The FED Weekly

Lawrence: Welcome to The FED Weekly for
28 December 2025 to 3 January 2026, 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 final week of 2025 brought a
mix of relief and administrative

complexity regarding holiday time.

To celebrate Christmas, President
Trump issued an Executive Order

excusing federal employees from
duty on Wednesday, 24 December

2025, and Friday, 26 December 2025.

This executive action effectively
created a five-day break for many,

excluding those required for national
security, defense, or other public needs.

However, this gift of time came
with a specific statutory catch

that affected both active workers
with "use or lose" leave and

retirees who might be re-employed.

The Office of Personnel Management,
or OPM, clarified that for

pay and leave purposes, these
days were treated as holidays.

Consequently, if an employee had
previously scheduled "use or lose"

annual leave for 24 December or 26
December, that leave was forfeited.

Under Title 5 of the United States
Code, Section 6304(d), the law does

not permit the restoration of leave
when a holiday prevents its use.

While employees could donate this excess
leave to approved recipients under the

voluntary leave transfer program, the
"use or lose" deadline of 10 January

2026 remained a hard stop for many.

As we transition into January,
the financial reality of

healthcare costs is hitting home.

The 2026 plan year for the
Federal Employees Health Benefits

program, or FEHB, has begun.

The overall average premium
increase for the program is 10.2

percent.

However, the impact on your
wallet is even more significant.

The average employee and retiree
share of the premium has risen by 12.3

percent.

This follows a 13.5

percent increase in 2025, marking two
consecutive years of double-digit hikes.

For those enrolled in the Postal Service
Health Benefits program, or PSHB, the pain

is slightly less but still acute, with an
average enrollee share increase of 11.3

percent.

These increases are driven by higher
utilization rates and medical inflation.

For example, self-only enrollees in
certain high-option plans, such as the

Aetna Open Access High Option in Northern
New Jersey, are seeing premiums so

high that the government’s contribution
covers only 27 percent of the total cost.

This is a stark reminder to
check your annuity statements and

pay stubs carefully this month.

Turning to Capitol Hill, the
legislative machinery is grinding

back into motion with high
stakes for the federal community.

The government is currently operating
under a Continuing Resolution, or CR, that

was signed into law on 12 November 2025.

This funding measure
expires on 30 January 2026.

The urgency of this deadline
cannot be overstated.

Congress has only a few weeks to
pass the remaining nine annual

appropriations bills for fiscal year 2026.

The previous lapse in appropriations,
which began on 1 October 2025, resulted

in a record-breaking 43-day shutdown.

With the House of Representatives
reconvening on 3 January 2026 and the

Senate on 5 January 2026, the threat
of another shutdown looms large.

There are specific legislative
items you need to be aware of.

Public Law 119-21, known as the
reconciliation bill enacted in

July 2025, continues to drive
changes across federal agencies.

Specifically, this law prohibits the
Department of Agriculture from increasing

the cost of the Thrifty Food Plan
based on a reevaluation of the market

basket of goods, tying adjustments
strictly to the Consumer Price Index.

This legislative constraint is altering
the workload and regulatory focus for

employees at the USDA and has downstream
effects on benefits administration.

Furthermore, the "Department of
Government Efficiency," or DOGE,

established by Executive Order, continues
to influence legislative priorities.

While not a bill itself, its
recommendations are fueling the

appropriations debates, with proposals
for deep cuts to foreign aid and

agency restructuring that will likely
feature prominently in the negotiations

leading up to the 30 January deadline.

Finally, for this section, we must
note the operating status of the

government as we closed out the week.

Despite the holiday closures, essential
operations continued, and the OPM

status for the Washington, D.C.

area returned to "Open" with normal
operating procedures by 4 January 2026.

As we move into the heart of winter, OPM
has reminded all employees and retirees

that "unscheduled telework" and other
flexibilities remain vital tools during

severe weather, a policy that interacts
complexly with the new return-to-office

mandates we will discuss later.

