Lawrence: Welcome to The FED Weekly for 7-13 December 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 Conclusion of Open Season and the 2026 Healthcare Cost Reality
As of Monday, December 8, 2025, the annual Federal Benefits Open Season
officially concluded, locking in health, dental, and vision coverage
choices for the upcoming plan year.
For the vast majority of the federal community, the close of this window
marks the beginning of a significantly more expensive fiscal year.
The Office of Personnel Management has confirmed that the enrollee share
of premiums for the Federal Employees Health Benefits (FEHB) program
will increase by an average of 12.3
percent in 2026.
This figure is not merely a statistical fluctuation but represents
a compounding economic pressure; coming on the heels of a 13.5
percent increase in 2025, federal employees and retirees have now absorbed
a cumulative premium hike exceeding 25 percent over a twenty-four-month period.
The drivers of this cost escalation are multifaceted and affect both
current employees and retirees equally.
The Office of Personnel Management attributes the sharp rise to the aging
demographic of the covered population, which now averages sixty years of
age when annuitants are included, alongside surging costs for medical
services and prescription drugs.
A primary inflationary factor identified in 2025 has been the
explosion in utilization of GLP-1 medications prescribed for weight
loss and diabetes management.
While these drugs offer significant health benefits, their high cost has forced
carriers to restructure benefit designs.
For example, in 2026, Kaiser Permanente plans will increase the member cost
share for these specific medications to 50 percent, a move indicative of a
broader trend among carriers to shift the financial burden of high-cost
pharmaceuticals onto the enrollee.
Beyond the premium increases, the 2026 plan year introduces structural changes
to benefits that will affect out-of-pocket exposure for all beneficiaries.
An analysis of the plan documents reveals that twenty-nine of the one hundred and
thirty-two available FEHB plans have increased their catastrophic limitsâthe
maximum amount an enrollee must pay before the plan covers 100 percent of costs.
A notable example is the GEHA Standard Option, a popular plan among
both active workers and retirees.
For 2026, GEHA has raised its out-of-network catastrophic limit by
135 percent, moving the cap from eight thousand five hundred dollars to twenty
thousand dollars for self-only coverage.
Similarly, the Blue Cross Blue Shield Basic Option, one of the most widely
held plans in the federal system, will implement increased copayments for
emergency room visits, inpatient hospital admissions, and outpatient services.
These changes effectively erode the value of the coverage while the cost to
maintain it rises, creating a scenario where federal workers and retirees
are paying significantly more for theoretically less financial protection.
The Open Season period also witnessed significant market exits
that caused disruption for specific subsets of the federal population.
HealthPartners Dental announced its withdrawal from the Federal Employees
Dental and Vision Insurance Program (FEDVIP) for the 2026 plan year.
This exit necessitated active engagement from enrollees who, if
they failed to select a new carrier by the December 8, 2025, deadline,
would find themselves without dental coverage effective January 1, 2026.
This churning of carriers underscores the volatility of the
current insurance market, where regional availability and provider
networks are increasingly unstable.
The narrative of "sticker shock" for 2026 is further complicated by the divergence
between the premium increases and the cost-of-living adjustments (COLAs) or
pay raises slated for the same period.
With premiums rising 12.3
percent, the absorption of this cost will essentially negate the modest
income adjustments for many retirees and active employees, a dynamic that NARFE
National President William Shackelford described as a continued trend of
steep rates that forces enrollees to make difficult financial trade-offs.
As the federal community moves into the new year, the "net" financial position
of the average household is likely to be static or negative once healthcare
deductions are processed in January.
The Fiscal Cliff: Continuing Resolution Extended to March 2026
While healthcare costs present a long-term economic challenge, the
immediate operational stability of the federal government remained in flux
throughout the week of December 7, 2025.
Following the cessation of the forty-three-day government shutdown
on November 12, 2025, federal agencies have been operating under a temporary
Continuing Resolution (CR) scheduled to expire for various agencies
beginning in late December and January.
However, legislative maneuvering during this reporting period has fundamentally
altered the timeline for the fiscal year 2026 appropriations process.
Congressional leadership, facing the dual pressures of a holiday recess
and deep ideological divisions over spending levels, unveiled a new
short-term spending deal this week.
This legislation, a second Continuing Resolution (H.R.
10545), extends federal funding at fiscal year 2025 levels through March 14, 2026.
The bill passed the House of Representatives by a vote of 366 to 34
and the Senate by a vote of 85 to 11, narrowly averting a shutdown threat that
would have triggered on December 20, 2025.
The passage of this extension to March 14, 2026, has profound implications for the
operational capacity of federal agencies.
