WEBVTT NOTE This file was generated by Descript 00:00:00.039 --> 00:00:05.570 Lawrence: Welcome to The FED Weekly for 18-24 January 2026, your essential 00:00:05.570 --> 00:00:09.729 weekly briefing on the policies and proposals shaping your career, 00:00:10.010 --> 00:00:11.989 your benefits, and your retirement. 00:00:12.569 --> 00:00:16.750 Whether you’re a current federal employee navigating changes in the civil service, 00:00:17.069 --> 00:00:22.549 or a retiree keeping a close watch on your hard-earned pension and healthcare, this 00:00:22.549 --> 00:00:27.120 is your source for the latest news from Capitol Hill and the executive branch. 00:00:27.707 --> 00:00:31.568 Each week, we cut through the noise to bring you the critical updates on budget 00:00:31.568 --> 00:00:37.308 negotiations, pay raises, workforce policies, and the legislative battles that 00:00:37.308 --> 00:00:39.548 directly impact the federal community. 00:00:40.147 --> 00:00:43.058 Let's get you up to speed on what happened this past week. 00:00:43.855 --> 00:00:47.095 Issues That Affect Current and Retired Federal Workers 00:00:47.739 --> 00:00:52.219 The primary focus for the federal family this week has been the finalization 00:00:52.219 --> 00:00:57.160 of the financial and legislative landscape for the 2026 calendar year. 00:00:57.929 --> 00:01:01.450 Between executive orders and the passage of long-awaited spending 00:01:01.450 --> 00:01:06.060 bills, the "new normal" for federal service is becoming much clearer. 00:01:06.794 --> 00:01:10.213 Finalization of the 2026 Federal Pay Adjustment 00:01:10.806 --> 00:01:16.446 During the week of 18 January 2026, the Office of Personnel Management, 00:01:16.446 --> 00:01:21.216 or OPM, released detailed guidance regarding the 2026 pay adjustment. 00:01:21.936 --> 00:01:26.245 Following a period of significant debate and previous proposals for a total pay 00:01:26.245 --> 00:01:31.616 freeze, the President signed an Executive Order earlier this year authorizing a 1.0 00:01:31.616 --> 00:01:35.245 percent across-the-board increase for statutory pay systems. 00:01:36.096 --> 00:01:39.786 This increase, which took effect during the first full pay period 00:01:39.786 --> 00:01:44.186 of the new year, applies to the General Schedule, the Foreign Service 00:01:44.186 --> 00:01:48.776 schedule, and statutory schedules for the Veterans Health Administration. 00:01:49.562 --> 00:01:53.921 A critical component of this year’s pay strategy is the decision to freeze 00:01:53.921 --> 00:01:57.631 locality pay percentages at 2025 levels. 00:01:58.272 --> 00:02:01.892 This means that while the base salary for federal employees has risen 00:02:01.892 --> 00:02:06.141 slightly, the geographic adjustments intended to offset the cost of living 00:02:06.141 --> 00:02:08.782 in high-cost areas remain unchanged. 00:02:09.581 --> 00:02:12.122 To understand the practical effect of this 1.0 00:02:12.122 --> 00:02:15.552 percent increase, we can look at specific examples provided 00:02:15.552 --> 00:02:17.792 by OPM for the "Rest of U.S." 00:02:17.792 --> 00:02:18.882 locality area. 00:02:19.012 --> 00:02:23.302 A General Schedule employee at grade 9, step 5, who earned a locality 00:02:23.302 --> 00:02:31.842 rate of $69,259 in 2025, has seen that rate rise to $69,954 in 2026. 00:02:32.521 --> 00:02:37.592 For those at grade 11, step 5, the previous locality rate of $83,795 00:02:37.592 --> 00:02:40.061 has been adjusted to $84,638. 00:02:40.482 --> 00:02:44.861 Finally, an employee at grade 12, step 2, has seen their 2026 locality 00:02:44.861 --> 00:02:48.831 rate move from $91,575 to $92,491. 00:02:49.606 --> 00:02:50.636 This 1.0 00:02:50.636 --> 00:02:54.836 percent raise is the smallest annual adjustment since 2021. 00:02:55.635 --> 00:02:59.856 Analysts have pointed out that this modest increase may struggle to keep pace 00:02:59.856 --> 00:03:04.566 with rising costs, particularly given that Federal Employees Health Benefits 00:03:04.566 --> 00:03:09.275 premiums are projected to increase by more than 12 percent in the coming year. 00:03:09.896 --> 00:03:14.935 For those planning for retirement, this smaller raise also impacts the calculation 00:03:14.935 --> 00:03:19.236 of the "high-three" average, which determines future pension annuities. 