Issues That Affect Retired Federal Workers

For our retiree listeners, the most
significant news of the week concerns your

annuity payments and the Cost-of-Living
Adjustment, or COLA, for 2026.

The 2026 COLA has been
finalized and is effective for

payments dated 2 January 2026.

For retirees under the Civil
Service Retirement System, or

CSRS, and for Social Security
beneficiaries, the adjustment is 2.8

percent.

This reflects the increase in the
Consumer Price Index for Urban Wage

Earners and Clerical Workers, or
CPI-W, from the third quarter of

2024 to the third quarter of 2025.

However, for those retired under
the Federal Employees Retirement

System, or FERS, the adjustment is 2.0

percent.

This discrepancy arises from the
statutory formula governing FERS COLAs.

When the CPI-W increase falls between 2.0

percent and 3.0

percent, FERS retirees receive a flat 2.0

percent.

This "diet COLA" means that FERS
retirees are effectively losing 0.8

percent in purchasing power
relative to inflation this year.

We must also address a technical
issue that arose this week.

NARFE has reported that some
federal annuitants received annuity

statements dated 1 December 2025
that contained errors regarding

the January 2026 COLA amounts.

If your statement shows a COLA
that does not align with the 2.8

percent or 2.0

percent figures we just
discussed, do not be alarmed.

This appears to be a reporting
error on the statement itself,

and the actual electronic payments
processed by the Treasury should

reflect the correct amounts.

If you do notice a discrepancy in
your actual bank deposit, NARFE

advises contacting OPM immediately,
though be prepared for wait times

given current staffing levels.

On the legislative front, there is
activity regarding Social Security that

is relevant to many federal retirees,
particularly those with "mixed" service.

Between 28 December 2025 and
3 January 2026, the House of

Representatives advanced several
bills aimed at improving the Social

Security Administration's services.

These bills focus on enhancing protections
for identity theft victims and improving

processes for replacing lost or stolen
Social Security cards for children.

While these are not the sweeping
repeals of the Windfall Elimination

Provision or the Government Pension
Offset that many are hoping for,

they represent a bipartisan effort
to fix the administrative plumbing

of the Social Security system.

Additionally, for those managing their
healthcare costs, it is important to

note the changes to Medicare Part D.

With the new plan year, the cap
on out-of-pocket prescription

drug costs is in full effect.

For retirees who have paired their
FEHB coverage with Medicare Part

D, this provides a significant
safeguard against high drug prices.

NARFE has highlighted that recent
improvements have made Medicare Part

D a more viable option for federal
annuitants, potentially offering savings

over standard FEHB drug coverage alone.

We also want to highlight a
reminder regarding the "Windfall

Elimination Provision."

A law passed late in 2024 repealed
this provision for many, and 2026 marks

a full year of its implementation.

This means that for eligible retirees,
your Social Security benefits

based on private sector work are
no longer reduced simply because

you receive a federal pension.

This is a massive victory that
continues to pay dividends in

your monthly checks this year.

Finally, for those who retired in
the calendar year 2025, remember

that your COLA for 2026 is prorated.

You will not receive the full 2.8

percent or 2.0

percent.

Instead, you will receive one-twelfth
of the applicable increase for each

month you were on the retirement
rolls before 1 December 2025.

If you retired late in the year, your
increase will be minimal, but you will

be eligible for the full COLA in 2027.

Issues That Affect Current Federal Workers

If you are currently on the
payroll, you are navigating one

of the most turbulent periods in
the history of the civil service.

The news from 28 December 2025 to
3 January 2026 has brought clarity

on pay, but considerable anxiety
regarding telework and job security.

First, the paycheck.

The 2026 pay raise is official.

On 18 December 2025, President
Trump signed the Executive Order

finalizing the pay schedules.

For the vast majority of the General
Schedule workforce, the raise is a 1.0

percent across-the-board
increase to base pay.

