The FED Weekly

The FED Weekly 10-16 May 2026 (Episode 50)
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[00:00:00] Welcome and Weekly Briefing
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Welcome to The FED Weekly for [dd-dd month June 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.

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

[00:00:47] Shutdown Pay Rule and Funding Lapses
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Legislative Measures and the Operational Realities of Government Funding Lapses

On 14 May 2026, the United States Senate unanimously approved a rules change designed to [00:01:00] increase the political consequences of government shutdowns. Adopted by voice vote, this resolution requires the Secretary of the Senate to withhold senators' paychecks during any government shutdown that begins after this year's midterm elections. The resolution specifies that senators' salaries will be disbursed but held in an escrow account, to be released as retroactive back pay once funding is restored. To comply with the Twenty-Seventh Amendment, which prevents immediate salary alterations, the rule will take effect on 4 November 2026, the day after the general election.

The House of Representatives is not bound by this resolution, though companion bills exist. Historically, lawmakers and the president received pay during shutdowns, creating a severe disconnect from the hardships endured by federal workers during the 76-day partial Department of Homeland Security shutdown that ended on 30 April 2026, and the [00:02:00] 43-day full government shutdown last fall.

[00:02:03] Shutdown Backlogs and Retirement Claims
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These shutdowns also backlog retirement claims. For example, OPM's retirement application inventory peaked in February 2026 at over 65,200 pending claims. Although OPM's Retirement Services division reduced the backlog to nearly 55,700 applications as of March 2026—partly using the Online Retirement Application system, which processes half of all claims—lapses threaten to delay annuity processing.

[00:02:32] Federal Tax Debt Crackdown
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Tax Compliance Trends and Delinquency Enforcement Across the Civil Service

A Treasury Inspector General for Tax Administration report, released on 11 May 2026, reveals rising tax debt within the federal workforce and retiree population. The audit found the delinquency rate grew from 4.9 percent in 2021 to 6.9 percent in 2024. In 2024, 215,000 [00:03:00] active employees had outstanding tax bills (a 45 percent increase from 2021), owing 2.1 billion dollars, up from 1.5 billion dollars three years prior. When combining active workers and retirees, the total number of non-compliant individuals reaches 572,000, representing a 43 percent increase since 2021 and a total outstanding liability of 6.3 billion dollars.

Within this group, 50,000 current employees failed to file returns for multiple years, and over 1,000 were delinquent for six or more years. TIGTA referred 122 employees who were at least eight years behind to the IRS Criminal Investigations division. The IRS has resumed its levy program as of August 2024, dedicating two days per week to federal delinquent collections instead of one day per quarter. TIGTA recommended that the Treasury Department lobby Congress to allow the IRS to share [00:04:00] non-compliance information with employing agencies, which is currently prohibited. Past collaborative efforts, including 427,000 delinquent notices sent to federal workers and retirees, successfully led to payments from nearly 65,000 individuals.

[00:04:17] Trump Accounts and Duplication Oversight
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Regulatory Implementations for Family Retirement and Program Duplication Oversight

On 13 May 2026, the Internal Revenue Service issued proposed regulations detailing the operational rules for "Trump Accounts," a new category of tax-advantaged retirement savings accounts. Created under the One Big Beautiful Bill Act of 2025, these accounts are scheduled to launch on 4 July 2026. A Trump Account is structured as a traditional Individual Retirement Account established for a child under the age of 18, with the child designated as both the beneficiary and the legal owner. The regulations restrict families [00:05:00] to one Trump Account per child, allowing active and retired employees to build early retirement security for children or grandchildren.

In another major administrative development, Chairman James Comer announced a legislative markup on 15 May 2026, scheduled for 20 May 2026, for H.R. 8096, the Duplication Scoring Act of 2026. This bill amends Title 31 of the United States Code to require the Comptroller General to analyze reported bills to prevent duplicative programs, impacting active workers administering programs and retirees relying on stable federal budgets.

Issues That Affect Retired Federal Workers

[00:05:43]  Issues That Affect Retired Federal Workers
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Health Insurance Suspensions and Medicare Advantage Selection Strategies

We begin this segment with health benefits and an analysis from the May 2026 NARFE Magazine regarding Section 9 of FEHB plan brochures. This provision allows retirees and former [00:06:00] spouses enrolled in Medicare Parts A and B to suspend FEHB coverage to enroll in commercial Medicare Advantage plans, eliminating FEHB premiums. This differs from FEHB-carrier Medicare Advantage plans, where retirees continue paying the FEHB premium. Cost comparison models for Fairfax County, Virginia, and Cass County, North Dakota, evaluated a 65-year-old annuitant under the IRMAA threshold.