00:03:19.807 --> 00:03:20.968 The House Passes H.R. 00:03:20.968 --> 00:03:25.257 7148: The Consolidated Appropriations Act, 2026 00:03:25.875 --> 00:03:30.855 On 22 January 2026, the House of Representatives passed H.R. 00:03:30.855 --> 00:03:39.535 7148, the Consolidated Appropriations Act, 2026, with a bipartisan vote of 341 to 88. 00:03:40.235 --> 00:03:43.225 This massive "minibus" package includes funding for Defense; 00:03:43.436 --> 00:03:47.276 Labor, Health and Human Services, Education; and Transportation and 00:03:47.276 --> 00:03:48.846 Housing and Urban Development. 00:03:49.585 --> 00:03:53.206 Chairman Tom Cole stated that the bill replaces previous spending levels with 00:03:53.235 --> 00:03:57.626 "disciplined, Republican-led funding that puts America First" and incorporates 00:03:57.626 --> 00:04:02.115 reforms backed by the Department of Government Efficiency, or DOGE. 00:04:02.794 --> 00:04:06.174 The bill contains several provisions that directly affect federal 00:04:06.174 --> 00:04:08.124 benefits and healthcare access. 00:04:08.513 --> 00:04:12.514 Notably, the legislation extends critical telehealth flexibilities for 00:04:12.514 --> 00:04:16.374 two years, through 31 December 2027. 00:04:17.084 --> 00:04:21.813 This ensures that Medicare beneficiaries, including federal retirees, can 00:04:21.813 --> 00:04:25.754 continue to receive care in their homes and that rural health clinics 00:04:25.754 --> 00:04:29.653 can provide services without the geographic restrictions that were 00:04:29.653 --> 00:04:31.944 temporarily waived during the pandemic. 00:04:32.718 --> 00:04:33.137 H.R. 00:04:33.137 --> 00:04:38.037 7148 also targets the Pharmacy Benefit Manager, or PBM, industry. 00:04:38.457 --> 00:04:42.428 The bill requires new transparency reporting and seeks to "delink" PBM 00:04:42.428 --> 00:04:46.577 compensation from the negotiated rebates of Medicare prescription drugs. 00:04:47.308 --> 00:04:50.987 For retirees on fixed incomes, these reforms are intended to reduce the 00:04:50.987 --> 00:04:55.458 financial incentive for PBMs to favor higher-priced medications, potentially 00:04:55.458 --> 00:04:57.247 lowering out-of-pocket costs. 00:04:57.887 --> 00:05:01.618 Furthermore, the bill maintains the salary cap for the National Institutes 00:05:01.618 --> 00:05:07.447 of Health at Executive Level II, or $228,000, and provides $47.2 00:05:07.447 --> 00:05:14.077 billion for the agency’s base budget—a $415 million increase over 2025 levels. 00:05:14.679 --> 00:05:18.370 The bill also includes several unique "America First" riders. 00:05:18.949 --> 00:05:22.449 These include a prohibition on using federal funds for vehicle 00:05:22.529 --> 00:05:26.709 "kill switch" technology and a ban on using funds for the annexation 00:05:26.709 --> 00:05:30.560 or purchase of Greenland without explicit congressional authorization. 00:05:31.250 --> 00:05:35.119 Additionally, the bill designates the "Melania Trump Foster Youth 00:05:35.410 --> 00:05:38.789 to Independence Initiative" within the Department of Housing and 00:05:38.789 --> 00:05:42.930 Urban Development to support foster youth transitioning to adulthood. 00:05:43.615 --> 00:05:45.996 DHS Appropriations and Border Security 00:05:46.563 --> 00:05:51.824 Simultaneously, on 22 January 2026, the House passed H.R. 00:05:51.824 --> 00:05:56.304 7147, the Department of Homeland Security Appropriations Act, 00:05:56.493 --> 00:05:59.953 2026, by a vote of 220 to 207. 00:06:00.724 --> 00:06:04.823 This legislation is heavily focused on the administration's priority to secure 00:06:04.823 --> 00:06:06.743 the border and empower federal agents. 00:06:07.334 --> 00:06:11.264 The bill eliminates funding for the "shelter and services program," 00:06:11.624 --> 00:06:15.763 which previously provided grants to non-governmental organizations assisting 00:06:15.763 --> 00:06:20.914 immigrants, and removes funding for the Office of Immigration Detention Ombudsman. 