The FED Weekly

Lawrence: Welcome to The FED Weekly
for 31 August - 6 September 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 Office of Personnel Management, or
OPM, announced that premiums for the

Federal Employees Health Benefits program,
the FEHB, will rise by an average of 13.5

percent.

This is the largest single-year
increase in almost two decades and

follows substantial hikes of 7.7

percent in 2024 and 8.7

percent in 2023.

For the average federal
family, this translates to an

additional cost of about $26.10

per biweekly paycheck.

OPM attributes this steep rise to several
industry-wide pressures, including price

increases from healthcare providers and
suppliers, higher utilization of certain

prescription drugs, and a notable increase
in spending on behavioral health services.

A significant driver of this cost increase
is the mandated expansion of benefits.

Beginning in 2025, all FEHB enrollees
will have access to nationwide plans

that offer comprehensive coverage
for in vitro fertilization, or IVF.

Additionally, health carriers will
now be required to cover at least one

GLP-1 class anti-obesity drug, such
as Wegovy or Ozempic, along with two

other oral anti-obesity medications.

While these expanded benefits
address critical health needs, their

high cost is being passed directly
to the entire pool of enrollees.

When you place this 13.5

percent premium hike alongside the
administration's proposed one percent

pay raise for 2026 and the projected 2.6

percent cost-of-living
adjustment for retirees, the

financial picture becomes stark.

The cost of a core benefit is rising
at a rate more than thirteen times

that of the proposed pay raise.

This effectively creates a net loss
in real income for the vast majority

of the federal community, eroding
purchasing power and potentially

impacting morale, recruitment, and
retention efforts across government.

For retirees, there is a silver lining,
but one that highlights a growing divide.

OPM is strongly encouraging FEHB plans to
offer Medicare Advantage options, which

can significantly reduce or even eliminate
out-of-pocket costs for annuitants who

are enrolled in Medicare Parts A and B.

However, this benefit is only available
to that specific subset of retirees,

leaving those without Part B to bear
the full brunt of the premium increases.

In contrast to the major FEHB hike,
premiums for the Federal Employees

Dental and Vision Insurance Program, or
FEDVIP, will see only modest increases.

Dental plan premiums will
rise by an average of 2.97

percent, while vision plans
will increase by just 0.87

percent.

In more positive financial news,
the Thrift Savings Plan, the

401(k)-style retirement savings
program for federal employees, has

reached a monumental milestone.

As of September 7th, 2025, the TSP
officially surpassed $1 trillion

in assets under management.

This landmark achievement reflects years
of steady contributions from more than 7.2

million participants, coupled
with strong market performance.

According to the latest data from
June 2025, the average TSP balance

across all accounts stood at $134,633.

For participants in the Federal
Employees Retirement System, or FERS,

that average was significantly higher
at $196,668, a figure that underscores

the long-term power of compounding
and agency matching contributions.

The market rally continued through
August, boosting TSP account balances.

The stock-based C Fund gained 2.03

percent, the S Fund rose by 4.08

percent, and the International
I Fund was up 3.95

percent.

The bond-based F Fund also
posted a positive return of 1.19

percent.

For September, the interest rate
for the government securities

G Fund was set at 4.250

percent.

While this milestone solidifies
the TSP's central role in federal

retirement security, it also highlights
the degree to which that security

is now tied to market performance.

With the workforce now almost entirely
under the FERS system, a major market

downturn would have a far more significant
impact on the financial futures of

federal employees than it would have two
decades ago, when a larger portion of

the workforce was covered by the more
traditional CSRS defined-benefit pension.

Turning to legislation, a massive
reconciliation bill signed into law on

July 4th, known as the "One Big Beautiful
Bill Act of 2025," has introduced several

new tax provisions that will affect both
working and retired federal employees.

Effective for the 2025 through 2028
tax years, the law creates a new

deduction specifically for seniors.

Individuals aged 65 and older will be
able to claim a new $6,000 deduction, or

$12,000 for a qualifying married couple.

This is in addition to the existing
standard deduction for seniors

and is aimed at providing relief
to retirees on fixed incomes.

However, this deduction does phase
out for individuals with a modified

adjusted gross income over $75,000,
or $150,000 for joint filers.

For current employees, the law introduces
new deductions for qualified tip

income and, notably, for overtime pay.

Employees can now deduct the
premium portion of their overtime

compensation—for example, the
"half" in "time-and-a-half" pay.

