Back in April, there was some alarming news coming from Capitol Hill regarding federal employee retirement benefits. Luckily, all of these spending cuts have been removed from the budget resolution bill recently approved by Congress and passed into law. Let’s look at what has been removed from consideration, including a proposition to radically increase the amount new FERS employees would contribute to their retirement fund.
Good News for Federal Employees: Suggested Slashing of Retirement Benefits Not in “One Big Beautiful Bill”
Here is what cuts to federal benefits were being considered in earlier iterations of the Congressional budgetary resolution:
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Changing High-3 Average Salary to “High-5” – When calculating the pension income for federal retirees, a multiplier (1.0% or 1.1%) is multiplied by years and months of service, multiplied by the high-3 average salary (which is the highest consecutive 36 months of pay in their federal career). The proposed change would’ve adjusted this figure to use the average of 5 years (60 months), effectively lowering the amount of FERS annuities.
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Eliminating the FERS Supplement – The special retirement supplement (SRS) for FERS retirees is a benefit for those who retire before the age of 62, and lasts until the employee becomes eligible to receive Social Security retirement benefits at age 62. FERS workers who retire with an immediate unreduced pension receive the benefit immediately upon retirement. However, this benefit can be delayed for employees who retire under VERA (Voluntary Early Retirement Authority) or DSR (Discontinued Service Retirement).
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Increasing Contributions for All FERS Workers – Currently, only regular federal employees who were hired in 2014 or later contribute 4.4% of their base pay to the retirement system. If you started working for a federal agency in 2013, the rate is 3.1% and anyone who began earlier only puts in 0.8% of their paycheck. If you are a Special Provision Employee, then you contribute a .5% more than regular employees. One of the original spending cuts proposed back in April was to increase the contribution rate for all regular FERS workers to 4.4 percent.
Had a previous draft of the Senate budget resolution bill passed, new hires to join the government’s workforce would have been required to choose their contribution amount to FERS, although both options were considerably more than the existing levels. The options would’ve been:
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Accept “at-will” employment with a lower contribution percentage (9.4%), or…
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Receive civil protections, but with high contribution amounts (14.4%)
This change would have severely reduced new federal employees' take-home pay and lessened their ability to contribute enough to the TSP or pay FEGLI or FEHB premiums.
Luckily, all of these considerations were removed from the final legislation that made its way to the President’s desk. The only item pertaining to federal benefits that was kept in the budgetary resolution was funding for an audit of the FEHB program, which could lead to higher employee and retiree costs for healthcare expenses.
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What the Recent Bill Means for the 2026 Federal Pay Raise
Unfortunately for the federal workforce, there was also no inclusion of an annual pay raise for civilian employees in the “big” bill. With lawmakers unlikely to pass separate legislation to give feds a pay increase, and no inclusion of a salary increase in the White House’s budget recommendations for fiscal year 2026, a pay freeze appears more likely.
Contract to Move OPM Retirement Application Process Online Quietly Canceled
In May, DOGE announced a 1-year contract with Workday to digitize the federal retirement application systems, which are currently paper-based. The switch was set to happen pretty abruptly, too. The online retirement application (ORA) was to go live on June 2nd, and all retirement claims were to be submitted completely through the digital portal by July 15th. However, almost just as quickly as the contract was announced and deadlines were imposed, the Justice Department deemed the contract unlawful and nullified it.
Now, there will be a conference held this week to host bidders for a similar contract, but with a much more realistic timeline. The new goal is to move OPM’s retirement services online to accept applications by 2028. For now, at least, FERS and CSRS packets will remain paper-based and sent through human resource offices at federal agencies.
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