While suspending FEHB can dramatically reduce premium costs, retirees must carefully evaluate doctor networks, drug formularies, and the strict OPM administrative steps required to re-enroll in FEHB during a future Open Season or following a qualifying life event. Furthermore, official guidelines from the Office of Personnel Management confirm the finalized Cost-of-Living Adjustments for 2026. Annuitants who retired under CSRS receive a 2.8 percent increase, whereas those under FERS receive a 2.0 percent increase. [00:07:00] OPM implements these adjustments in December of each year. FERS retirees are generally eligible for COLAs starting at age 62, except for special categories such as disability retirees.

[00:07:11] Why Delaying Retirement Pays
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Maximizing Annuity Computations and Delaying Federal Retirement

On 14 May 2026, federal retirement expert Tammy Flanagan examined the compounding financial benefits of delaying retirement across three distinct pillars: the basic annuity, Social Security, and the Thrift Savings Plan. Under FERS, delaying retirement until age 62 with at least 20 years of service permanently upgrades the pension multiplier from 1.0 percent to 1.1 percent of the high-three average salary per year of service. For a high-three average salary of 120,000 dollars, this bonus adds 2,400 dollars in annual pension income.

Delaying retirement also helps employees avoid the severe MRA+10 penalties. [00:08:00] Under Minimum Retirement Age plus ten rules, individuals separating with ten to twenty-nine years of service face a permanent pension reduction of 5 percent for every year they are under age 62. Postponing the start of the annuity after separating is an effective mechanism to reduce or eliminate this penalty. FERS basic annuities generally do not receive COLAs until the retiree reaches age 62. Retiring early means enduring flat pension payments during high-inflation years, whereas working longer increases the high-three average salary and accumulates additional creditable service.

[00:08:37] Social Security TSP and Best Dates
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Strategic Claiming for Social Security, Tax Rules, and Retirement Transitions

The financial incentives for delaying are stronger for Social Security. Claiming at age 62 reduces monthly payouts by 30 percent compared to claiming at Full Retirement Age, which is 67 for those born in 1960 or later. Delaying past Full [00:09:00] Retirement Age earns credits of 8 percent per year up to age 70. A monthly benefit of 3,000 dollars at age 67 grows to 3,720 dollars at age 70, representing a lifetime difference exceeding 225,000 dollars if a retiree lives to age 92. Claiming before Full Retirement Age while working triggers temporary benefit withholding if earnings exceed the 2026 limit of 24,480 dollars.

Federal employees can retire from their civil service jobs without immediately claiming Social Security, allowing the benefit to continue growing. Regarding the Thrift Savings Plan, active employees must plan around early withdrawal penalties. Withdrawing TSP funds before age 59½ triggers a 10 percent tax penalty. Exceptions exist for public safety employees who separate in or after the year they turn 50, or those with 25 years of service, as well as exceptions for [00:10:00] total disability and terminal illness. Retirees must also prepare for Required Minimum Distributions, which must begin by April 1 of the year following age 73 or 75, calculating the distribution based on the prior year-end balance and the expected distribution period, though Roth TSP balances are exempt from RMDs.

Finally, active employees planning their retirement dates should utilize key retirement timing rules. Retiring at the end of a pay period and month minimizes paycheck gaps and maximizes leave accruals. Top 2026 retirement dates are 10 January 2026, 31 May 2026, 31 October 2026, and 31 December 2026. Retiring at the end of the leave year on 9 January 2027 maximizes the lump-sum annual leave payout by avoiding the 240-hour carryover cap rollover. Proper planning requires requesting a formal retirement estimate 6 [00:11:00] to 12 months in advance, submitting a notice of intent and completing application forms (SF 3107 or SF 2801) 3 to 6 months out, and verifying insurance continuations in the final 30 days.

