencies are instructed to "take all necessary steps
to terminate remote work arrangements" and require employees to return to their
duty stations on a full-time basis.
The guidance specifies that telework cannot be used to "avoid
working full-time, in-person from an agency worksite on a
regular and recurring basis".
While there are limited exceptions for military spouses, reasonable
accommodations, and compelling agency needs, the era of widespread
remote work appears to be ending.
Union reaction has been swift and fierce.
AFGE National President Everett Kelley issued a statement condemning
the directive, arguing that it "turns back the clock to before
2010" and ignores the operational efficiencies gained through telework.
AFGE has also flagged that legislation introduced by Representative James
Comer, such as the "Stopping Home Office Workâs Unproductive Problems Act,"
creates a legislative pincer movement alongside the executive crackdown.
The NTEU has vowed to fight these changes by enforcing existing collective
bargaining agreements, arguing that contracts signed before the
executive action should remain valid.
The workforce itself is also shrinking.
The "Department of Government Efficiency," led by Elon Musk, is driving a
campaign of mass buyouts and layoffs.
We are seeing the fallout of the "Deferred Resignation Program,"
with reports indicating that over 150,000 employees have taken buyouts.
The Department of Education has been particularly hard hit, with a 50 percent
workforce reduction plan in motion.
In response, the American Federation of Teachers filed a lawsuit on 29 December
2025, challenging the Department of Education's termination of grants
for community schools, alleging the cuts were made "on a whim" and
violated administrative procedures.
At the Department of Veterans Affairs, a massive reorganization of
the Veterans Health Administration was announced this week.
While the VA claims this is not a reduction in force, senators have raised
alarms about the elimination of up to 35,000 vacant healthcare positions,
fearing it will degrade care for veterans.
Finally, we must discuss your retirement savings.
The Thrift Savings Plan, or TSP, contribution limits have changed for 2026.
The elective deferral limit has increased to 24,500 dollars.
The standard catch-up contribution limit for those turning 50 or
older is now 8,000 dollars.
Additionally, a new "super catch-up" tier created by the SECURE 2.0
Act allows participants aged 60, 61, 62, or 63 to contribute up to 11,250
dollars in catch-up contributions.
But there is a critical new rule: the mandatory Roth catch-up.
Starting 1 January 2026, if your FICA wages in 2025 were greater than 150,000
dollars, you must make your catch-up contributions as Roth contributions.
You are no longer permitted to make pre-tax catch-up contributions if
you exceed this income threshold.
This is a major change that will increase your taxable income for 2026.
Payroll providers are currently implementing this check, but you
should review your Leave and Earnings Statement carefully to ensure your
contributions are not rejected.
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.
Be sure to subscribe wherever you get your podcasts, so you never miss an update.
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.