Crucially, locality pay percentages
have been frozen at 2025 levels.

This means the "locality adjustment" on
your pay stub will not change, resulting

in a net average increase of just 1.0

percent.

This is significantly lower than the
increases seen in 2024 and 2025 and

effectively represents a decline in
real wages when adjusted for inflation.

However, there is a major
exception for law enforcement.

On 31 December 2025, OPM Director Scott
Kupor issued a memorandum approving

special salary rates for certain federal
civilian law enforcement personnel.

This directive, stemming from the
President's Executive Order, provides an

additional increase of approximately 2.8

percent for eligible officers, bringing
their total raise to roughly 3.8

percent.

This applies to specific job series
in agencies like Customs and Border

Protection and is intended to align
civilian law enforcement pay with

the 2026 military pay increase.

OPM has posted these new
special rate tables, L001

through L133, on their website.

The most explosive news of the
week, however, concerns telework.

On Wednesday, 31 December 2025, OPM
issued a new "Guide to Telework and

Remote Work in the Federal Government".

This guidance serves as the implementation
blueprint for the President's memorandum

titled "Return to In-Person Work".

The guidance is blunt: agencies are
instructed to "take all necessary steps

to terminate remote work arrangements"
and require employees to return to their

duty stations on a full-time basis.

The guidance specifies that
telework cannot be used to "avoid

working full-time, in-person
from an agency worksite on a

regular and recurring basis".

While there are limited exceptions
for military spouses, reasonable

accommodations, and compelling
agency needs, the era of widespread

remote work appears to be ending.

Union reaction has been swift and fierce.

AFGE National President Everett
Kelley issued a statement condemning

the directive, arguing that it
"turns back the clock to before

2010" and ignores the operational
efficiencies gained through telework.

AFGE has also flagged that legislation
introduced by Representative James

Comer, such as the "Stopping Home Office
Work’s Unproductive Problems Act,"

creates a legislative pincer movement
alongside the executive crackdown.

The NTEU has vowed to fight these
changes by enforcing existing collective

bargaining agreements, arguing
that contracts signed before the

executive action should remain valid.

The workforce itself is also shrinking.

The "Department of Government Efficiency,"
led by Elon Musk, is driving a

campaign of mass buyouts and layoffs.

We are seeing the fallout of the
"Deferred Resignation Program,"

with reports indicating that over
150,000 employees have taken buyouts.

The Department of Education has been
particularly hard hit, with a 50 percent

workforce reduction plan in motion.

In response, the American Federation of
Teachers filed a lawsuit on 29 December

2025, challenging the Department of
Education's termination of grants

for community schools, alleging
the cuts were made "on a whim" and

violated administrative procedures.

At the Department of Veterans
Affairs, a massive reorganization of

the Veterans Health Administration
was announced this week.

While the VA claims this is not a
reduction in force, senators have raised

alarms about the elimination of up to
35,000 vacant healthcare positions,

fearing it will degrade care for veterans.

Finally, we must discuss
your retirement savings.

The Thrift Savings Plan, or TSP,
contribution limits have changed for 2026.

The elective deferral limit has
increased to 24,500 dollars.

The standard catch-up contribution
limit for those turning 50 or

older is now 8,000 dollars.

Additionally, a new "super catch-up"
tier created by the SECURE 2.0

Act allows participants aged 60, 61,
62, or 63 to contribute up to 11,250

dollars in catch-up contributions.

But there is a critical new rule:
the mandatory Roth catch-up.

Starting 1 January 2026, if your FICA
wages in 2025 were greater than 150,000

dollars, you must make your catch-up
contributions as Roth contributions.

You are no longer permitted to make
pre-tax catch-up contributions if

you exceed this income threshold.

This is a major change that will
increase your taxable income for 2026.

Payroll providers are currently
implementing this check, but you

should review your Leave and Earnings
Statement carefully to ensure your

contributions are not rejected.

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.