The FED Weekly

The FED Weekly 3-9 May 2026 (Episode 49)
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[00:00:00] Weekly Briefing Intro
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Welcome to The FED Weekly for 3-9 May 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.

[00:00:43]  Issues That Affect Current and Retired Federal Workers
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Issues That Affect Current and Retired Federal Workers

We begin this week with Public Service Recognition Week, which runs from 3 May 2026 to 9 May 2026. While this period is traditionally a time for the nation to [00:01:00] pause and thank those who keep the country running, this year’s celebration is overshadowed by a growing debate over privacy and the handling of sensitive personnel data. The Office of Personnel Management, or OPM, chose the start of this week, specifically 4 May 2026, to mark the occasion by highlighting its move toward artificial intelligence with the launch of the USA Class tool. This tool is intended to streamline the hiring process, but for many already in the system, the technological focus of the week has shifted toward a much more personal and invasive data initiative.

[00:01:37] OPM Medical Data Firestorm
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Throughout this week there has been an escalating firestorm regarding OPM’s request for unredacted, claims-level medical records for approximately 8 million federal employees, retirees, and their family members. This initiative, which stems from a notice issued to 65 insurance carriers in the Federal Employees Health Benefits (FEHB) and Postal Service Health [00:02:00] Benefits (PSHB) programs, seeks monthly reports that include identifiable health data such as diagnoses, prescription histories, and even clinical notes from doctor visits.

OPM Director Scott Kupor has defended the plan, stating that the data is necessary for "health oversight" to ensure that plans remain competitive and affordable. However, the response from the federal community and its representatives has been swift and deeply critical. On 19 April 2026, a group of 16 Democratic senators, including Adam Schiff and Mark Warner, expressed "grave concern" that the plan lacks a valid statutory basis and violates the Health Insurance Portability and Accountability Act, commonly known as HIPAA.

Advocacy organizations like the National Active and Retired Federal Employees Association, or NARFE, joined the fray during this week, with National President William Shackelford questioning why OPM requires [00:03:00] identifiable data rather than the de-identified, anonymous data that usually suffices for cost-management. The American Federation of Government Employees, or AFGE, through President Everett Kelley, echoed these sentiments, suggesting that the administration's silence on the specific safeguards for this data is "not reassuring".

The timing of this data collection is particularly sensitive because it coincides with the broader implementation of the One Big Beautiful Bill Act (OBBBA), which was signed into law on 4 July 2025. While the OBBBA introduced several tax benefits that we will discuss shortly, it also expanded the government’s ability to coordinate data across agencies. For federal employees and retirees, the concern is that medical data could be used to target individuals seeking specific treatments, such as transgender care or reproductive health services, which the current administration has sought to curb through [00:04:00] policy.

[00:04:00] OBBBA Health And HSA Changes
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Moving into the realm of healthcare and benefits, the OBBBA has brought about several significant changes that are reaching an operational peak this week. One of the most positive developments for federal families is the permanent extension of the telehealth "safe harbor" for those enrolled in high-deductible health plans, or HDHPs. This means that for plan years starting on or after 1 January 2025, and continuing through this week of 3 May 2026, federal workers and retirees can receive telehealth and other remote care services before meeting their plan's deductible without jeopardizing their eligibility to contribute to a Health Savings Account, or HSA.

Furthermore, as of 1 January 2026, the OBBBA has expanded HSA eligibility significantly. Individuals enrolled in "bronze" and "catastrophic" health insurance plans are now treated as HSA-compatible, regardless of whether those [00:05:00] plans were purchased through an exchange. For current employees and retirees looking to manage out-of-pocket costs, another major update taking effect this year involves direct primary care (DPC) arrangements. Beginning 1 January 2026, participation in a DPC arrangement no longer disqualifies an individual from contributing to an HSA, and HSA funds can now be used tax-free to pay periodic DPC fees.

For those managing workplace injuries or chronic conditions, the Department of Labor’s Office of Workers’ Compensation Programs (OWCP) announced a notable expansion on 5 May 2026. The pharmacy benefit program under the Federal Employees’ Compensation Act (FECA) is being expanded to include more beneficiaries, including those under the Black Lung Benefits Act and the Energy Employees Occupational Illness Compensation Program Act. This expansion is part of a broader effort to lower prescription drug prices through enhanced clinical management and [00:06:00] pricing transparency. The Labor Department reported this week that similar initiatives have reduced drug expenditures by over 82 percent since 2018, dropping from 226.2 million dollars to just 39.8 million dollars in 2025.

