The FED Weekly

Lawrence: Welcome to The FED Weekly for
21-27 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.

Issues That Affect Current
and Retired Federal Workers

The Imminent Government Shutdown Crisis

The most urgent news dominating
the week ending 27 September 2025

was the dramatic escalation of
the government funding crisis.

With the fiscal year set to expire
on September 30, Congress must

pass a continuing resolution
(CR) or full appropriations bills

to avoid a lapse in funding.

This week saw the breakdown
of stopgap negotiations.

On Friday, 26 September 2025, a
House-passed bill, intended to fund

the federal government for seven
weeks, failed to pass in the Senate.

This legislative rejection
immediately intensified the

threat of a government shutdown.

The political confrontation intensified
further when Republican leaders reportedly

canceled scheduled votes for September
29 and September 30, an action intended

to pressure the Senate to agree to
their continuing resolution proposal

without further bipartisan negotiation.

The failure to pass a short-term
CR signals a critical breakdown

in cross-chamber negotiations over
funding specifics, elevating the risk

beyond a typical temporary lapse.

This situation imposes severe stress
on active workers, potentially

resulting in furloughs, and creates
uncertainty regarding timely back pay.

For annuitants, while annuity checks
from the Civil Service Retirement

System (CSRS) and the Federal Employees
Retirement System (FERS) are generally

protected, a shutdown severely jeopardizes
the administrative functions of the

Office of Personnel Management (OPM).

A protracted funding lapse could delay the
processing of new retirement applications,

postpone benefit enrollment changes, and
disrupt crucial communication and guidance

from OPM, placing both current employees
and applicants in a state of high alert.

In response to this imminent threat,
organizations like the National

Treasury Employees Union (NTEU)
urgently called upon Congress to find

a bipartisan solution to prevent a
shutdown and ensure adequate funding.

Furthermore, the union proactively
reminded members to seek information

from OPM regarding pay and benefits
in the event of a shutdown, and

noted the availability of hardship
loans through the Federal Employee

Education and Assistance Fund.

The Crucial FEHB Premium and Benefit Watch

The latter half of September is
typically the period when OPM releases

the average Federal Employees Health
Benefits (FEHB) program premium rates

for the forthcoming Open Season.

As of the end of this reporting
period, 27 September 2025, OPM had not

yet announced the final average rate
increases for the 2026 plan year, creating

considerable suspense for the nearly 8.3

million federal employees and
retirees enrolled in the program.

This anticipation is heightened by the
dramatic increase seen in the prior year.

For the 2025 plan year, OPM
announced that the average enrollee

share of FEHB premiums increased
by an unprecedented 13.5%.

This figure represented the largest
price hike in recent memory, nearly

doubling the previous year’s increase.

While the overall program-wide weighted
average premium increase was 11.2%,

the government’s average
contribution increased by 10.1%,

demonstrating that the financial
burden of rising healthcare costs

was disproportionately absorbed
by the enrollees themselves.

The high premium increase for 2025 is
directly correlated with OPM’s successful

negotiation to expand coverage mandates.

For the 2025 plan year, all
FEHB enrollees, both active

and retired, gained access to
comprehensive coverage expansions.

These expansions include fertility
benefits, requiring multiple nationwide

plans to offer comprehensive in
vitro fertilization (IVF) coverage.

Furthermore, OPM mandated that all
FEHB carriers cover at least one

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

two additional oral anti-obesity
medications, often coupled with required

comprehensive behavioral therapy.

Plan carriers are also now required to
reimburse behavioral health services

offered in primary care settings.

This dynamic presents a benefits-cost
conundrum: OPM successfully secured

medically advanced and highly desired
benefits, but the implementation of

these high-cost treatments translated
immediately into significant

inflationary pressure on premium
rates, underscoring the challenge

OPM faces in balancing expanded
access with affordability for 2026.

OPM confirmed that carriers have been
developing their 2026 proposals since

January 2025, with continued emphasis on
prior year initiatives such as fertility

benefits and the prevention and treatment
of obesity, alongside goals to ease

administrative burdens on enrollees.

Issues That Affect Retired Federal Workers

Final 2026 COLA Projections

The annual Cost-of-Living Adjustment is
calculated based on the increase in the

average Consumer Price Index for Urban
Wage Earners and Clerical Workers (CPI-W).

The final rate is determined by comparing
the average CPI-W of the third quarter

of the current year (July, August, and
September) against the average of the

third quarter of the preceding year.

As of 27 September 2025, the official
calculation is nearly complete,

requiring only the September CPI-W
figure, which is scheduled for release

on Wednesday, October 15, 2025.

However, the August 2025
CPI-W figure (317.306)

released earlier in September provides the
definitive pre-announcement projection.

This August data indicates
that the CPI-W is 2.78

percent higher than the average
third-quarter 2024 baseline (308.729).

Based on this 2.78

percent inflationary index change, the
2026 COLA projections are highly certain

and largely beneficial, though disparities
between retirement systems remain.

Projected 2026 Annuity Increases

CSRS Annuitants: The COLA for Civil
Service Retirement System (CSRS)

annuities, military retirement annuities,
and Social Security benefits is determined

directly by the calculated CPI-W change.

The projected 2026 COLA
for this group is 2.8

percent.

FERS Annuitants: Federal Employees
Retirement System (FERS) annuitants

receive a COLA subject to statutory
caps when inflation is moderate or high.

Under current law, if the CPI-W increase
is between 2 percent and 3 percent,

the FERS COLA is capped at 2 percent.

Since the projected CPI-W increase is 2.8

percent, the projected 2026 COLA
for FERS annuitants is capped at 2.0

percent.