00:06:21.683 --> 00:06:26.183 For the thousands of federal employees within Customs and Border Protection and 00:06:26.183 --> 00:06:30.853 Immigration and Customs Enforcement, the bill provides the resources needed to 00:06:30.853 --> 00:06:36.384 expand detention capacity and increase the rate of removals for criminal aliens. 00:06:37.066 --> 00:06:39.085 Digital Accessibility Milestones 00:06:39.643 --> 00:06:44.754 On 20 January 2026, federal agencies reached a compliance deadline under 00:06:44.754 --> 00:06:47.453 Section 508 of the Rehabilitation Act. 00:06:47.883 --> 00:06:54.133 Pursuant to OMB Memorandum M-24-08, agencies were required to report the 00:06:54.133 --> 00:06:59.333 name and contact information of their agency-wide Section 508 program managers 00:06:59.624 --> 00:07:01.634 to the Office of Management and Budget. 00:07:02.271 --> 00:07:06.382 This is part of a broader push to ensure that the federal government's digital 00:07:06.382 --> 00:07:11.461 environment—including the software and portals used by employees—is fully 00:07:11.461 --> 00:07:14.192 accessible to people with disabilities. 00:07:14.891 --> 00:07:19.992 Moving forward, agencies are preparing for a March 2026 deadline to place 00:07:19.992 --> 00:07:24.162 digital accessibility statements on all websites and to establish 00:07:24.162 --> 00:07:27.832 public feedback mechanisms for reporting accessibility barriers. 00:07:28.403 --> 00:07:31.004 Issues That Affect Retired Federal Workers 00:07:31.626 --> 00:07:35.706 While the major legislative victories of the week provide long-term optimism, 00:07:36.016 --> 00:07:40.546 federal retirees are currently navigating several technical shifts regarding 00:07:40.546 --> 00:07:43.025 taxes and pension administration. 00:07:43.858 --> 00:07:46.438 2026 IRS Tax Withholding Updates 00:07:47.039 --> 00:07:50.930 Retirees began seeing the practical effects of the 2026 00:07:50.990 --> 00:07:52.599 tax year updates this week. 00:07:53.190 --> 00:07:58.859 The IRS has finalized the 2026 versions of Form W-4P, for periodic pension 00:07:58.859 --> 00:08:03.670 and annuity payments, and Form W-4R, for non-periodic distributions. 00:08:04.280 --> 00:08:07.799 All retirement plan administrators, including the Office of Personnel 00:08:07.799 --> 00:08:11.149 Management and the Thrift Savings Plan, were required to incorporate 00:08:11.149 --> 00:08:17.239 these changes into their substitute forms by no later than 16 January 2026. 00:08:17.923 --> 00:08:22.753 The 2026 Form W-4P includes updated deduction worksheets that account 00:08:22.753 --> 00:08:24.963 for 2026 inflation adjustments. 00:08:25.534 --> 00:08:30.573 For retirees who may be taking one-time distributions or rolling over funds, Form 00:08:30.573 --> 00:08:36.244 W-4R provides updated marginal tax rate tables to ensure accurate withholding. 00:08:36.845 --> 00:08:39.105 Safe Harbor and Rollover Explanations 00:08:39.707 --> 00:08:45.157 On 15 January 2026, the Department of the Treasury and the IRS issued 00:08:45.157 --> 00:08:50.997 Notice 2026-13, providing updated "safe harbor" explanations for 00:08:50.997 --> 00:08:52.628 retirement plan participants. 00:08:53.058 --> 00:08:56.667 These explanations are required to be provided to participants when they 00:08:56.667 --> 00:08:59.297 receive eligible rollover distributions. 00:08:59.970 --> 00:09:03.870 The update is significant because it reflects several major tax law 00:09:03.870 --> 00:09:06.610 changes originating from the SECURE 2.0 00:09:06.610 --> 00:09:07.019 Act. 00:09:07.749 --> 00:09:11.930 Specifically, the notice addresses changes to the 10 percent additional 00:09:11.930 --> 00:09:16.600 tax on early withdrawals, updated required minimum distribution rules for 00:09:16.600 --> 00:09:21.669 surviving spouses, and the increased age for beginning required distributions. 00:09:21.780 --> 00:09:25.870 Retirees should ensure that any distribution notices they receive 00:09:25.870 --> 00:09:29.760 this week include these updated explanations to help them make 00:09:29.760 --> 00:09:31.610 informed financial decisions. 00:09:32.235 --> 00:09:34.305 The Importance of Retirement Timing 00:09:34.861 --> 00:09:41.042 The week of 18 January 2026 also serves as a reminder of the impact of retirement 00:09:41.042 --> 00:09:43.331 timing on cost-of-living adjustments. 