This deduction is capped at $12,500
annually, or $25,000 for joint filers,

and also has income-based phase-outs.

While these provisions offer targeted
tax relief, the same bill enacts

significant changes to the Supplemental
Nutrition Assistance Program, or SNAP.

The law freezes the cost basis for
the Thrifty Food Plan, expands work

requirements to individuals up to age
65, and tightens eligibility rules.

These changes could negatively impact
low-income federal families who may

rely on SNAP to supplement their
earnings, creating a situation where

some in the federal community benefit
from tax cuts while others face a

reduction in essential support from
the very same piece of legislation.

Finally in this section, the
long-simmering conflict over the

role of unions in the federal
government has erupted once again.

On August 28th, President Trump issued
a new executive order, EO 14343,

which bans collective bargaining
at several more federal agencies.

The list includes NASA, the U.S.

Patent and Trademark Office, and the
National Weather Service, among others.

This action expands on a previous
order from March that targeted

nearly 20 other agencies.

The response from federal
unions was swift and forceful.

On September 3rd, the National
Treasury Employees Union, or

NTEU, filed a lawsuit in the D.C.

District Court to block the order.

The lawsuit argues that the President
has exceeded his statutory authority,

which permits such exclusions only
when an agency's "primary function" is

intelligence or national security work.

The NTEU also alleges that the order
constitutes illegal retaliation

against the union for its vocal
opposition to administration policies.

The American Federation of Government
Employees, AFGE, labeled the order

"immoral and abhorrent," viewing
it as part of a broader plan to

dismantle government agencies.

The unions are not fighting alone.

On September 2nd, a coalition of
state attorneys general filed a legal

brief in a related Ninth Circuit case,
supporting the unions and arguing

that the administration's actions are
likely unconstitutional retaliation

in violation of the First Amendment.

These legal battles over collective
bargaining are not happening in a vacuum.

They are intrinsically linked to the
administration's other major workforce

initiatives, including mass layoffs and
changes to hiring and firing practices.

By removing union protections, the
administration weakens a primary

source of organized resistance, making
it easier to implement its broader

agenda for reshaping the civil service.

The lawsuits, therefore, represent more
than a fight over contracts; they are a

fight over the fundamental structure and
independence of the federal workforce.

Section 2: Issues That Affect
Retired Federal Workers

First up is the closely
watched projection for the 2026

Cost-of-Living Adjustment, or COLA.

Based on the latest inflation data
from July, the 2026 COLA for Social

Security benefits and Civil Service
Retirement System, or CSRS, annuities

is projected to be around 2.5

to 2.7

percent.

The final figure will be locked
in after the September inflation

numbers are released in mid-October.

However, for retirees under the
Federal Employees Retirement System,

or FERS, the story is different.

The FERS system includes what
is often called a "diet COLA."

Under its formula, if the official COLA
falls between 2 and 3 percent, FERS

annuitants receive a flat 2 percent.

If the COLA is 3 percent or
higher, they receive the full

amount minus one percentage point.

Let's illustrate the real-world impact.

Assuming the final COLA is 2.6

percent, a CSRS retiree with a
$50,000 annual pension would see

their annuity increase by $1,300.

A FERS retiree with the identical
pension would receive only a 2

percent increase, amounting to $1,000.

That $300 difference may seem small, but
it compounds year after year, leading

to a gradual but significant erosion
of purchasing power for FERS retirees

compared to their CSRS counterparts.

This structural inequity was designed
as a cost-saving measure, but in

an era of persistent inflation,
it effectively shifts more of the

inflation risk from the government
onto the individual FERS retiree.

Next, an important update from the
Social Security Administration.

While the agency is maintaining its
normal payment schedule for September,

a policy change regarding overpayments
is causing significant financial

distress for some beneficiaries.

The SSA has begun aggressively recouping
past overpayments by withholding

50 percent of a recipient's monthly
check until the debt is repaid.

This is a dramatic increase
from a temporary 10 percent cap

that was previously in place.

For retirees living on a fixed
income, suddenly losing half of

their monthly Social Security
benefit can be devastating.

This policy shift suggests a change in
administrative priorities, moving from

minimizing beneficiary hardship to a more
aggressive fiscal recoupment strategy.

This comes as the agency announced
a new leadership team on September

5th, which has been noted as being
"light on government experience,"

potentially signaling further
operational changes ahead.

Section 3: Issues That Affect
Current Federal Workers

On August 31st, President Trump submitted
his alternative pay plan to Congress.