FECA Benefits: Individuals
receiving benefits under the Federal

Employees Compensation Act (FECA)
will see a projected COLA of 2.7

percent.

The FECA adjustment is calculated
differently, based on the

percentage change in the CPI-W
from December to December.

Issues That Affect Current Federal Workers

The 2026 Pay Raise Proposal
and Strategic Pay Targeting

The compensation structure for the
upcoming calendar year remains a major

point of contention following the
issuance of the President’s Alternative

Pay Plan to Congress on August 28, 2025.

This plan announced the President's
decision regarding January 2026 pay

adjustments: a modest 1 percent base
increase for General Schedule (GS)

employees and a complete freeze of 2026
locality rates at their 2025 levels.

This proposal has drawn immediate
and strong criticism from

federal employee organizations.

The National Treasury Employees
Union (NTEU) characterized the

proposed pay increase as "meager" and
"inadequate," arguing that it fails

to address the widening gap between
federal and private sector salaries.

This disparity, which the
Federal Salary Council previously

reported had increased to 27.54

percent, persists due to administrations
frequently overriding the Federal

Employees Pay Comparability Act
(FEPCA) formula, which would

otherwise dictate a higher increase.

Significantly, the Alternative
Pay Plan includes a highly

targeted compensation strategy.

The President simultaneously
directed OPM to leverage its special

salary rate authority to implement
an additional approximately 2.8

percent pay increase for certain
law enforcement officials.

This special adjustment would
grant targeted law enforcement

personnel a total pay increase of 3.8

percent in January 2026, aligning
their compensation increase with

the planned military pay increase.

OPM is consulting with affected agencies
to determine which specific front-line

law enforcement employees, particularly
those deemed critical to border security

and immigration enforcement, will
receive this accelerated compensation.

This targeted approach fundamentally
alters the traditional principle

of uniform civilian pay increases.

By providing a low 1 percent increase
for the majority of the GS workforce

while granting a substantially larger,
strategically focused raise to a

specific cadre of law enforcement, the
Administration is utilizing the pay system

to prioritize specific mission-critical
functions while actively suppressing

general civilian workforce compensation.

Congress retains the ability to override
this alternative pay plan through the

final appropriations bills, a process
that continues through December.

Legislative Threats to Workforce
Stability and Pay Structure

Two pieces of legislation introduced
in the House of Representatives, H.R.

200 and H.R.

201, represent fundamental threats to
the current structure, stability, and

compensation of the civilian merit system.

Both bills were introduced in January
2025 and remain active, posing a

significant risk to current employees.

H.R.

200, known as the Federal Freeze Act,
proposes a strategy of retrenchment

aimed at shrinking the size and
cost of the federal government.

The bill was referred to the
House Committee on Oversight

and Government Reform.

Pay and Hiring Freeze: Upon enactment,
the bill mandates a one-year

prohibition on increasing the
basic pay of any federal employee.

Additionally, for the same
period, agencies are prohibited

from increasing their number of
employees beyond the headcount

present on the date of enactment.

Narrow exceptions are made only for
appointments related to law enforcement,

public safety, or national security.

Mandatory Reduction in Force (RIF):
The most impactful provision is the

mandatory workforce reduction requirement.

The bill mandates reductions in force
such that within three years of its

enactment, the number of employees at each
agency must be 5 percent lower than the

number employed on the date of enactment.

If enacted, H.R.

200 would impose legislative controls
that effectively suspend agency hiring

and compensation adjustments, compelling
agencies to undergo deep, mandatory

staff reductions across the board, moving
beyond typical hiring slowdowns to force

a structural reduction in government size.

H.R.

201 proposes a strategy of restructuring
the civil service by replacing

traditional pay progression with
a performance-based pilot program.

The bill aims to implement a
5-year pilot program establishing

a performance-based pay structure
for certain federal employees.

Performance-Based Compensation: The
bill dictates a tiered pay outcome

tied to yearly performance metrics:

Employees who significantly
exceeded established performance

metrics must receive a pay
increase of up to 10 percent.

Employees who merely met established
performance metrics are explicitly

prohibited from receiving a pay increase.

Employees who rate below expectations must
receive a 10 percent reduction in pay.

Ineligibility for Standard Increases:
Crucially, employees participating in

this pilot program are made ineligible
for annual or locality-based pay increases

otherwise authorized under current law.

H.R.

201 represents a direct challenge
to the predictability and stability

of the General Schedule system.

By making compensation contingent on
potentially subjective metrics and

eliminating guaranteed annual and locality
increases, the bill would fundamentally

shift career financial outcomes away from
tenure and standardized locality-based

needs, eroding the core principles of the
merit system and the economic stability

long afforded to federal workers.

Administrative and Policy Updates

Beyond the major conflicts over
funding and legislative structure,

current employees should be aware
of two key administrative updates.

First, OPM issued a final rule pertaining
to the Federal Wage System (FWS) that

will become effective on October 1, 2025.

This rule changes the regulatory
criteria used to define FWS wage

area boundaries for the appropriated
fund system, impacting approximately

10 percent of the FWS workforce.

The purpose of this change is to
align the FWS wage area criteria more

closely with the General Schedule
(GS) locality pay area criteria,

aiming to simplify pay administration
and harmonize pay boundaries across

different major federal systems.

Second, OPM continues to focus
on the implementation of the

Presidential Memorandum mandating
the "Return to In-Person Work".

OPM maintains centralized guidance,
confirming that any previous telework

policies inconsistent with the
Presidential directive are rescinded.

The agency reminds all federal
organizations of the legal requirements

under the Telework Enhancement Act of
2010 to integrate telework into Continuity

of Operations (COOP) planning, ensure
policy compliance, and designate Telework

Managing Officers to manage the strategic
implementation of telework programs.

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.