The FED Weekly

The FED Weekly 22-28 Mar 2026 (Episode 43)
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[00:00:00] Weekly Briefing Intro
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Welcome to The FED Weekly for 22-28 March 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.

[00:00:44]  Issues That Affect Current and Retired Federal Workers
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Issues That Affect Current and Retired Federal Workers

The most pressing issue bridging the gap between active and retired federal personnel during this research period was the ongoing Department of Homeland Security (DHS) shutdown and the [00:01:00] subsequent legislative efforts to mitigate its financial impact. The shutdown, which began following a lapse in appropriations on 1 October 2025, reached a critical juncture in late March 2026 as lawmakers remained deadlocked over funding for border security and immigration enforcement.

[00:01:19] Senate Deal House Roadblock
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The Fiscal Standoff and DHS Funding Negotiations

By 27 March 2026, the United States Senate reached a tentative bipartisan agreement to fund the vast majority of the Department of Homeland Security through September 2026. This deal was intended to provide a path toward ending the operational uncertainty that has plagued agencies such as the Transportation Security Administration (TSA), the Federal Emergency Management Agency (FEMA), and the Cybersecurity and Infrastructure Security Agency (CISA).

However, the agreement faced immediate obstacles in the House of Representatives, where leadership expressed dissatisfaction [00:02:00] with the funding levels allocated for the U.S. Border Patrol and Immigration and Customs Enforcement (ICE). The implications of this stalemate are far-reaching. For current employees, the lack of funding has meant working without a full paycheck for over forty days, leading to significant financial hardship and a reported decline in morale.

For retired federal workers, particularly those whose benefits are administered through agencies currently under fiscal strain, the instability of the federal budget continues to raise concerns about the long-term solvency and administrative efficiency of benefit programs.

[00:02:40] Shutdown Pay Fixes
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Legislative Remedies for Government Shutdowns

During the week of 22 March 2026, several legislative vehicles were analyzed by policymakers and employee advocacy groups as potential solutions to the recurring problem of "excepted" employees working without pay. The debate centered on whether to [00:03:00] provide targeted relief to specific sectors or a broad guarantee of pay for the entire workforce.

Key legislative proposals include:

S. 3012, the Shutdown Fairness Act: This bill provides appropriations for federal agencies to provide standard rates of pay, benefits, and allowances to "excepted" employees and certain contractors during a lapse. While it was reconsidered in the Senate on 7 November 2025, it remained a central reference point for 2026 negotiations.

S. 3165, the True Shutdown Fairness Act: A more comprehensive measure, this act appropriates funds for pay and allowances of all federal employees, active-duty military, and contractors, while also prohibiting Reductions in Force (RIFs) during the shutdown period. It is currently viewed as a robust alternative to narrower pay bills.

S. 3043, the Military and Federal Employee Protection Act: Currently in [00:04:00] committee with over forty cosponsors as of late March 2026, this bill ensures that federal employees and members of the armed forces receive their pay during any federal government shutdown occurring in the covered period.

S. 3011, the Keep America Flying Act: This bill specifically targets pay for air traffic controllers, operational FAA employees, and TSA security personnel during a lapse in appropriations, introduced as a contingency for critical transportation infrastructure.

The analysis of these bills reveals a fundamental philosophical divide in Congress. Supporters of the "True Shutdown Fairness Act" (S. 3165) argue that a comprehensive approach is necessary to prevent the demoralization of the entire workforce and to ensure that essential services are not compromised by the financial instability of individual employees. Conversely, proponents of more targeted measures, such as the "Keep America Flying Act" [00:05:00] (S. 3011), suggest that focusing on the most critical "front-line" roles is the most fiscally responsible and politically viable path forward in a divided legislature.

[00:05:11] Social Security Fairness Update
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Implementation of the Social Security Fairness Act

For both current employees planning for retirement and those already in their post-service years, the continued implementation of the Social Security Fairness Act remained a primary focus. Signed into law on 5 January 2025, this landmark legislation effectively repealed the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), two provisions that had reduced Social Security benefits for millions of public servants for decades.

The Social Security Administration (SSA) provided significant updates during the week of 22 March 2026, noting that the processing of retroactive payments—dating back to January 2024—was nearing completion for a majority [00:06:00] of eligible beneficiaries. The SSA reported that the average retroactive payment was approximately $6,710. Furthermore, the agency confirmed that many beneficiaries would see their higher monthly benefit amounts reflected in their April 2026 payments, which cover the month of March.

Despite this progress, advocacy groups like the National Active and Retired Federal Employees Association (NARFE) and the American Federation of State, County and Municipal Employees (AFSCME) warned of a "retroactivity problem" for complex cases that require manual processing. The SSA has urged beneficiaries to wait until after their April 2026 payment is received before contacting the agency with inquiries regarding missing funds.