It calls for a one percent
across-the-board increase to base

pay, while freezing locality pay
rates at their current 2025 levels.

However, the plan creates a
significant exception for certain

law enforcement personnel.

It directs OPM to use its special
salary rate authority to provide

these employees with a total
pay raise of approximately 3.8

percent, aligning their increase
with that of the military.

OPM will now consult with the
Departments of Homeland Security,

Justice, and the Interior to identify
the specific job categories that will

be eligible for this higher raise, with
a focus on roles critical to border

security and immigration enforcement.

This two-tiered approach is more
than just a fiscal decision;

it is a clear policy statement.

By singling out law enforcement for
a substantial raise while offering a

minimal one to the rest of the civil
service, the administration is using

compensation as a tool to signal its
priorities and incentivize talent to flow

into its preferred sectors of government.

Federal employee unions
immediately denounced the proposal.

NTEU President Doreen Greenwald
called the 1 percent raise "meager and

inadequate" and demanded that the 3.8

percent increase be extended
to all federal employees.

The union continues to back the
FAIR Act, a bill in Congress that

calls for an average raise of 4.3

percent for 2026.

It is worth noting that during the
president's first term, Congress

overruled his proposed pay freezes
on multiple occasions, suggesting

a potential legislative battle over
the final pay figure is likely.

Meanwhile, the Office of Personnel
Management is moving forward with a

series of reforms that are fundamentally
reshaping how the government

hires and manages new employees.

On September 2nd, OPM announced a
new two-page resume standard for

all applications submitted through
the USAJOBS website, which will

take effect on September 27th.

This change is part of the
administration's broader "Merit

Hiring Plan," which also updates
job announcements to include

language seeking candidates who
are, quote, "passionate about the

ideals of our American republic".

In parallel, OPM has been
implementing a major change to

probationary periods for new hires.

Under a new executive order, a new
employee's appointment will no longer

automatically become permanent after their
one- or two-year probationary period.

Instead, agencies must now
affirmatively certify in writing

that the employee's continued
service is in the public interest.

This shifts the default from retention
to a system requiring active approval

to keep a new employee, giving managers
and political appointees significantly

more power over the workforce before full
civil service protections are granted.

Combined, these policies create a
system that streamlines the hiring

of ideologically screened candidates
and makes it easier to remove them

before they gain career tenure.

The subjective language in job
announcements and the requirement for an

affirmative political sign-off at the end
of probation work together to potentially

weaken the apolitical, merit-based
foundation of the civil service.

These policy shifts are occurring
against a backdrop of significant

turmoil in the federal headcount.

The latest jobs report from the Bureau of
Labor Statistics, released on September

5th, showed that federal government
employment fell by 15,000 in August alone.

Since January of 2025, the federal
workforce has shrunk by 97,000 positions.

This official data reflects
the ongoing mass layoffs

initiated by the administration.

The Partnership for Public Service
estimates that as of late August,

nearly 200,000 federal workers have
already left their jobs amid plans to

eliminate over 290,000 positions in
total, largely through the Department

of Government Efficiency initiative.

Yet, this decline is not uniform.

At the same time these layoffs
are proceeding, the administration

is planning to "surge hiring"
in the very law enforcement

agencies targeted for higher pay.

This reveals a strategic reallocation
of federal resources—a de facto

reorganization of government through
attrition and replacement, shrinking

regulatory and service-oriented
agencies while expanding

those focused on enforcement.

Finally, several bills pending in Congress
illustrate the deep, competing visions

for the future of the federal workforce.

On one side is the Federal Employee
Performance and Accountability Act, H.R.

201.

This bill would create a pilot program
where pay for senior employees is

tied directly to performance ratings,
including a mandatory 10 percent pay cut

for those rated "below expectations".

Another bill, the Federal
Employee Return to Work Act, H.R.

236, would make any employee who teleworks
even one day a week ineligible for annual

pay raises and locality pay adjustments.

On the other side stands the FAIR
Act, which advocates for a 4.3

percent pay raise for all employees,
and the Equal COLA Act, which would

ensure FERS retirees receive the
same full cost-of-living adjustment

as their CSRS counterparts.

These bills represent a legislative
battle over the core principles of federal

employment—pitting a vision of control,
punishment, and austerity against one of

competitive compensation and fairness.

The path these bills take will
say a great deal about the future

culture of the federal workplace.

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.