The FED Weekly

Lawrence: Welcome to The FED Weekly
for 24-30 August 2025, your essential

weekly briefing on the policies
and proposals shaping your career,

your benefits, and your retirement.

Whether you’re 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.

Section 1: Issues That Affect
Current and Retired Federal Workers

The 2025 FEHB Premium Shock:
A Historic Increase Finalized

The most significant financial news
impacting the entire federal community

this week is the finalization of premium
rates for the 2025 Federal Employees

Health Benefits, or FEHB, program.

The Office of Personnel Management
(OPM) confirmed what many had

feared: enrollees will face an
average premium increase of 13.5%

for their share of the costs.

This represents the largest such hike
in nearly two decades and continues

a painful trend of substantial
increases, following a 7.7%

rise in 2024 and an 8.7%

rise in 2023.

For the average federal employee
and retiree, this translates into

a direct hit to their budget,
costing an additional $26.10

per biweekly paycheck.

While the government's contribution
to premiums will also increase,

it will do so by a lesser 10.1%,

shifting a greater portion of
the rising costs onto enrollees.

OPM has attributed this dramatic
surge to several key factors: price

increases from healthcare providers
and suppliers, a significant rise in

the utilization of certain prescription
drugs, particularly GLP-1 anti-obesity

medications like Ozempic and Wegovy,
and higher spending on both outpatient

procedures and behavioral health services.

The Federal Employees Dental and Vision
Insurance Program, or FEDVIP, will see

more modest average increases of 2.97%

for dental plans and 0.87%

for vision plans.

The combination of these financial
and policy developments will make the

upcoming Open Season, which runs from
November 11 to December 9, 2024, one

of the most critical in recent memory.

All federal employees and annuitants
will need to meticulously re-evaluate

their plan choices to mitigate
the impact of these rising costs.

The Looming Threat of
a Government Shutdown

As one fiscal year winds down, the
battle over the next one begins.

With the end of fiscal year 2025
approaching on September 30, tensions

are escalating in Congress over the
12 appropriations bills needed to fund

the government for fiscal year 2026.

As of this week, none of those 12
bills have been enacted into law.

On August 29, 2025, Democratic
leaders in Congress voiced growing

concern over the lack of progress and
the contentious political climate,

stating that the likelihood of a
government shutdown is increasing.

A shutdown would have distinct impacts
on current and retired employees.

For the active workforce, all
non-essential federal employees would

be placed on an unpaid furlough.

While Congress has historically
passed legislation to provide back

pay after shutdowns conclude, the
immediate loss of income can cause

significant financial hardship.

For federal annuitants,
the situation is different.

Retirement annuity payments, which are
drawn from the Civil Service Retirement

and Disability Trust Fund, are not
subject to annual appropriations and

would continue to be paid on time.

The same is true for
Social Security benefits.

However, a shutdown would severely
disrupt agency operations.

This means that OPM and the Social
Security Administration would halt

the processing of new retirement
applications, changes to benefits,

and other customer service requests.

This would create significant delays
and backlogs, leaving recent and

prospective retirees in a state of
uncertainty until funding is restored.

Section 2: Issues That Affect
Retired Federal Workers

2026 COLA Projections:
A Familiar Disparity

For federal retirees, one of the most
important numbers of the year is the

annual Cost-of-Living Adjustment, or COLA.

Projections for the 2026 COLA became
clearer this month with the release

of the July 2025 Consumer Price Index
for Urban Wage Earners and Clerical

Workers (CPI-W) on August 12, 2025.

Based on this data, the 2026
COLA is projected to be 2.5%

- 2.6%

for retirees under the older Civil
Service Retirement System, or CSRS.

However, for the majority of federal
retirees who are covered by the

Federal Employees Retirement System,
or FERS, the projection is a lower 2.0%

- 2.1%

increase.

This disparity is not an anomaly;
it is the result of the statutory

formula governing the FERS COLA.

When the inflation rate as measured
by the CPI-W falls between 2%

and 3%, CSRS retirees receive the
full amount, but the FERS COLA is

automatically capped at a flat 2%.

This is often referred to as the "diet
COLA," and it has been a long-standing

point of contention for retiree advocates,
who argue that it systematically

erodes the purchasing power of FERS
annuities over a long retirement.

Legislation to address this, such as
the Equal COLA Act, has been introduced

but has failed to gain traction.

New Legislation for Military
Retirees: The FORWARD Act

There was a notable legislative
development this week for military

retirees who also participate
in the federal government's

401(k)-style retirement savings plan.

On August 25, 2025, a bipartisan
bill was introduced in the House of

Representatives by Representative Jen
Kiggans, a Republican from Virginia.

The bill is titled the "Financial
Opportunities for Retirees and

Warriors Advancing Retirement
Development Act," or the FORWARD Act.

If enacted, the FORWARD Act would, for
the first time, allow certain veterans

to continue contributing to their
Thrift Savings Plan, or TSP, accounts

after they have separated from service.

Under current law, all contributions
to the TSP must cease upon leaving

federal or military employment.

This legislation would specifically
extend eligibility to two groups:

military members who are entitled
to retirement pay, and veterans who

have a 100% disability rating from
the Department of Veterans Affairs.

These individuals would be permitted to
contribute a portion of their military

retirement pay or their disability
compensation directly into their existing

TSP accounts, allowing them to continue
building their retirement savings within

the plan they are already familiar with.

The bill explicitly clarifies that these
new contributions would not be eligible

for any government matching funds.