[00:06:48]  Issues That Affect Retired Federal Workers
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Issues That Affect Retired Federal Workers

Tax Liability and Public Benefit Impacts of Lump-Sum Payments

The issuance of significant lump-sum retroactive payments [00:07:00] from the Social Security Administration has created an unintended financial complication for many retirees as the 15 April 2026 tax deadline approaches. Because the Internal Revenue Service (IRS) generally taxes Social Security benefits in the year they are received, the lump-sum payments covering benefits from 2024 and 2025 are considered taxable income for the 2025 or 2026 tax years, depending on the exact date of receipt.

Based on Congressional Budget Office and SSA data as of March 2026, the estimated financial impact on various beneficiaries is substantial. For example, a WEP-impacted retiree can expect an average monthly increase of $360 (approximately $4,320 annually) and an average retroactive lump sum of $6,710. GPO-impacted spouses are projected to see an average monthly increase of $700 (approximately [00:08:00] $8,400 annually) with variable retroactive payments. GPO-impacted survivors may see an average monthly increase of $1,190 (approximately $14,280 annually), also with variable retroactive amounts.

This influx of cash can push retirees into higher tax brackets and may also impact their Medicare Part B and Part D premiums, which are income-adjusted. Furthermore, legal experts have raised concerns about the impact of these payments on state-administered benefits like Medicaid (MassHealth). While federal regulations suggest that Social Security lump sums should not be counted as an asset for at least nine months, the permanent increase in monthly income may disqualify some retirees from certain low-income assistance programs.

[00:08:47] OPM Backlog Modernization
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OPM Retirement Processing Backlog and Digital Modernization

The administrative state of federal retirement processing reached a critical level during the research period. As of 7 March [00:09:00] 2026, the backlog of retirement applications at OPM nearly doubled over a four-month period, reaching over 65,200 pending cases. This surge in delayed adjudications has left thousands of new retirees in a state of financial limbo, relying on interim pay while their full annuities are calculated.

On 25 March 2026, OPM Director Scott Kupor testified before the House Appropriations Subcommittee on Financial Services and General Government, addressing these delays. Kupor characterized the existing 50-year-old paper-based system as an "intellectual insult" to the federal workforce and outlined the agency's transition to a digital ecosystem.

Key elements of the OPM modernization effort discussed in late March 2026 include:

Core HCM Implementation: The development of a single human capital management system to replace over 120 disparate systems across the government, aimed at [00:10:00] reducing costs and improving data accuracy.

Online Retirement Application (ORA): A digital platform that OPM claims has already reduced adjudication times by 50 percent for participating employees.

Interim Pay Guarantees: Director Kupor reported that 70 percent of applicants are now placed in interim pay immediately, with nearly all receiving it within seven business days of application completion—a significant increase from the 40 percent rate seen in prior administrations.

Despite these technological advancements, the high volume of applications from an "aging workforce"—where 44 percent of employees are over the age of fifty—continues to strain OPM's resources.

[00:10:43] SSA Overpayment Crackdown
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SSA Overpayment Recovery Policy Shift

In a move that has caused substantial concern among the retiree community, the Social Security Administration announced in March 2026 that it would revert to a policy of 100 percent withholding for [00:11:00] overpayment recoveries. This represents a significant shift from the 10 percent cap implemented in March 2024 to prevent beneficiary hardship. The new policy dictates that if a retiree is found to have received benefits in excess of what they were due—regardless of whether the error was made by the agency or the recipient—the SSA may withhold their entire monthly check until the debt is recovered.

While the policy ostensibly applies to new overpayments discovered as of 27 March 2025, the ambiguity of its implementation has prompted warnings from legal aid organizations. Supplemental Security Income (SSI) recipients remain exempt from this 100 percent withholding, with their recovery rate maintained at 10 percent.

[00:11:49]  Issues That Affect Current Federal Workers
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Issues That Affect Current Federal Workers

[00:11:53]  Reclassification and the Shift to "At-Will" Employment
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Reclassification and the Shift to "At-Will" Employment

On 9 March 2026, the final rule for [00:12:00] "Schedule Policy/Career" (Schedule P/C) officially took effect. This policy, which serves as the formal successor to the "Schedule F" executive order of 2020, allows the administration to reclassify an estimated 50,000 career federal employees in "policy-influencing" or "policy-advocating" roles into a new category within the excepted service. The primary consequence of this reclassification is the removal of statutory due process rights.

Employees assigned to Schedule P/C are exempt from the chapters of the U.S. Code that govern performance and conduct actions, effectively making them "at-will" employees who can be terminated without the right to appeal to the Merit Systems Protection Board (MSPB).