Issues That Affect Current Federal Workers

[00:11:18]  Issues That Affect Current Federal Workers
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Legislative Protections for Federal Credit and Short-Term Disability Options

Turning to legislative protections for active employees, S. 4478, the Federal Worker Credit Protection Act of 2026, was introduced on 1 May 2026 to address the credit damage from the 76-day Department of Homeland Security shutdown that ended on 30 April 2026. Sponsored by Senator Mark Kelly along with Senators Angela Alsobrooks, Ruben Gallego, Tim Kaine, Chris Van Hollen, and Mark Warner, this bill bars consumer reporting agencies from reporting adverse information on federal employees' credit reports during a shutdown and for [00:12:00] 30 days afterward. The bill, requiring the Office of Management and Budget to notify credit bureaus of agency funding status, applies retroactively to 1 February 2026, allowing workers to correct adverse credit reports free of charge.

On 11 May 2026, Congresswoman Eleanor Holmes Norton introduced H.R. 8731, the Federal Employee Short-Term Disability Insurance Act of 2026, to allow civil service, Postal Service, and Postal Regulatory Commission employees to purchase voluntary short-term disability insurance at group rates to replace lost income due to illness, injury, or pregnancy for up to one year. Referred to the House Committee on Oversight and Government Reform, the program would have employees pay 100 percent of premiums at zero cost to the government, contracting through OPM. Carriers are prohibited from excluding workers or charging higher premiums for preexisting [00:13:00] conditions. This program bridges a critical gap, as employees do not qualify for permanent federal disability retirement until they have worked for 18 months.

[00:13:10] 2027 Pay Freeze and Hazard Pay
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The 2027 Pay Freeze, Hazard Pay Adjustments, and Dispute Settlement Investigations

Active employees face uncertainty regarding their calendar year 2027 pay adjustment. In late April and early May 2026, the House Appropriations Committee advanced its draft of the fiscal year 2027 FSGG spending bill, which supports President Trump's proposed civilian pay freeze for 2027, while proposing rank-based raises of 5 to 7 percent for military personnel. Republican appropriators defeated a 3.1 percent raise amendment proposed by Representative Steny Hoyer. This pay freeze stands in contrast to the FAIR Act of 2027, introduced on 10 February 2026 by Representative James Walkinshaw and Senator [00:14:00] Brian Schatz, which proposes a 4.1 percent average pay raise. Exceptions may occur under special rate authority for certain law enforcement personnel, and OPM proposed expanding wildland firefighter hazard pay on 13 May 2026, offering a 25 percent boost during prescribed burns, with comments due by 15 June 2026. Appropriators also defeated amendments to block transitioning career positions into at-will roles under Schedule Policy/Career and Schedule G.

Concurrently, on 11 May 2026, House Committee on Oversight Chairman James Comer launched an investigation into taxpayer-funded payouts used to settle employment disputes. In a letter sent to OPM Director Scott Kupor, Comer requested documents from January 2020 to the present, setting a deadline of 25 May 2026. The committee highlighted that in fiscal year 2023, the EEOC secured over [00:15:00] 202 million dollars in settlements compared to 22.6 million dollars through litigation, while MSPB sue-and-settle attorney fee payouts reached nearly 11 million dollars. The review notes a structural bias toward settling: agencies choose to settle 68 percent of non-dismissed MSPB cases, yet win over 80 percent of decisions when they proceed to a formal dispute.

[00:15:25] MSPB Telework and Commuter Tolls
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Board Quorums, Telework Guidance, and Commuter Congestion Toll Protections

Additionally, the Merit Systems Protection Board faces an operational bottleneck. As of 12 May 2026, the Board is blocked from acting on nearly 40 percent of petitions for review because sitting members Henry Kerner (with over 100 recusals) and James Woodruff (with 30 recusals) must abstain due to prior employment conflicts. This quorum deficit means administrative judges' initial decisions become final, meaning employees appealing adverse [00:16:00] actions must build exhaustive records at the initial stage, as Board-level relief is largely unavailable.

Furthermore, telework policies have undergone tightening, as the EEOC and OPM issued joint technical assistance evaluating telework accommodations. Aligning with President Trump's January 2025 returning directive, the guidance confirms that in-person presence can be deemed an essential function. In contrast, a GAO report (GAO-26-107645) warned that the Social Security Administration faces skills gaps as employees seek greater telework flexibility elsewhere. In a related development to assist commuting employees, H.R. 8801, the D.C. Rejecting Oppressive Automotive Driving Surcharges (DC ROADS) Act, was advanced for markup on 15 May 2026, to prohibit congestion tolls on D.C. roads, bridges, or tunnels, protecting employees commuting from surrounding jurisdictions.

[00:16:59] Wrap Up and Subscribe
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And that’s a [00:17:00] 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.