The FED Weekly

Lawrence: Welcome to The FED Weekly
for 7-13 December 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 Conclusion of Open Season and
the 2026 Healthcare Cost Reality

As of Monday, December 8, 2025, the
annual Federal Benefits Open Season

officially concluded, locking in
health, dental, and vision coverage

choices for the upcoming plan year.

For the vast majority of the federal
community, the close of this window

marks the beginning of a significantly
more expensive fiscal year.

The Office of Personnel Management
has confirmed that the enrollee share

of premiums for the Federal Employees
Health Benefits (FEHB) program

will increase by an average of 12.3

percent in 2026.

This figure is not merely a
statistical fluctuation but represents

a compounding economic pressure;
coming on the heels of a 13.5

percent increase in 2025, federal
employees and retirees have now absorbed

a cumulative premium hike exceeding 25
percent over a twenty-four-month period.

The drivers of this cost escalation
are multifaceted and affect both

current employees and retirees equally.

The Office of Personnel Management
attributes the sharp rise to the aging

demographic of the covered population,
which now averages sixty years of

age when annuitants are included,
alongside surging costs for medical

services and prescription drugs.

A primary inflationary factor
identified in 2025 has been the

explosion in utilization of GLP-1
medications prescribed for weight

loss and diabetes management.

While these drugs offer significant health
benefits, their high cost has forced

carriers to restructure benefit designs.

For example, in 2026, Kaiser Permanente
plans will increase the member cost

share for these specific medications
to 50 percent, a move indicative of a

broader trend among carriers to shift
the financial burden of high-cost

pharmaceuticals onto the enrollee.

Beyond the premium increases, the 2026
plan year introduces structural changes

to benefits that will affect out-of-pocket
exposure for all beneficiaries.

An analysis of the plan documents reveals
that twenty-nine of the one hundred and

thirty-two available FEHB plans have
increased their catastrophic limits—the

maximum amount an enrollee must pay before
the plan covers 100 percent of costs.

A notable example is the GEHA
Standard Option, a popular plan among

both active workers and retirees.

For 2026, GEHA has raised its
out-of-network catastrophic limit by

135 percent, moving the cap from eight
thousand five hundred dollars to twenty

thousand dollars for self-only coverage.

Similarly, the Blue Cross Blue Shield
Basic Option, one of the most widely

held plans in the federal system, will
implement increased copayments for

emergency room visits, inpatient hospital
admissions, and outpatient services.

These changes effectively erode the
value of the coverage while the cost to

maintain it rises, creating a scenario
where federal workers and retirees

are paying significantly more for
theoretically less financial protection.

The Open Season period also
witnessed significant market exits

that caused disruption for specific
subsets of the federal population.

HealthPartners Dental announced its
withdrawal from the Federal Employees

Dental and Vision Insurance Program
(FEDVIP) for the 2026 plan year.

This exit necessitated active
engagement from enrollees who, if

they failed to select a new carrier
by the December 8, 2025, deadline,

would find themselves without dental
coverage effective January 1, 2026.

This churning of carriers
underscores the volatility of the

current insurance market, where
regional availability and provider

networks are increasingly unstable.

The narrative of "sticker shock" for 2026
is further complicated by the divergence

between the premium increases and the
cost-of-living adjustments (COLAs) or

pay raises slated for the same period.

With premiums rising 12.3

percent, the absorption of this cost
will essentially negate the modest

income adjustments for many retirees and
active employees, a dynamic that NARFE

National President William Shackelford
described as a continued trend of

steep rates that forces enrollees to
make difficult financial trade-offs.

As the federal community moves into the
new year, the "net" financial position

of the average household is likely to
be static or negative once healthcare

deductions are processed in January.

The Fiscal Cliff: Continuing
Resolution Extended to March 2026

While healthcare costs present a
long-term economic challenge, the

immediate operational stability of the
federal government remained in flux

throughout the week of December 7, 2025.

Following the cessation of the
forty-three-day government shutdown

on November 12, 2025, federal agencies
have been operating under a temporary

Continuing Resolution (CR) scheduled
to expire for various agencies

beginning in late December and January.

However, legislative maneuvering during
this reporting period has fundamentally

altered the timeline for the fiscal
year 2026 appropriations process.

Congressional leadership, facing the
dual pressures of a holiday recess

and deep ideological divisions over
spending levels, unveiled a new

short-term spending deal this week.

This legislation, a second
Continuing Resolution (H.R.

10545), extends federal funding at fiscal
year 2025 levels through March 14, 2026.

The bill passed the House of
Representatives by a vote of 366 to 34

and the Senate by a vote of 85 to 11,
narrowly averting a shutdown threat that

would have triggered on December 20, 2025.

The passage of this extension to March 14,
2026, has profound implications for the

operational capacity of federal agencies.

