The FED Weekly

The FED Weekly 17-23 May 2026 (Episode 51)
===

[00:00:00]

[00:00:00] Weekly Briefing Intro
---

Welcome to The FED Weekly for 17-23 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.

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

Issues That Affect Current and Retired Federal Workers

[00:00:47] Tax Relief for Back Pay
---

In response to the substantial lump-sum retroactive back payments distributed to beneficiaries in early 2026, congressional lawmakers have introduced measures to address the associated tax liabilities. [00:01:00] In February 2026, Representative Lance Gooden (D-TX) introduced the No Tax on Restored Benefits Act. This legislative proposal seeks to establish a one-time tax carve-out that would exclude these lump-sum retroactive payments from federal income taxation. Proponents of the bill argue that the legislation is necessary to protect public-sector retirees from an unexpected and steep tax burden, ensuring they retain the full value of the benefits they earned. The bill has been referred to the House Committee on Ways and Means, though its legislative future remains uncertain.

The debate surrounding the tax impact of these retroactive benefits has drawn scrutiny from fiscal analysts. Karen Smith, a senior fellow at the Urban Institute, warned that exempting these lump-sum payments from taxation could worsen the financial outlook of the Social Security trust funds. This concern is compounded by a Congressional [00:02:00] Budget Office report warning that the trust funds are on track to be depleted by 2032, which would trigger an automatic twenty percent benefit reduction under current statutory guidelines if Congress fails to intervene.

This debate contrasts with another legislative effort introduced earlier in 2026 by Senator Ruben Gallego (D-AZ), which proposed to simplify retiree tax preparation by eliminating federal taxes on all Social Security benefits entirely. Gallego's proposal sought to offset the revenue loss by raising the maximum taxable earnings limit—which stands at 184,500 dollars for calendar year 2026—to 250,000 dollars, a change projected to extend the solvency of the trust funds through 2058. Although Gallego's bill has not advanced out of committee, it represents a competing philosophy on managing retirement solvency.

[00:02:57] Pension and TSP Tax Basics
---

Pension Taxation and Savings [00:03:00] Strategies

These legislative developments highlight the broader complexity of federal pension taxation in 2026. For civil servants covered under the Federal Employees Retirement System, basic pension annuities are generally subject to federal income tax, except for the portion that represents a recovery of the employee's after-tax contributions. The tax-free portion of the annuity is calculated using the Internal Revenue Service Simplified Method, which divides the total employee contributions by a factor based on the retiree's age at the time of retirement. The remainder of the monthly annuity is treated as ordinary taxable income based on the individual's marginal federal tax bracket.

This taxable status also applies to the FERS Annuity Supplement, which is paid to eligible retirees who separate from service before age sixty-two, with the supplement terminating the month before the retiree reaches age sixty-two. [00:04:00] The Office of Personnel Management reports these figures annually on Form 1099-R, which details the gross annuity and the taxable portion. State taxation of these annuities varies widely, with nine states exempting personal income tax entirely, while other states offer partial exemptions or tax the annuities in full.

Active and retired workers must also navigate the tax rules governing the Thrift Savings Plan. Withdrawals from traditional Thrift Savings Plan accounts are taxed as ordinary income and are frequently subject to an automatic twenty percent federal withholding rule upon distribution. Conversely, qualified withdrawals from Roth Thrift Savings Plan accounts remain entirely tax-free, provided that the account has been active for at least five years and the individual is at least fifty-nine and a half years old, disabled, or deceased.

For active employees planning their retirement, the Roth catch-up rule for calendar year [00:05:00] 2026 mandates that federal workers age fifty and older who earned more than 150,000 dollars in Federal Insurance Contributions Act wages in the preceding calendar year must make all catch-up contributions to the Thrift Savings Plan in a Roth account.

[00:05:18] Webinars and Aid Resources
---

The complex interactions between pension annuities, Social Security, and tax-advantaged savings accounts have driven demand for targeted education. The Federal Employees Benefits Association announced a series of educational webinars scheduled for 26 and 28 May 2026. These sessions are designed to assist federal workers in maximizing their Thrift Savings Plan strategies, navigating the new Roth catch-up rules, and utilizing partial Roth conversions to reduce tax liabilities before mandatory Required Minimum Distributions begin. Additionally, financial planning guidelines for 2026 indicate that married couples filing [00:06:00] jointly can optimize their tax returns by realizing long-term capital gains at a zero percent federal capital gains tax rate, provided their taxable income remains below approximately 100,000 dollars.

