The FED Weekly

Lawrence: Welcome to The FED Weekly
for 19-25 October 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 2026 Healthcare Cost Shock
and Open Season Preparation

The most pressing financial concern
facing the entire federal community

is the soaring cost of health
insurance for the 2026 plan year.

While the premium rates were calculated
earlier in October 2025, their immense

scale formed the essential financial
backdrop against which all retirement

announcements this week were viewed.

The Office of Personnel Management
confirmed that federal health

insurance premiums for 2026
will experience a sharp rise.

For participants in the Federal
Employees Health Benefits (FEHB)

program, the enrollee’s share of premiums
will increase by an average of 12.3

percent.

For U.S.

Postal Service participants in
the Postal Service Health Benefits

(PSHB) program, the average enrollee
increase is slightly lower but

still extremely significant at 11.3

percent.

These figures confirm a
difficult trajectory, as the

2026 increase follows a 13.5

percent spike in the
enrollee share for 2025.

OPM attributes this steep increase
to several structural factors,

including rising prescription
drug and medical service costs.

Furthermore, OPM points directly to the
demographics of the program participants.

The average age for the entire
FEHB/PSHB enrollee population, including

retirees, is approximately 60 years.

Even among active employees, the
median age stands at 47 years.

This older demographic inherently drives
up utilization and overall healthcare

costs, placing a significant financial
burden on the system that is now

being passed directly to participants.

This dynamic means the financial strain
on the program is tied to the successful

longevity of the federal workforce, which
in turn necessitates the high premium

increases that are drastically outpacing
cost-of-living adjustments for annuitants.

The steep premium increase sets a
high-stakes scenario for the upcoming

Federal Benefits Open Season,
which OPM confirmed will run from

November 10 through December 8, 2025.

During this time, eligible federal
employees and annuitants must review

their plans, compare options, and make
enrollment decisions for FEHB, PSHB,

and the Federal Employees Dental and
Vision Insurance Program (FEDVIP).

For 2026, the FEHB program will offer 132
plan options across 47 carriers, while

PSHB offers 75 options from 17 carriers.

However, the Open Season will
require immediate action for some,

as OPM has also noted that six FEHB
plans, one PSHB plan, and one FEDVIP

plan will be discontinued in 2026.

Enrollees in these specific plans must
actively choose a new plan during the

November/December enrollment period.

On a positive note, some carriers are
announcing benefit simplifications.

For example, FEP Blue will eliminate
the requirement for prior approval

for outpatient hospice care and
simplify rules for genetic testing,

provided the enrollee shows signs or
symptoms of the condition being tested.

Administrative Instability
and Medicare Claims

The ongoing federal government shutdown,
which commenced on October 1, 2025

, continues to introduce instability
into crucial federal benefit systems,

as evidenced by administrative actions
taken this week regarding Medicare.

The Centers for Medicare & Medicaid
Services (CMS) provided updated

guidance to its Medicare Administrative
Contractors (MACs) on the temporary

holding of certain claims.

This complexity arose because various
legislative payment provisions,

particularly those related to the Medicare
Physician Fee Schedule and certain

expanded services previously covered under
the Full-Year Continuing Appropriations

and Extensions Act, 2025 (Pub.

L.

119-4), had expired.

In a move to relieve pressure on
healthcare providers, CMS directed MACs

to lift the claims hold for services
provided on or after October 1, 2025,

concerning several specific areas,
including ground ambulance transport

claims, Federally Qualified Health
Center claims, and claims paid under

the Medicare Physician Fee Schedule.

This partial release of claims is vital
for ensuring that providers continue

to serve the millions of federal
beneficiaries who rely on Medicare.

However, not all services were released.

CMS explicitly instructed MACs to continue
temporarily holding claims for acute

Hospital Care at Home and for certain
telehealth services, specifically those

that CMS cannot confirm are definitively
for behavioral and mental health services.

This highly specific claims guidance
demonstrates how legislative funding

gaps, even those unrelated to the
immediate shutdown debate, can immediately

affect the delivery of healthcare.

The continued hold on specific telehealth
services means that beneficiaries who rely

on these non-behavioral virtual services
face reduced access and uncertainty

regarding payment, highlighting the
profound operational vulnerability

introduced by congressional inaction.

Issues That Affect Retired Federal Workers

The 2026 COLA Announcement: A
Net Loss of Purchasing Power

On Thursday, October 24, 2025, the
Social Security Administration (SSA)

formalized the 2026 Cost-of-Living
Adjustment, finalizing the annual

adjustment for federal retirees.

This announcement immediately defined the
financial prospects for the year ahead.

SSA announced that Social Security
benefits, along with annuities

for retirees covered under the
Civil Service Retirement System

(CSRS), will increase by 2.8

percent beginning in January 2026.

This adjustment reflects a moderation
in inflation compared to recent years.

For Social Security recipients, this
means an average retirement benefit

increase of approximately $56 per month.