By relying on a Continuing Resolution
for nearly half of the fiscal year,

Congress has effectively imposed a
"shadow freeze" on government operations.

Under a CR, agencies are generally
prohibited from initiating new

programs, awarding new multi-year
contracts, or increasing hiring

above previously authorized levels.

They are restricted to the funding
rates and conditions of the previous

fiscal year, regardless of new statutory
mandates or shifting priorities.

For active employees, this translates to
continued uncertainty regarding resources,

travel budgets, and staffing support.

For retirees, while annuity payments are
protected from lapses in appropriations,

the administrative functions that support
them—such as the processing of retirement

applications or complex benefits
changes by OPM—remain vulnerable to the

resource constraints imposed by the CR.

The new spending deal does
include specific anomalies, or

"anomalies," to address urgent
needs that cannot wait until March.

Notably, the CR includes over one
hundred billion dollars in supplemental

funding for critical federal disaster
programs, specifically allocating

twenty-nine billion dollars to
the Federal Emergency Management

Agency (FEMA) Disaster Relief Fund.

This injection of capital is critical
for FEMA, which has been operating

under severe strain following a series
of natural disasters and the abrupt

cancellation of its review council’s
scheduled vote on the agency’s future

recommendations earlier in the week.

The deal also provides a year-long
extension of the 2018 Farm Bill through

September 30, 2025, ensuring continuity
for agricultural programs that employ

thousands of federal workers in the USDA.

However, the "clean" nature of the
CR—meaning it largely lacks controversial

policy riders—masks the intense partisan
conflict occurring beneath the surface.

The initial proposal for the CR had
included provisions for workforce and

reentry services that were priorities
for county governments and social

service agencies, but these were rejected
by the House in the final version.

Furthermore, the extension does
not resolve the looming expiration

of the enhanced Affordable Care
Act subsidies, which are set

to expire on December 31, 2025.

Senate leaders have indicated a separate
vote may occur in December to address

these subsidies, but as of December
13, no such legislation has passed.

The failure to extend these subsidies
would likely result in increased workload

for federal employees at the Centers
for Medicare and Medicaid Services

(CMS) and the IRS, who would be tasked
with managing the fallout of increased

premiums for millions of Americans.

The persistence of the shutdown
threat, even deferred to March,

continues to affect workforce morale.

The Office of Management and Budget
(OMB) recently issued a memo arguing

that the administration is not
legally required to provide backpay

to federal employees furloughed
during a lapse in appropriations,

despite the language of the Government
Employee Fair Treatment Act of 2019.

This interpretation has drawn sharp
rebuke from employee advocacy groups like

NARFE, who argue the law clearly mandates
that furloughed employees be made whole.

This legal ambiguity adds a layer
of anxiety to the workforce, who

now must wait until spring to know
if their agencies will be fully

funded for the remainder of 2026.

Administrative and Regulatory Shifts

Beyond the budget, the week of
December 7, 2025, saw significant

administrative actions that will
reshape the regulatory environment

in which federal employees operate.

On December 11, 2025, President Trump
signed an Executive Order titled

"Eliminating State Law Obstruction of
National Artificial Intelligence Policy".

This directive mandates the establishment
of a uniform federal policy framework

for artificial intelligence that
preempts conflicting state laws.

For federal employees in regulatory
agencies such as the Federal Trade

Commission, the Department of
Commerce, and the Office of Science

and Technology Policy, this Executive
Order represents a massive expansion

of federal authority and workload.

Staff will be required to draft
new legislative recommendations and

regulatory guidance that overrides
the growing patchwork of state-level

AI safety and transparency laws.

The order specifically instructs the
Special Advisor for AI and Crypto

and the Assistant to the President
for Science and Technology to jointly

prepare these recommendations.

This centralization of AI governance in
the federal executive branch elevates the

strategic importance of federal technology
roles but also places federal workers at

the center of a contentious debate over
federalism and technology regulation.

Additionally, the regulatory
landscape for workplace compliance

is shifting as winter approaches.

Legal experts have advised employers,
including federal agencies, to prepare

for a surge in regulatory action now
that the government has reopened and

funding is stabilized through March.

Agencies are expected to ramp up
oversight activities that were stalled

during the 43-day shutdown, potentially
leading to increased field work for

inspectors and compliance officers
in the Department of Labor and the

Environmental Protection Agency.

This return to "normal operations"
comes with the added pressure

of clearing backlogs accumulated
during the funding lapse.

Issues That Affect Retired Federal Workers

For the millions of retired federal
employees and their survivors, the

week of December 7, 2025, brought
the final crystallization of their

financial outlook for the coming year.

The news is dominated by the finalized
Cost-of-Living Adjustment (COLA) for

2026, which, when analyzed against the
backdrop of inflation and healthcare

costs, paints a picture of diminishing
purchasing power for a significant

portion of the retiree population.