[00:06:18] Taxes And USPS Retirement Alarm
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On the financial and tax front, federal workers and retirees filing their taxes for 2025 or planning for 2026 are seeing the benefits of several OBBBA provisions. The cap on State and Local Tax (SALT) deductions, which has long been a pain point for federal employees living in the Washington, D.C. metropolitan area, has been raised to 40,000 dollars for those with modified adjusted gross incomes under 500,000 dollars. This cap is scheduled to increase by 1 percent annually.

Additionally, for the active workforce and retirees who continue to work in the private sector, the OBBBA has introduced a "No Tax on [00:07:00] Overtime" rule and a "No Tax on Tips" law. Certain workers can now claim a dollar-for-dollar deduction for overtime pay earned beyond 40 hours a week, with the deduction capped at 12,500 dollars for single filers and 25,000 dollars for those filing jointly. These changes are part of the broader tax reform package that also made the standard deduction and the 2,200 dollar Child Tax Credit permanent.

However, the week of 3 May 2026 also brings reminders of the ongoing challenges facing the U.S. Postal Service. NARFE has spent this week urging Congress to find a solution for USPS funding after the agency recently decided to suspend its employer contributions toward the Federal Employee Retirement System (FERS). This move was described as a precautionary measure to ensure the continued funding of current postal operations, but it has raised alarms about the long-term stability of the retirement fund for [00:08:00] postal employees.

[00:08:01]  Issues That Affect Retired Federal Workers
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Issues That Affect Retired Federal Workers

As we turn our attention exclusively to the retired federal community, the dominant topic remains the Social Security Fairness Act (H.R. 82). This legislation, which was signed into law on 5 January 2025, represents the first significant expansion of Social Security benefits in decades. Its primary purpose is the total repeal of the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), two rules that have unfairly reduced the Social Security benefits of nearly 3 million public servants, including those under the Civil Service Retirement System (CSRS).

Throughout the week of 3 May 2026, the Social Security Administration has provided updates on the restoration of these benefits. While the SSA reported in July 2025 that it had completed over 3.1 million retroactive payments totaling [00:09:00] 17 billion dollars, many retired workers in May 2026 are still navigating the complexities of their specific cases. The repeal is retroactive to 1 January 2024, which means that beneficiaries are entitled to a lump-sum payment covering the period from January 2024 until their monthly benefit was adjusted.

A significant issue reported during this week involves the "six-month lookback" rule for new applicants. There are two distinct groups of retirees impacted by this. Group One includes those who were already receiving Social Security benefits—albeit reduced ones—when the law was signed. These individuals generally saw their accounts adjusted automatically back to January 2024. Group Two, however, consists of retirees who never applied for spousal or survivor benefits because they knew the GPO would reduce those benefits to zero.

For these individuals, the SSA is applying its [00:10:00] standard rule that limits retroactive benefits to six months prior to the date of the application. NARFE and other advocacy groups are currently pushing for a waiver of this six-month limitation, arguing that public servants should not be penalized for failing to apply for benefits that were, at the time, legally unavailable to them.

For those who have already received their adjustments, the financial impact is substantial. On average, the removal of the WEP increases monthly benefits by 360 dollars. The GPO repeal is even more significant, raising monthly benefits by an average of 700 dollars for spouses and 1,190 dollars for surviving spouses. These increases have prompted experts to advise retirees to review their estate planning documents. As noted on 4 May 2026, the increase in retirement income may necessitate updates to wills, trusts, and beneficiary designations to align with the new financial situation of [00:11:00] many federal families.

Retired railroad workers are also seeing the benefits of these changes. The Railroad Retirement Board (RRB) confirmed this week that it has completed the processing of cases affected by the "non-covered service pension" reduction and the "public service pension" offset, which are the railroad equivalents of the WEP and GPO. Like CSRS retirees, these individuals have had their "Tier I" annuity amounts restored retroactively to months after December 2023.