During the week of 22 March 2026, several critical updates emerged regarding Schedule P/C:Conversion Lists: While agencies have submitted lists of positions deemed eligible for conversion to OPM, formal movements [00:13:00] of personnel into the new schedule had not yet begun as of 24 March 2026.

Acknowledgement Forms: The National Treasury Employees Union (NTEU) reported that OPM may require employees to sign a form acknowledging their conversion. The union has advised employees to sign the form while maintaining that their legal rights remain subject to ongoing court challenges.

Litigation Status: A coalition of unions, including AFGE and NTEU, renewed their federal lawsuit against the policy in early March 2026. On 23 March 2026, reports surfaced that the MSPB had issued a ruling in a related case involving immigration judges, which could further restrict the board's jurisdiction over such reclassifications. The administration argues that Schedule P/C is necessary to ensure that senior career officials are accountability for advancing the president's agenda and to remove "underperforming" employees who might [00:14:00] otherwise obstruct policy directives.

[00:14:02] Performance Ratings Overhaul
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Overhaul of Federal Performance Management

Concurrent with the reclassification efforts, OPM proposed a major rule change on 24 February 2026, aimed at correcting what it views as "inflated" performance ratings within the federal workforce. Director Kupor noted in his testimony on 25 March 2026 that 99.7 percent of federal employees currently receive ratings of "at or above expectations," a figure he believes demonstrates a lack of accountability. The proposed rule, which concluded its public comment period on 26 March 2026, includes several transformative provisions:

Elimination of "Level 2" Ratings: The rule would remove the "Level 2" (frequently "minimally successful") rating category, forcing a more binary or simplified rating system.

Forced Distribution of Ratings: The proposal would remove the existing prohibition on "forced" [00:15:00] or standardized distributions of performance-rating levels, potentially allowing agencies to cap the number of "Level 5" or "Outstanding" ratings awarded.

Removal of Grievance Rights: Employees would lose the ability to formally grieve a performance rating, further consolidating managerial authority over appraisals. Agency supervisors would also face a new "supervisory critical element," requiring them to be evaluated on their effectiveness in managing performance and conduct issues among their staff.

[00:15:32] RIF Rules And Layoff Fears
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Streamlining Reductions in Force (RIFs)

In a move that has been described by union leaders as the groundwork for "mass layoffs," OPM proposed new rules on 5 March 2026 to govern Reductions in Force. The new framework would shift the primary factor in retention during a RIF from seniority (years of service) to performance ratings. Under the current system, long-tenured employees often have more protection during a [00:16:00] reorganization.

The proposed changes would allow agencies to retain lower-tenured employees with higher performance ratings while separating senior employees with lower ratings. Critics argue that combined with the new "forced distribution" of ratings, this policy could be used to facilitate politically motivated removals or "arbitrary" terminations.

[00:16:22] FAIR Act Pay Raise Push
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Compensation and the FAIR Act of 2027

While federal employees received a one percent base pay increase in January 2026, the discussion shifted toward 2027 compensation during the research period. On 23 February 2026, Representative James Walkinshaw and Senator Brian Schatz introduced the Federal Adjustment of Income Rates (FAIR) Act (H.R. 7480/S. 3823). The FAIR Act proposes a total average increase of 4.1 percent for 2027, consisting of a 3.1 percent basic pay adjustment and a 1.0 [00:17:00] percent locality pay adjustment.

This stands in contrast to the current 2026 raise, which averaged 1.0 percent (with basic pay at 1.0 percent and locality pay frozen at 0.0 percent), though a 3.8 percent exception was granted for Law Enforcement Officers to match military increases. The FAIR Act aims to close the persistent salary gap between federal and private-sector employees, which the Federal Salary Council reported at 24.72 percent in late 2024 and nearly 27 percent by early 2026. Advocates for the bill argue that federal workers have endured government shutdowns and pay freezes for over a decade and deserve a raise that reflects the cost of living and the competitive labor market.

[00:17:49] TSA Staffing Workarounds
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DHS Staffing and Security Concerns

The ongoing shutdown has led to unique staffing arrangements that became a focal point of debate during the week of 22 March [00:18:00] 2026. On 26 March 2026, it was reported that the head of the TSA had informed Congress that ICE personnel were being utilized to assist airport screeners after receiving only two days of training. These agents are reportedly being used for identification checks and crowd control to alleviate the pressure on TSA officers, many of whom have missed shifts due to the lack of pay.

AFGE President Everett Kelley slammed the decision to deploy ICE personnel, arguing that it compromises aviation security and further degrades the professional standing of TSA officers. These staffing "workarounds" highlight the increasing desperation of agency leadership as the shutdown enters its second month with no clear end in sight.

[00:18:48] Wrap Up And Next Week
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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 [00:19:00] 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.