This section details the specifics
of the 2026 income adjustments, the

legislative efforts to address inequities
in the system, and the broader financial

implications for the retired community.

The "Net" Income Analysis: COLA vs.

Healthcare

The true financial picture for 2026
only emerges when the COLA is weighed

against the simultaneous increase
in non-discretionary expenses, most

notably health insurance premiums.

As detailed previously, the
enrollee share of FEHB premiums

is rising by an average of 12.3

percent in 2026.

Because these premiums are typically
deducted directly from federal annuities

before the funds are deposited, the
"net" increase in a retiree's monthly

payment will be significantly lower
than the headline COLA figure suggests.

For many retirees, particularly those
with modest annuities or those enrolled

in more expensive health plans, the 12.3

percent premium hike will
consume the entirety of the 2.0

percent (or even 2.8

percent) COLA.

In some scenarios, retirees may see a
net reduction in their monthly deposit in

January 2026 compared to December 2025.

This phenomenon effectively freezes
the purchasing power of the federal

annuity, leaving the retiree to
cover other inflationary costs—such

as food, utilities, and property
taxes—with fewer real dollars.

Furthermore, while not explicitly
detailed in every snippet, the

interaction with Medicare Part
B premiums must be considered.

Historically, Part B premiums rise
in tandem with healthcare costs.

If the Part B premium increase
for 2026 follows the trend of FEHB

increases, the combined deduction load
will place extreme pressure on the

fixed incomes of federal annuitants.

Taxation Changes for 2026

Amidst the challenging news regarding
COLAs and insurance costs, there

is a potential bright spot in
the federal tax code for 2026.

Reports indicate that an enhanced
tax deduction for seniors aged

sixty-five and older will take
effect in the 2026 tax year.

This legislative change is intended
to reduce the amount of income subject

to federal tax for older Americans.

Although this deduction does not apply
exclusively to federal annuities, it will

impact the taxation of income derived from
them, as well as Social Security benefits.

Legislative Advocacy and Future Outlook

Issues That Affect Current Federal Workers

The 2026 Pay Raise: 1.0

Percent and the LEO Exception

The most immediate concern for the
active workforce is the compensation

adjustment scheduled for January 2026.

During this reporting period, the contours
of the raise were effectively finalized,

revealing a significant divergence from
the adjustments seen in recent years.

President Trump’s "Alternative
Pay Plan," submitted to Congress

in August 2025, proposed a 1.0

percent across-the-board base pay increase
for most federal civilian employees,

with zero increase to locality pay rates.

Under the Federal Employees Pay
Comparability Act (FEPCA) of 1990, the

President has the authority to submit
an alternative plan if he deems the

statutory formula (which would have called
for a much higher raise, approximately

22 percent in total) to be economically
unfeasible due to "national emergency

or serious economic conditions".

As of December 13, 2025, Congress has
taken no action to override this plan.

The Senate Appropriations Committee’s
draft of the Financial Services and

General Government appropriations bill—the
vehicle typically used to mandate a

pay raise—was silent on the issue.

In the absence of legislative language
mandating a higher figure (such as the 4.3

percent endorsed by the FAIR
Act and unions like AFGE and

NTEU), the President’s 1.0

percent plan will take effect
by default on the first full

pay period of January 2026.

This 1.0

percent raise is the smallest increase
for the federal workforce since 2021.

When adjusted for the 2.8

percent inflation rate
indicated by the 2026 COLA, this

represents a real wage cut of 1.8

percent for the average federal employee.

The freeze on locality pay is
particularly damaging for employees in

high-cost areas such as San Francisco,
New York, and Washington, D.C.,

where the gap between federal and
private sector pay exceeds 30 percent.

However, a significant exception
to this austerity has been carved

out for federal law enforcement.

The President has directed the Office
of Personnel Management (OPM) to

utilize its "Special Salary Rate"
authority to provide an additional 2.8

percent increase for "certain
law enforcement officials".

This additional adjustment
brings the total raise for

these specific employees to 3.8

percent, creating parity with the 3.8

percent pay increase authorized
for the military in the NDAA.

OPM is currently in consultation
with agencies to determine the

exact coverage of this special rate.

It is expected to apply to front-line
personnel in agencies such as

Customs and Border Protection (Border
Patrol), Immigration and Customs

Enforcement (ICE), and potentially
the Federal Bureau of Prisons.

This creates a two-tiered
compensation system for 2026: a 3.8

percent raise for those in
security roles, and a 1.0

percent raise for the
remainder of the civil service.

The National Treasury Employees Union
(NTEU) has condemned this disparity

as "inadequate" and "meager," arguing
that all federal employees deserve

the same economic consideration as
the military and law enforcement.