Concurrently, SSA noted that the
maximum amount of earnings subject to

the Social Security tax (the taxable
maximum) is slated to rise to $184,500 in

January 2026, up from $176,100 in 2025.

Critically, retirees under the Federal
Employees Retirement System (FERS)

will receive a lower increase of 2.0

percent.

This disparity, where
CSRS retirees receive 0.8

percent more than their FERS counterparts,
represents the continuation of a

long-standing financial penalty
built into the FERS COLA formula.

The overwhelming conclusion reached by
analysts immediately following the October

24, 2025, COLA announcement is that both
CSRS and FERS retirees face a guaranteed

net loss of purchasing power in 2026.

The 2.8

percent (CSRS) or 2.0

percent (FERS) COLA fails to
compensate for the average 12.3

percent increase in the
enrollee share of FEHB premiums.

Legislative Efforts to
Achieve FERS COLA Parity

The announcement of the reduced 2.0

percent COLA for FERS
retirees relative to the 2.8

percent CSRS increase reignited the
debate over FERS benefit parity.

The disparity is triggered by the
statutory FERS COLA calculation mechanism:

when the annual inflation rate, as
measured by the CPI-W, falls between 2.01

percent and 3.0

percent, the FERS COLA is capped at 2.0

percent.

Since the 2026 inflation rate
fell into this range, FERS

retirees receive the lower rate.

Federal employee organizations argue
that this disparity imposes an arbitrary

penalty that compounds over time,
noting that FERS retirees who retired

just four years ago have already
lost over $1,000 to rising costs

due to these compounded reductions.

To combat this, the Equal COLA Act (H.R.

866 in the House and S.

3194 in the Senate), championed
by Representative Gerry Connolly

and Senator Alex Padilla, has
gained renewed support this week.

Endorsed by organizations like the
National Treasury Employees Union (NTEU)

and the American Federation of Government
Employees (AFGE), the Equal COLA Act is

specifically designed to eliminate this
disparity, ensuring that FERS annuitants

receive the same adjustment as CSRS
retirees when inflation exceeds 2 percent.

The legislative push following the October
24, 2025, announcement provides concrete

evidence of the financial detriment caused
by the current formula, thereby maximizing

the political urgency for the bill.

Ongoing Implementation of the
Social Security Fairness Act

In other news relevant to federal
annuitants, the Social Security

Administration provided implicit
confirmation this week that implementation

efforts continue for the Social
Security Fairness Act, which was

signed into law on January 5, 2025.

This landmark legislation ended the
Windfall Elimination Provision (WEP)

and the Government Pension Offset
(GPO), two policies that historically

reduced or eliminated Social Security
benefits for individuals who received

a non-covered pension, such as many
former federal employees under the CSRS.

SSA confirmed that it began adjusting
monthly benefit payments for individuals

affected by WEP and GPO starting in
February 2025 and is continuing the

process of delivering additional
accrued benefits resulting from the Act.

While the law benefits many former
public workers, SSA emphasizes that

only individuals receiving a pension
based on work not covered by Social

Security—which includes certain CSRS
federal retirees—will see benefit

increases due to this repeal.

Issues That Affect Current Federal Workers

The Shutdown Gridlock: Failure
of Emergency Pay Legislation

The ongoing government shutdown
since October 1, 2025 , remains

the most immediate threat to
the active federal workforce.

On Wednesday, October 23, 2025,
the Senate attempted to pass three

competing bills aimed at ensuring
federal employees and contractors would

be paid during the funding lapse, but
all three efforts failed to advance.

The failure highlighted the
political gridlock over defining

who constitutes an essential
recipient of pay during a shutdown:

1.

The Shutdown Fairness Act (S.

3012)

Introduced by Senator Ron Johnson
(R-WI), this bill proposed to pay only

the "excepted" federal employees—those
mandated to report to work during the

shutdown—along with specific contractors
and active duty military members.

Crucially, S.

3012 explicitly excluded furloughed
employees from immediate payment.

The bill failed to pass the
Senate by a vote of 54-45.

Its rejection stemmed from legislative
concerns that the bill would grant

the President undue authority
to selectively determine which

employees receive compensation,
disregarding the financial hardship

faced by the furloughed workforce.

2.

The True Shutdown Fairness Act (S.

3039)

Senator Chris Van Hollen
(D-MD) introduced S.

3039, a comprehensive measure that
sought to pay all federal employees—both

those working ("excepted") and those
placed on furlough—in addition to

servicemembers and federal contractors.

This bill also contained specific
provisions designed to prevent the

administration from attempting mass
firings, or Reduction in Force (RIFs),

while the government remained shut down.

This protective language directly
corresponds to legal actions occurring

during this period, including a court
order issued around October 20, 2025,

that halted an administration’s attempt
at mass firings related to shutdown RIFs.

S.

3039 failed when Senator Johnson
objected to a request for Unanimous

Consent (UC), preventing its passage.

3.