The legislation has been referred to
the House Committee on Oversight and

Government Reform for consideration.

Section 3: Issues That Affect
Current Federal Workers

The 2026 Federal Pay Raise:
A Shift from Freeze to 1%

For months, the active federal workforce
has been bracing for a potential pay

freeze in 2026, a prospect first raised in
President Trump's initial budget proposal.

However, on Friday, August 28,
2025, the administration submitted

its formal alternative pay plan to
Congress, revealing a different path.

The plan calls for an
average pay raise of 1.0%

for civilian federal employees,
with locality pay being

frozen at current levels.

By law, the president must issue such
a plan by the end of August to prevent

a much larger, automatic pay increase
from taking effect under the Federal

Employees Pay Comparability Act of 1990.

In his letter to Congress, President
Trump stated that without this

alternative plan, the automatic
formula would have triggered a 3.3%

across-the-board increase plus an
average locality pay hike of 18.88%.

A key component of the administration's
plan is a targeted pay raise of 3.8%

for "certain categories of
law enforcement personnel".

This move is designed to
create pay parity with the 3.8%

raise planned for uniformed
military service members in 2026.

The Office of Personnel Management
has been tasked with determining which

specific law enforcement job series
will qualify for this larger increase.

The reaction from federal employee
unions was swift and critical.

Doreen Greenwald, president of the
National Treasury Employees Union,

called the 1% figure inadequate,
particularly in light of the massive FEHB

premium hikes, and argued that the 3.8%

raise for law enforcement and
the military should be extended

to all federal employees.

Unions are now urging Congress to
intervene and legislate a higher pay

raise, as it has done in the past
to override presidential pay plans.

They continue to advocate for the 4.3%

average raise proposed in the FAIR Act.

To finalize the 1% raise, the
President must issue a formal

executive order in December.

OPM Overhauls Performance
Awards to Reward Top Performers

The administration is also moving
to change how federal employees

are rewarded for their work.

In a government-wide memorandum issued
on August 11, 2025, OPM Director

Scott Kupor unveiled new guidance
aimed at fundamentally overhauling the

distribution of performance awards.

The stated goal is to move away from
a system where award money is spread

thinly across the workforce and
instead concentrate larger bonuses

on a smaller group of top performers.

Under the new policy, agencies are
directed to "normalize" their performance

ratings and are required to designate
at least 60% of their available bonus

pools for employees who receive the
highest ratings, typically a Level

4 or Level 5 on a five-tier system.

The guidance also encourages managers
to make greater use of non-monetary

recognition, such as time-off awards
and Quality Step Increases, as well

as "special act" awards to recognize
specific accomplishments in real time.

The policy is even more stringent
for the government's top leaders.

For the Senior Executive Service, or
SES, the guidance establishes a hard cap,

which will become mandatory in fiscal
year 2026, stipulating that no more than

30% of an agency's executives can receive
one of the top two performance ratings.

All federal agencies are required
to submit their plans for complying

with this new awards philosophy
to OPM by September 8, 2025.

Agency and Administrative Roundup

In other news from across the
government this week, the Internal

Revenue Service has reversed course
on planned workforce reductions.

In a report from August 22, 2025, it
was confirmed that the IRS has canceled

its plans for widespread layoffs.

The agency, which has seen its
staffing levels shrink by about

a quarter, will now focus on
strategic hiring and reassignments

to fill mission-critical roles.

It will also rescind some of the
deferred resignation offers that

were part of the administration's
earlier "Fork in the Road" program.

The Office of Personnel Management also
made several administrative announcements.

In August 2025, the agency issued
updated guidance and new Q&As to clarify

policies related to President Trump's
executive order on "Strengthening

Probationary Periods in the Federal
Service," which makes it easier for

agencies to remove employees during their
initial one- or two-year trial periods.

On August 20, 2025, OPM officially
announced that the 2025 Federal

Employee Viewpoint Survey,
or FEVS, has been canceled.

The flagship survey on employee
morale, which had already been

delayed for months, will be retooled
and is expected to return in 2026.

Finally, on August 28, 2025, OPM announced
that it is centralizing its guidance

memorandums for Chief Human Capital
Officers by moving them from a separate

website directly onto the main OPM.gov

portal to improve accessibility.

Legislative Watch: Key
Bills Remain in Committee

Finally, we are tracking two House
bills of interest to federal employees

that saw no new action this week
but remain pending in committee.

First is H.R.

1522, the Federal Retirement Fairness Act.

Introduced in February 2025, this
bill would be a significant benefit

for employees who started their
careers in temporary positions.

It would allow them to make retroactive
retirement contributions to receive FERS

credit for temporary or non-deduction
service performed after December 31,

1988, essentially allowing them to "buy
back" that time toward their pension.

Second is H.R.

201, the Federal Employee Performance
and Accountability Act of 2025.

Introduced in January 2025, this
bill proposes a five-year pilot

program that would radically alter
the pay system for some employees.

It would tie pay adjustments directly
to performance for a select group of

employees at the GS-11 level and above.

Under the pilot, employees who
significantly exceed performance metrics

could receive a pay increase of up to 10%,
but those who are rated below expectations

would see their pay cut by 10%.

Participants in the pilot would not
be eligible for the standard annual

across-the-board and locality pay raises.

Both bills remain in the House Committee
on Oversight and Government Reform.

And that’s a wrap on this week’s
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.

We’ll be back next week to
track the latest developments

and what they mean for you.

Until then, stay engaged and be well.