00:09:43.991 --> 00:09:49.842 For those who retired by 30 November 2024, the January 2026 annuity checks 00:09:49.842 --> 00:09:52.522 were the first to reflect the full 2.5 00:09:52.522 --> 00:09:54.831 percent cost-of-living adjustment. 00:09:55.675 --> 00:10:00.525 However, those who retired on 31 December 2024 only received 00:10:00.525 --> 00:10:02.255 11/12ths of that adjustment. 00:10:03.906 --> 00:10:07.715 This technical nuance underscores the financial importance of choosing 00:10:07.715 --> 00:10:11.085 a retirement date with a full awareness of how the first year 00:10:11.085 --> 00:10:12.865 of benefits will be calculated. 00:10:13.996 --> 00:10:16.326 For the average retiree, the 2.5 00:10:16.326 --> 00:10:20.496 percent adjustment added approximately $50 to their monthly check, which 00:10:20.496 --> 00:10:25.535 many retirees report is essential for offsetting the rise in healthcare costs. 00:10:26.151 --> 00:10:27.401 A Legacy of Advocacy 00:10:27.982 --> 00:10:31.991 The implementation of the Social Security Fairness Act is the result of what 00:10:31.991 --> 00:10:38.362 advocacy groups like NARFE and Mass Retirees describe as a "41-year quest". 00:10:39.152 --> 00:10:43.732 These organizations have been fighting to reverse the 1983 laws that created 00:10:43.732 --> 00:10:47.532 the Windfall Elimination Provision and the Government Pension Offset. 00:10:48.231 --> 00:10:51.901 As retirees receive their first major updates on retroactive 00:10:51.901 --> 00:10:56.241 payments this week, the historical context of this victory highlights 00:10:56.241 --> 00:11:00.202 the power of sustained grassroots effort in the federal community. 00:11:00.895 --> 00:11:03.385 Issues That Affect Current Federal Workers 00:11:03.998 --> 00:11:06.307 New Special Salary Rates for Law Enforcement 00:11:06.887 --> 00:11:11.058 In a positive development for federal law enforcement, OPM announced 00:11:11.058 --> 00:11:16.778 the approval of new special salary rates, effective 11 January 2026. 00:11:17.457 --> 00:11:22.167 Throughout the week of 18 January 2026, agencies have been implementing 00:11:22.167 --> 00:11:26.597 these new schedules, which provide a total pay increase of 3.8 00:11:26.597 --> 00:11:33.128 percent over 2025 levels—aligning federal civilian law enforcement with the 3.8 00:11:33.128 --> 00:11:35.257 percent raise provided to the military. 00:11:35.827 --> 00:11:39.627 The Department of Homeland Security coverage includes Aviation Enforcement 00:11:39.627 --> 00:11:44.277 Agents, Criminal Investigators, Customs and Border Protection Officers, and 00:11:44.277 --> 00:11:48.718 Border Patrol Agents, as well as Air and Marine Interdiction Agents. 00:11:49.407 --> 00:11:53.228 Within the Department of Justice, the rates apply to Deputy U.S. 00:11:53.228 --> 00:11:56.997 Marshals, Federal Enforcement Officers, Aviation Enforcement 00:11:56.997 --> 00:11:59.087 Officers, and Detention Officers. 00:11:59.548 --> 00:12:04.138 These special rates are considered basic pay for purposes such as retirement and 00:12:04.138 --> 00:12:10.988 overtime, though they remain subject to a statutory cap of $197,200 for 2026. 00:12:11.603 --> 00:12:13.684 TSP "Spillover" Method Implementation 00:12:14.257 --> 00:12:18.717 The Thrift Savings Plan reached a major operational milestone this week with the 00:12:18.717 --> 00:12:23.118 full implementation of the "spillover" method for catch-up contributions. 00:12:24.198 --> 00:12:27.957 Under this new system, required by the SECURE 2.0 00:12:27.957 --> 00:12:32.068 Act, participants aged 50 and older no longer need to make a separate 00:12:32.068 --> 00:12:34.018 election for catch-up contributions. 00:12:34.615 --> 00:12:40.505 Once an employee reaches the elective deferral limit of $23,500, their 00:12:40.505 --> 00:12:44.765 regular contributions will automatically "spill over" into the catch-up limit. 