[00:11:31] Medicare Deductions And Medicaid Rules
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However, the implementation has not been without errors. During this week of 3 May 2026, the Centers for Medicare and Medicaid Services (CMS) acknowledged that some beneficiaries are experiencing "dual Medicare premium deductions". Because Medicare premiums are typically deducted from a person’s Social Security check once they begin receiving benefits, some retirees found that premiums were being taken from both their Social Security and their federal [00:12:00] annuity. CMS is working to issue refunds to those affected and advises that there is no need to call, as the process is being handled automatically.

Looking ahead, retirees aged 60 to 64 who rely on the Affordable Care Act (ACA) for health coverage must be aware of the new Medicaid work requirements mandated by the OBBBA. While these requirements apply to able-bodied adults under the age of 65, several states have begun implementation earlier than the federal deadline of 1 January 2027. For example, Nebraska’s work requirements became operational on 1 May 2026, requiring individuals to document 80 hours per month of "community engagement" or work to maintain their coverage. Retirees in this age bracket should check if they qualify for exemptions, such as "medical frailty" or being a primary caregiver for a disabled individual.

[00:12:57]  Issues That Affect Current Federal Workers
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Issues That Affect Current Federal [00:13:00] Workers

[00:13:00] Schedule P C And Performance Overhaul
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The active workforce is grappling with the implementation of Schedule Policy/Career, or Schedule P/C. This new category of employment was finalized by OPM in February 2026 and began taking effect in March 2026. During the week of 3 May 2026, agencies have been actively identifying career positions—estimated to be around 50,000 initially—to be moved into this new schedule.

The primary consequence of a position being moved to Schedule P/C is the loss of statutory due-process rights. Employees in these "policy-influencing" roles can now be removed without the traditional right to appeal to the Merit Systems Protection Board. The OPM rule states that while merit-based hiring and veterans' preference still apply, these employees effectively serve at the "will" of the administration to ensure "accountability" for the President’s agenda. The NTEU has advised its members this week that [00:14:00] if they are notified of a reclassification, they should sign the acknowledgement forms to protect their employment while the legal challenges against the rule proceed through the courts.

Parallel to the changes in job protections, OPM has proposed a major overhaul of the federal performance management system. As reported throughout the first week of May 2026, the administration is moving toward a "forced distribution" model for performance ratings. This proposal would eliminate the current "minimally satisfactory" level, moving the system from five levels down to four. More significantly, it would allow agencies to set quotas on how many employees can receive top marks, such as a Level 4 or Level 5 rating. OPM argues this is necessary to correct for "inflated" ratings, but labor leaders argue it will demoralize the workforce and give supervisors too much power to issue "unacceptable" ratings without sufficient higher-level review.

[00:14:59] Pay Raise IVF And Retirement Buyback
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On the topic [00:15:00] of compensation, current employees are tracking the progress of the Federal Adjustment of Income Rates (FAIR) Act. As of 6 May 2026, NARFE is actively supporting H.R. 7480 and S. 3823, which would provide a 4.1 percent pay increase for federal employees in 2027. This proposal includes a 3.1 percent across-the-board raise and a 1.0 percent increase in locality pay. While this is a priority for 2027, the 2026 pay tables are already in effect, following an executive order that established the current rates for the General Schedule, Law Enforcement Officer schedules, and the Federal Wage System.

Active employees should also note the expansion of fertility benefits announced on 10 May 2026, just following this reporting week, but discussed heavily throughout May 3–9, 2026. The Trump administration has proposed a rule to [00:16:00] create a new category of "limited excepted benefits" that would allow employers to offer up to 120,000 dollars in lifetime benefits for in vitro fertilization (IVF) and other fertility treatments. This rule is intended to ease the statutory and regulatory burdens that have previously made robust fertility coverage rare in the federal workforce.

Finally, for those who joined the federal service as temporary employees, the Federal Retirement Fairness Act (H.R. 1522) remains a key piece of legislation under watch this week. This bill would allow employees to "buy back" credit for temporary service performed after 31 December 1988, enabling them to count that time toward their retirement eligibility under FERS. NARFE continues to urge members of Congress to support this measure as a matter of basic fairness for those who transitioned from temporary to career status.

[00:16:57] Wrap Up And Subscribe
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And that’s a wrap on this week’s Federal [00:17:00] 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.