Beyond standard pension and tax programs, the Federal Employee Education and Assistance Fund remains a vital independent nonprofit resource for both active and retired civil servants. The organization provides emergency financial assistance through confidential, no-interest loans to help employees navigate immediate financial crises, along with disaster relief grants for those affected by natural disasters. Furthermore, the fund supports the federal community by offering merit-based college scholarships and administering childcare subsidy programs on behalf of several federal agencies.

Whistleblower Protections

[00:06:53] Whistleblower Bill Update
---

In addition to tax and retirement planning, federal employees and contractors are affected by legislative [00:07:00] changes to statutory oversight and workplace protections. On 21 May 2026, the United States Senate considered and passed S. 4631, a bill sponsored by Senator Gary Peters and officially titled "A bill to ensure that whistleblowers, including contractors, are protected from retaliation when a Federal employee orders a reprisal, and for other purposes". This legislation passed the Senate without amendment by Unanimous Consent and was subsequently sent to the House of Representatives, where it is currently held at the desk. The primary provision of S. 4631 is to extend comprehensive anti-retaliation protections to government contractors, subcontractors, and grantees in situations where a federal supervisor or employee initiates a retaliatory action against them for disclosing waste, fraud, or abuse of authority.

By legally prohibiting such reprisals, the bill seeks to close a long-standing statutory [00:08:00] loophole that left non-civil service personnel vulnerable to workplace retaliation when reporting misconduct within federal programs.

Political Labor Campaigns and Union Endorsements

[00:08:11] Union Endorsements Push
---

The tracking period of May 17-23, 2026, also saw significant political activity by federal labor unions seeking to influence the composition of the next Congress. On 19 May 2026, coinciding with the statewide primary election, the American Federation of Government Employees announced its endorsement of Representatives Rob Bresnahan and Brian Fitzpatrick for reelection to the House of Representatives representing Pennsylvania. Fitzpatrick, representing the First Congressional District, co-chairs the bipartisan Problem Solvers Caucus and has sponsored several pieces of workforce-focused legislation. These include the Protect America's Workforce Act (designated as H.R. 2550), which was designed to restore federal [00:09:00] collective bargaining rights.

Fitzpatrick also cosponsored the FAIR Act, the Saving the Civil Service Act to block Schedule F, and the Rights for the TSA Workforce Act. Rob Bresnahan, representing the Eighth Congressional District, has supported regional federal labor issues, including sponsoring legislation to correct Wage Grade pay at Tobyhanna Army Depot, advancing a thirty-five percent pay raise for Bureau of Prisons personnel at United States Penitentiary Canaan, and cosponsoring the House version of the Shutdown Fairness Act to guarantee pay for federal workers during government shutdowns.

Phil Glover, the AFGE District 3 National Vice President, praised both representatives for defending the collective bargaining rights and financial security of regional civil servants, noting that Fitzpatrick was honored with the Outstanding Dedication to Federal Employees award and Bresnahan was named Outstanding New Member of Congress at the union's [00:10:00] 2026 legislative conference. Pennsylvania is home to more than 66,000 federal employees who support these key regional installations.

In a similar effort, the American Federation of Government Employees announced endorsements for three congressional candidates in Iowa on 18 May 2026, ahead of the statewide primary on 2 June 2026 and the general election on 3 November 2026. The union endorsed former state Representative Christina Bohannan for the First Congressional District, current state Representative Lindsay James for the Second Congressional District, and current state Senator Sarah Trone Garriott for the Third Congressional District. AFGE District 8 National Vice President Ruark Hotopp stated that these candidates have committed to protecting the workplace rights and retirement benefits of Iowa's 22,000 federal employees.

Nationwide, [00:11:00] the American Federation of Government Employees represents more than 820,000 federal and District of Columbia workers, with District 8 representing over 19,000 civil servants across Iowa, Minnesota, Nebraska, North Dakota, and South Dakota. This focus on regional representation is further reflected in the upcoming District 12 Caucus in San Diego, scheduled for 29 May 2026, to coordinate regional advocacy and civil service protection strategies.