The Military and Federal
Employee Protection Act (S.

3043)

A third bill, S.

3043, introduced by Senator Gary
Peters (D-MI), also sought to pay

all employees and military personnel.

However, its pay provisions were limited,
only covering the duration from October

1st up to the date the bill was enacted.

This bill also failed after
Senator Johnson objected to the

UC request, blocking the measure.

The failure of all three proposals on
October 23, 2025, demonstrated that

ensuring basic pay for the federal
workforce remains a legislative

commodity rather than an automatic
obligation during a funding impasse.

Union leaders continue to cite
these failures as evidence that

federal employees are being
improperly used as bargaining

tools in political budget debates.

OPM’s Digital Transformation:
Consolidating 119 Human Capital Systems

On Monday, October 20, 2025, OPM
Director Scott Kupor announced a

massive, multi-year technological
initiative intended to fundamentally

transform the government’s
approach to talent management.

This plan, described by Kupor as a "big
package," aims to solve deep-rooted

administrative inefficiencies that
affect the workforce from the day they

are hired until the day they retire.

The problem, as outlined by OPM, is
the current existence of 119 distinct

core Human Capital Management (HCM)
systems across the federal government.

These systems do not integrate, leading
to an "inordinate amount of money"

spent by taxpayers and a complete
lack of a single, reliable source of

truth for basic employee information.

Consequently, OPM cannot easily track
metrics such as accurate payroll data

by sub-department, the true count
of positions in an organization,

or managerial span of control.

The fragmentation severely
impacts the retirement process.

OPM currently spends excessive time and
resources coordinating with multiple

agency HR staff to manually assemble
a retiring employee’s complete work

history—often called the "golden file."

This manual process is error-prone,
costly, and directly contributes

to long, frustrating delays for new
annuitants awaiting their benefits.

The solution proposed by OPM
is the development of a single,

pan-government core HCM system.

This consolidation is projected to
drive significant per-user cost savings

and provide the government with full,
real-time visibility into its workforce.

By replacing the duplicative,
outdated technology, OPM aims to

free the approximately 44,000 HR
professionals (who cost about $5.5

billion annually) to focus
on talent development and

performance management, rather than
navigating technological thickets.

The agency immediately launched a process
to invite industry proposals on how to

achieve this government-wide objective.

This shift, while focused on active
employees, holds profound long-term

implications for future retirees
by promising to automate and

accelerate the currently agonizing
retirement processing timeline.

Legislative Debate:
Traditional Pay Raise vs.

Performance-Based Pay

The discussion around compensation
for 2026 for active federal workers is

currently split between a union-backed
push for a standard increase and

a radical legislative proposal to
tie pay entirely to performance.

The FAIR Act and Pay Parity

Federal employee organizations,
including AFGE and NTEU, continue to

advocate for the Federal Adjustment
of Income Rates (FAIR) Act.

This endorsed legislation would
grant federal employees an

average pay adjustment of 4.3

percent in 2026.

The rationale behind this push stems
from evidence suggesting that federal

salaries lag private sector salaries
for similar jobs by an average of

27 percent, a gap that severely
hinders recruitment and retention

efforts across government agencies.

The Federal Employee Performance
and Accountability Act of 2025 (H.R.

201)

In sharp contrast to the
FAIR Act, the House bill H.R.

201 proposes a five-year pilot
program that completely upends the

traditional General Schedule (GS)
compensation model for certain employees.

This program, titled the Federal Employee
Performance and Accountability Act of

2025, mandates participation from 1%
to 10% of eligible employees (GS-11

and above) whose positions feature
clearly measurable performance criteria.

A key provision dictates that participants
in this pilot are made ineligible

for the annual across-the-board
and locality-based pay increases

authorized under current law.

Under the H.R.

201 structure, pay changes are rigidly
tied to the employee's performance

rating from the preceding year:

Significantly Exceeded Performance
Metrics: The employee’s pay must

be increased by up to 10 percent.

Met Performance Metrics: The
employee’s pay may not be increased.

Below Expectations: The employee’s
pay must be reduced by 10 percent.

This proposed legislation introduces
high financial risk, where a successful

employee could rapidly advance, but
an employee rated as simply "Meets

Expectations" would receive zero
inflationary adjustment, and an

underperforming employee would face
a mandatory 10 percent reduction.

The administrative viability of H.R.

201 is implicitly linked to
the success of OPM’s concurrent

HCM consolidation announcement.

For H.R.

201 to succeed, agencies must establish
and track "clearly measurable performance

criteria" and productivity metrics.

Given OPM Director Kupor’s finding
that the government currently operates

119 fragmented systems and lacks a
single source of truth for workforce

data , the effective implementation
of a high-stakes, performance-based

pay system would be nearly impossible
without the simultaneous overhaul

of the underlying IT infrastructure
announced just days earlier.

The proposed legislative reform,
therefore, demands a massive technological

investment simply to be administrable.

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.

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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.