By relying on a Continuing Resolution for nearly half of the fiscal year,
Congress has effectively imposed a "shadow freeze" on government operations.
Under a CR, agencies are generally prohibited from initiating new
programs, awarding new multi-year contracts, or increasing hiring
above previously authorized levels.
They are restricted to the funding rates and conditions of the previous
fiscal year, regardless of new statutory mandates or shifting priorities.
For active employees, this translates to continued uncertainty regarding resources,
travel budgets, and staffing support.
For retirees, while annuity payments are protected from lapses in appropriations,
the administrative functions that support themâsuch as the processing of retirement
applications or complex benefits changes by OPMâremain vulnerable to the
resource constraints imposed by the CR.
The new spending deal does include specific anomalies, or
"anomalies," to address urgent needs that cannot wait until March.
Notably, the CR includes over one hundred billion dollars in supplemental
funding for critical federal disaster programs, specifically allocating
twenty-nine billion dollars to the Federal Emergency Management
Agency (FEMA) Disaster Relief Fund.
This injection of capital is critical for FEMA, which has been operating
under severe strain following a series of natural disasters and the abrupt
cancellation of its review councilâs scheduled vote on the agencyâs future
recommendations earlier in the week.
The deal also provides a year-long extension of the 2018 Farm Bill through
September 30, 2025, ensuring continuity for agricultural programs that employ
thousands of federal workers in the USDA.
However, the "clean" nature of the CRâmeaning it largely lacks controversial
policy ridersâmasks the intense partisan conflict occurring beneath the surface.
The initial proposal for the CR had included provisions for workforce and
reentry services that were priorities for county governments and social
service agencies, but these were rejected by the House in the final version.
Furthermore, the extension does not resolve the looming expiration
of the enhanced Affordable Care Act subsidies, which are set
to expire on December 31, 2025.
Senate leaders have indicated a separate vote may occur in December to address
these subsidies, but as of December 13, no such legislation has passed.
The failure to extend these subsidies would likely result in increased workload
for federal employees at the Centers for Medicare and Medicaid Services
(CMS) and the IRS, who would be tasked with managing the fallout of increased
premiums for millions of Americans.
The persistence of the shutdown threat, even deferred to March,
continues to affect workforce morale.
The Office of Management and Budget (OMB) recently issued a memo arguing
that the administration is not legally required to provide backpay
to federal employees furloughed during a lapse in appropriations,
despite the language of the Government Employee Fair Treatment Act of 2019.
This interpretation has drawn sharp rebuke from employee advocacy groups like
NARFE, who argue the law clearly mandates that furloughed employees be made whole.
This legal ambiguity adds a layer of anxiety to the workforce, who
now must wait until spring to know if their agencies will be fully
funded for the remainder of 2026.
Administrative and Regulatory Shifts
Beyond the budget, the week of December 7, 2025, saw significant
administrative actions that will reshape the regulatory environment
in which federal employees operate.
On December 11, 2025, President Trump signed an Executive Order titled
"Eliminating State Law Obstruction of National Artificial Intelligence Policy".
This directive mandates the establishment of a uniform federal policy framework
for artificial intelligence that preempts conflicting state laws.
For federal employees in regulatory agencies such as the Federal Trade
Commission, the Department of Commerce, and the Office of Science
and Technology Policy, this Executive Order represents a massive expansion
of federal authority and workload.
Staff will be required to draft new legislative recommendations and
regulatory guidance that overrides the growing patchwork of state-level
AI safety and transparency laws.
The order specifically instructs the Special Advisor for AI and Crypto
and the Assistant to the President for Science and Technology to jointly
prepare these recommendations.
This centralization of AI governance in the federal executive branch elevates the
strategic importance of federal technology roles but also places federal workers at
the center of a contentious debate over federalism and technology regulation.
Additionally, the regulatory landscape for workplace compliance
is shifting as winter approaches.
Legal experts have advised employers, including federal agencies, to prepare
for a surge in regulatory action now that the government has reopened and
funding is stabilized through March.
Agencies are expected to ramp up oversight activities that were stalled
during the 43-day shutdown, potentially leading to increased field work for
inspectors and compliance officers in the Department of Labor and the
Environmental Protection Agency.
This return to "normal operations" comes with the added pressure
of clearing backlogs accumulated during the funding lapse.
Issues That Affect Retired Federal Workers
For the millions of retired federal employees and their survivors, the
week of December 7, 2025, brought the final crystallization of their
financial outlook for the coming year.
The news is dominated by the finalized Cost-of-Living Adjustment (COLA) for
2026, which, when analyzed against the backdrop of inflation and healthcare
costs, paints a picture of diminishing purchasing power for a significant
portion of the retiree population.