00:12:45.575 --> 00:12:49.015 For members of the Federal Employees Retirement System and the Blended 00:12:49.015 --> 00:12:53.395 Retirement System, these spilling-over contributions will be matched by 00:12:53.395 --> 00:12:57.735 the government up to the 5 percent of basic pay limit, ensuring that 00:12:57.735 --> 00:13:02.666 employees do not miss out on matching funds even if they reach their primary 00:13:02.666 --> 00:13:05.205 contribution limit early in the year. 00:13:05.787 --> 00:13:08.198 Agency Layoffs and Workforce Reductions 00:13:08.794 --> 00:13:13.483 The week of 18 January 2026 saw continued instability within 00:13:13.483 --> 00:13:15.193 several federal agencies. 00:13:15.823 --> 00:13:19.624 Reports indicated that the Department of Health and Human Services and 00:13:19.624 --> 00:13:23.174 the Centers for Disease Control and Prevention are moving forward with 00:13:23.174 --> 00:13:25.184 significant workforce reductions. 00:13:25.834 --> 00:13:31.104 Earlier this year, approximately 1,700 workers at the CDC received 00:13:31.104 --> 00:13:32.973 reduction-in-force notices. 00:13:33.453 --> 00:13:37.604 While some of these were later rescinded due to "data discrepancies," roughly 00:13:37.604 --> 00:13:40.143 1,000 employees remain impacted. 00:13:40.830 --> 00:13:45.919 This follows the reported "gutting" of the HHS Office of Population Affairs, 00:13:46.240 --> 00:13:49.569 where nearly all 50 employees were locked out of their accounts and 00:13:49.569 --> 00:13:51.769 subjected to a reduction in force. 00:13:52.420 --> 00:13:57.460 Federal unions have responded with legal challenges, seeking to expand court orders 00:13:57.460 --> 00:14:02.579 that previously barred "illegal shutdown firings" to protect the non-partisan 00:14:02.579 --> 00:14:05.210 civil service from targeted terminations. 00:14:05.871 --> 00:14:07.871 Legal Challenges and Board Quorums 00:14:08.494 --> 00:14:12.443 The federal labor landscape shifted this week as the Federal Labor 00:14:12.443 --> 00:14:16.233 Relations Authority officially reached a quorum following the Senate 00:14:16.233 --> 00:14:18.294 confirmation of Charles Arrington. 00:14:18.733 --> 00:14:22.494 Arrington, a Trump nominee with extensive labor relations experience 00:14:22.494 --> 00:14:27.503 at the VA and HHS, gives the authority a 2-1 Republican majority. 00:14:28.083 --> 00:14:32.683 While this allows the FLRA to begin processing a massive backlog of appeals 00:14:32.683 --> 00:14:37.794 and negotiability cases, the AFGE has expressed concerns that the new majority 00:14:37.974 --> 00:14:42.964 may issue management-friendly rulings that could roll back existing union rights. 00:14:43.650 --> 00:14:47.630 Simultaneously, the Merit Systems Protection Board continues 00:14:47.630 --> 00:14:49.349 to face legal uncertainty. 00:14:49.900 --> 00:14:55.259 On 20 January 2026, the Supreme Court issued an order allowing 00:14:55.259 --> 00:14:58.169 the administration to continue with the removal of members of 00:14:58.169 --> 00:15:02.120 certain independent agencies while legal proceedings are ongoing. 00:15:02.809 --> 00:15:06.669 This order has raised significant questions about the long-term independence 00:15:06.669 --> 00:15:11.249 of the MSPB and the survival of the merit system, which was originally 00:15:11.249 --> 00:15:15.780 designed to prevent federal employment from becoming a patronage-based system. 00:15:16.660 --> 00:15:21.340 Currently, the MSPB is operating with only two Republican members, as the 00:15:21.340 --> 00:15:26.530 chairwoman confirmed under the previous administration was fired in early 2025. 00:15:27.171 --> 00:15:30.631 And that’s a wrap on this week’s Federal Workforce Roundup. 00:15:31.032 --> 00:15:35.182 The landscape for federal employees and retirees is constantly shifting, 00:15:35.482 --> 00:15:39.592 with major decisions being made about everything from pay and job security 00:15:39.831 --> 00:15:43.652 to retirement benefits and the very structure of the civil service. 00:15:44.412 --> 00:15:46.781 Staying informed is your best tool. 00:15:47.242 --> 00:15:51.761 Be sure to subscribe wherever you get your podcasts, so you never miss an update. 00:15:52.507 --> 00:15:53.607 Thanks for tuning in. 00:15:54.038 --> 00:15:56.757 We’ll be back next week to track the latest developments 00:15:56.797 --> 00:15:58.187 and what they mean for you. 00:15:58.627 --> 00:16:01.387 Until then, stay engaged and be well.