Thrift Savings Plan (TSP) Limits for 2026

While base pay stagnates, the capacity
for federal employees to save for

their own retirement has expanded.

The Internal Revenue Service and the
Federal Retirement Thrift Investment

Board announced the contribution
limits for the Thrift Savings

Plan (TSP) for the 2026 tax year.

The maximum amount an employee can
contribute from their salary increases

from twenty-three thousand five
hundred dollars in 2025 to twenty-four

thousand five hundred dollars in 2026.

For employees turning fifty or older
in 2026, the catch-up limit increases

from seven thousand five hundred
dollars to eight thousand dollars.

This allows older workers to contribute
a total of thirty-two thousand

five hundred dollars to their TSP.

A new provision under the SECURE 2.0

Act maintains a higher "Super Catch-Up"
limit of eleven thousand two hundred

and fifty dollars specifically
for participants aged sixty,

sixty-one, sixty-two, or sixty-three.

A critical change taking effect in
2026 involves the "Roth Catch-Up Rule."

Under SECURE 2.0,

if a participant’s wages (specifically,
Medicare wages) exceeded one hundred and

fifty thousand dollars in the preceding
year (2025), any catch-up contributions

made in 2026 must be designated
as Roth (after-tax) contributions.

They cannot be made to the
traditional tax-deferred balance.

This mandatory change requires
high-earning federal employees to

adjust their tax planning, as they
will no longer receive an immediate

tax deduction on these catch-up funds.

The Battle for Labor Rights: H.R.

2550 vs.

The NDAA

The most volatile developments of
the week concerned the fundamental

rights of federal workers to
organize and bargain collectively.

This battle was fought across two
major pieces of legislation: the

Protect America's Workforce Act (H.R.

2550) and the National
Defense Authorization Act

(NDAA) for Fiscal Year 2026.

H.R.

2550 On Thursday, December 11, 2025,
the House of Representatives passed H.R.

2550 by a vote of 231 to 195.

The bill was designed to nullify President
Trump’s March 27, 2025, Executive

Order titled "Exclusions from Federal
Labor-Management Relations Programs".

This Executive Order had used statutory
authority to strip collective bargaining

rights from approximately one million
federal workers in agencies with

national security missions, including
the Department of Defense and the VA.

The passage of H.R.

2550 was achieved through a "discharge
petition," a rare procedural maneuver

that allows a majority of House members
(218) to force a bill to the floor

over the objection of the Speaker.

The success of this petition, which
garnered support from all Democrats

and twenty Republicans, represents
a significant bipartisan rebuke of

the administration’s labor policies.

Proponents, including Rep.

Jared Golden (D-ME) and Rep.

Brian Fitzpatrick (R-PA), argued
that the Executive Order was a

pretext for union-busting and that
collective bargaining enhances, rather

than diminishes, national security.

However, the victory on H.R.

2550 was immediately tempered by a
simultaneous defeat in the must-pass NDAA.

Previously, the House version of the
NDAA included Section 1110, known

as the "Norcross Amendment," which
would have prohibited the Department

of Defense from using any funds to
implement the anti-union Executive Order.

This provision was seen as the most
effective shield for defense workers

because the NDAA is essential legislation
that the President is unlikely to

veto solely over a labor provision.

During the conference negotiations between
the House and Senate held the week of

December 7, Senate Republicans insisted
on the removal of the Norcross Amendment.

Reports indicate they feared a
confrontation with President Trump,

who had threatened to veto the
entire defense bill if it restricted

his authority over the workforce.

Despite a letter from sixteen House
Republicans urging the Senate to keep

the provision, the final compromise
version of the NDAA emerged on December

10, 2025, with Section 1110 stripped out.

The final NDAA passed the House on
December 10 by a vote of 312 to 112.

The removal of the labor protections drew
sharp condemnation from major unions.

The American Federation of Government
Employees (AFGE) and the International

Federation of Professional and Technical
Engineers (IFPTE) expressed profound

disappointment, noting that while H.R.

2550 passed, it faces a likely
filibuster in the Senate, whereas the

NDAA provision would have been law.

Consequently, despite the
symbolic victory of H.R.

2550, the legal reality for Department
of Defense civilians remains

precarious, with no legislative
barrier preventing the implementation

of the Executive Order in 2026.

Retroactive Pay for Wage Grade Employees

Finally, a specific positive
development occurred for Federal

Wage System (Wage Grade) employees.

After months of delays, the Department
of Defense Wage Committee acted this week

to process retroactive pay raises for
approximately one hundred and eighteen

thousand blue-collar federal employees.

These adjustments, which had been
stalled due to administrative

backlogs and the previous government
shutdown, will be retroactive

to the effective dates in 2024.

Employees can expect to see
these adjustments, along with the

lump-sum backpay, reflected in their
paychecks as early as January 2026.

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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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.