This section details the specifics of the 2026 income adjustments, the
legislative efforts to address inequities in the system, and the broader financial
implications for the retired community.
The "Net" Income Analysis: COLA vs.
Healthcare
The true financial picture for 2026 only emerges when the COLA is weighed
against the simultaneous increase in non-discretionary expenses, most
notably health insurance premiums.
As detailed previously, the enrollee share of FEHB premiums
is rising by an average of 12.3
percent in 2026.
Because these premiums are typically deducted directly from federal annuities
before the funds are deposited, the "net" increase in a retiree's monthly
payment will be significantly lower than the headline COLA figure suggests.
For many retirees, particularly those with modest annuities or those enrolled
in more expensive health plans, the 12.3
percent premium hike will consume the entirety of the 2.0
percent (or even 2.8
percent) COLA.
In some scenarios, retirees may see a net reduction in their monthly deposit in
January 2026 compared to December 2025.
This phenomenon effectively freezes the purchasing power of the federal
annuity, leaving the retiree to cover other inflationary costsâsuch
as food, utilities, and property taxesâwith fewer real dollars.
Furthermore, while not explicitly detailed in every snippet, the
interaction with Medicare Part B premiums must be considered.
Historically, Part B premiums rise in tandem with healthcare costs.
If the Part B premium increase for 2026 follows the trend of FEHB
increases, the combined deduction load will place extreme pressure on the
fixed incomes of federal annuitants.
Taxation Changes for 2026
Amidst the challenging news regarding COLAs and insurance costs, there
is a potential bright spot in the federal tax code for 2026.
Reports indicate that an enhanced tax deduction for seniors aged
sixty-five and older will take effect in the 2026 tax year.
This legislative change is intended to reduce the amount of income subject
to federal tax for older Americans.
Although this deduction does not apply exclusively to federal annuities, it will
impact the taxation of income derived from them, as well as Social Security benefits.
Legislative Advocacy and Future Outlook
Issues That Affect Current Federal Workers
The 2026 Pay Raise: 1.0
Percent and the LEO Exception
The most immediate concern for the active workforce is the compensation
adjustment scheduled for January 2026.
During this reporting period, the contours of the raise were effectively finalized,
revealing a significant divergence from the adjustments seen in recent years.
President Trumpâs "Alternative Pay Plan," submitted to Congress
in August 2025, proposed a 1.0
percent across-the-board base pay increase for most federal civilian employees,
with zero increase to locality pay rates.
Under the Federal Employees Pay Comparability Act (FEPCA) of 1990, the
President has the authority to submit an alternative plan if he deems the
statutory formula (which would have called for a much higher raise, approximately
22 percent in total) to be economically unfeasible due to "national emergency
or serious economic conditions".
As of December 13, 2025, Congress has taken no action to override this plan.
The Senate Appropriations Committeeâs draft of the Financial Services and
General Government appropriations billâthe vehicle typically used to mandate a
pay raiseâwas silent on the issue.
In the absence of legislative language mandating a higher figure (such as the 4.3
percent endorsed by the FAIR Act and unions like AFGE and
NTEU), the Presidentâs 1.0
percent plan will take effect by default on the first full
pay period of January 2026.
This 1.0
percent raise is the smallest increase for the federal workforce since 2021.
When adjusted for the 2.8
percent inflation rate indicated by the 2026 COLA, this
represents a real wage cut of 1.8
percent for the average federal employee.
The freeze on locality pay is particularly damaging for employees in
high-cost areas such as San Francisco, New York, and Washington, D.C.,
where the gap between federal and private sector pay exceeds 30 percent.
However, a significant exception to this austerity has been carved
out for federal law enforcement.
The President has directed the Office of Personnel Management (OPM) to
utilize its "Special Salary Rate" authority to provide an additional 2.8
percent increase for "certain law enforcement officials".
This additional adjustment brings the total raise for
these specific employees to 3.8
percent, creating parity with the 3.8
percent pay increase authorized for the military in the NDAA.
OPM is currently in consultation with agencies to determine the
exact coverage of this special rate.
It is expected to apply to front-line personnel in agencies such as
Customs and Border Protection (Border Patrol), Immigration and Customs
Enforcement (ICE), and potentially the Federal Bureau of Prisons.
This creates a two-tiered compensation system for 2026: a 3.8
percent raise for those in security roles, and a 1.0
percent raise for the remainder of the civil service.
The National Treasury Employees Union (NTEU) has condemned this disparity
as "inadequate" and "meager," arguing that all federal employees deserve
the same economic consideration as the military and law enforcement.
Thrift Savings Plan (TSP) Limits for 2026
While base pay stagnates, the capacity for federal employees to save for
their own retirement has expanded.
The Internal Revenue Service and the Federal Retirement Thrift Investment
Board announced the contribution limits for the Thrift Savings
Plan (TSP) for the 2026 tax year.
The maximum amount an employee can contribute from their salary increases
from twenty-three thousand five hundred dollars in 2025 to twenty-four
thousand five hundred dollars in 2026.
For employees turning fifty or older in 2026, the catch-up limit increases
from seven thousand five hundred dollars to eight thousand dollars.
This allows older workers to contribute a total of thirty-two thousand
five hundred dollars to their TSP.
A new provision under the SECURE 2.0
Act maintains a higher "Super Catch-Up" limit of eleven thousand two hundred
and fifty dollars specifically for participants aged sixty,
sixty-one, sixty-two, or sixty-three.
A critical change taking effect in 2026 involves the "Roth Catch-Up Rule."
Under SECURE 2.0,
if a participantâs wages (specifically, Medicare wages) exceeded one hundred and
fifty thousand dollars in the preceding year (2025), any catch-up contributions
made in 2026 must be designated as Roth (after-tax) contributions.
They cannot be made to the traditional tax-deferred balance.
This mandatory change requires high-earning federal employees to
adjust their tax planning, as they will no longer receive an immediate
tax deduction on these catch-up funds.
The Battle for Labor Rights: H.R.
2550 vs.
The NDAA
The most volatile developments of the week concerned the fundamental
rights of federal workers to organize and bargain collectively.
This battle was fought across two major pieces of legislation: the
Protect America's Workforce Act (H.R.
2550) and the National Defense Authorization Act
(NDAA) for Fiscal Year 2026.
H.R.
2550 On Thursday, December 11, 2025, the House of Representatives passed H.R.
2550 by a vote of 231 to 195.
The bill was designed to nullify President Trumpâs March 27, 2025, Executive
Order titled "Exclusions from Federal Labor-Management Relations Programs".
This Executive Order had used statutory authority to strip collective bargaining
rights from approximately one million federal workers in agencies with
national security missions, including the Department of Defense and the VA.
The passage of H.R.
2550 was achieved through a "discharge petition," a rare procedural maneuver
that allows a majority of House members (218) to force a bill to the floor
over the objection of the Speaker.
The success of this petition, which garnered support from all Democrats
and twenty Republicans, represents a significant bipartisan rebuke of
the administrationâs labor policies.
Proponents, including Rep.
Jared Golden (D-ME) and Rep.
Brian Fitzpatrick (R-PA), argued that the Executive Order was a
pretext for union-busting and that collective bargaining enhances, rather
than diminishes, national security.
However, the victory on H.R.
2550 was immediately tempered by a simultaneous defeat in the must-pass NDAA.
Previously, the House version of the NDAA included Section 1110, known
as the "Norcross Amendment," which would have prohibited the Department
of Defense from using any funds to implement the anti-union Executive Order.
This provision was seen as the most effective shield for defense workers
because the NDAA is essential legislation that the President is unlikely to
veto solely over a labor provision.
During the conference negotiations between the House and Senate held the week of
December 7, Senate Republicans insisted on the removal of the Norcross Amendment.
Reports indicate they feared a confrontation with President Trump,
who had threatened to veto the entire defense bill if it restricted
his authority over the workforce.
Despite a letter from sixteen House Republicans urging the Senate to keep
the provision, the final compromise version of the NDAA emerged on December
10, 2025, with Section 1110 stripped out.
The final NDAA passed the House on December 10 by a vote of 312 to 112.
The removal of the labor protections drew sharp condemnation from major unions.
The American Federation of Government Employees (AFGE) and the International
Federation of Professional and Technical Engineers (IFPTE) expressed profound
disappointment, noting that while H.R.
2550 passed, it faces a likely filibuster in the Senate, whereas the
NDAA provision would have been law.
Consequently, despite the symbolic victory of H.R.
2550, the legal reality for Department of Defense civilians remains
precarious, with no legislative barrier preventing the implementation
of the Executive Order in 2026.
Retroactive Pay for Wage Grade Employees
Finally, a specific positive development occurred for Federal
Wage System (Wage Grade) employees.
After months of delays, the Department of Defense Wage Committee acted this week
to process retroactive pay raises for approximately one hundred and eighteen
thousand blue-collar federal employees.
These adjustments, which had been stalled due to administrative
backlogs and the previous government shutdown, will be retroactive
to the effective dates in 2024.
Employees can expect to see these adjustments, along with the
lump-sum backpay, reflected in their paychecks as early as January 2026.
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.