Real Estate and Public Works Infrastructure

[00:11:35] Federal Buildings and Public Works
---

Finally, federal workers are impacted by broad structural efforts to modernize the government’s physical footprint. On 21 May 2026, the General Services Administration, joined by twenty-two Cabinet departments and federal agencies, sent a joint letter to congressional leadership advocating for full access to the Federal Buildings Fund. This capital fund is used by the General Services [00:12:00] Administration to maintain and modernize federal offices, courtrooms, and laboratories nationwide. The letter also requested congressional authority to increase the prospectus threshold from 3.96 million dollars, allowing agencies to execute lease agreements and building repairs more efficiently, directly affecting the physical working environments of thousands of civil servants.

During the same week, on 21 May 2026, the Senate passed several resolutions honoring public service, including S. Res. 750, which recognized "National Public Works Week" and the contributions of public works professionals, and S. Res. 749, which designated May 2026 as "Older Americans Month".

[00:12:46]  Issues That Affect Retired Federal Workers
---

Issues That Affect Retired Federal Workers

Inflation Adjustments and Cost-of-Living Disparities

[00:12:53] Retiree COLA Gap
---

The primary financial concern for retired federal employees during this tracking period centers on cost-of-living [00:13:00] adjustments and their ability to keep pace with inflation. For calendar year 2026, the cost-of-living adjustment for retirees under the Civil Service Retirement System and Social Security beneficiaries was finalized at 2.8 percent, whereas retirees under the Federal Employees Retirement System received an adjustment of only 2.0 percent.

This statutory disparity occurs because Federal Employees Retirement System cost-of-living adjustments are legally capped at 2.0 percent whenever the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers is between 2.0 and 3.0 percent. If inflation exceeds 3.0 percent, the FERS adjustment is reduced by a full percentage point. To address this inequality, the National Treasury Employees Union has endorsed the Equal COLA Act (designated as H.R. 491 and S. 624). This proposed [00:14:00] legislation seeks to align FERS and CSRS adjustments, ensuring that all federal retirees receive the full inflation-adjusted increase regardless of their retirement system.

The need for legislative reform is emphasized by recent inflation data. On 10 June 2026, the Bureau of Labor Statistics is scheduled to release the Consumer Price Index data for May 2026. However, the data released for April 2026 indicated that the Consumer Price Index for Urban Wage Earners and Clerical Workers increased by 0.94 percent in April alone, reaching a level of 326.541. This is 2.92 percent higher than the average index level for the third quarter of 2025, which was 317.265. In addition, individuals receiving workers' compensation benefits under the Federal Employees Compensation Act received a 2.6 percent adjustment in April 2026, calculated using a different [00:15:00] calendar-year formula.

Healthcare Plan Suspending and Medicare Advantage

[00:15:05] FEHB vs Medicare Advantage
---

Retired federal employees must also carefully evaluate changes to their healthcare coverage. In the May 2026 edition of NARFE Magazine, researchers published a comprehensive guide addressing the suspension of Federal Employees Health Benefits in favor of enrolling in private Medicare Advantage plans. While some Medicare Advantage plans offer reduced premiums and additional wellness benefits, the analysis advises retired civil servants to proceed with caution. Suspending rather than canceling Federal Employees Health Benefits is a crucial administrative distinction, as suspension allows retirees to re-enroll in a standard health plan during a subsequent annual open season or if they experience a qualifying life event, such as a private plan terminating its coverage.

Administrative Retirement Platform Transition

[00:15:58] Benefits Platforms Go Digital
---

In terms of administrative [00:16:00] services, retired federal employees are navigating a transition in how benefits are managed. The Department of Health and Human Services recently completed its migration from the legacy Government Retirement and Benefits Platform to the new FedHR Navigator platform. Concurrently, the Office of Personnel Management has implemented the Online Retirement Application system. During a House Appropriations Subcommittee hearing, OPM Director Scott Kupor testified that the system has processed over 130,000 annuitants. Kupor reported that the digital portal has successfully doubled administrative processing productivity and reduced application processing times by more than half, helping to resolve long-standing pension processing backlogs.

[00:16:47]  Issues That Affect Current Federal Workers
---

Issues That Affect Current Federal Workers

Compensation Battles and the Fiscal Year 2027 Budget

[00:16:54] 2027 Pay Raise Fight
---

Active federal employees are facing significant challenges regarding compensation and [00:17:00] agency funding. On 10 February 2026, Senator Brian Schatz and Representative James Walkinshaw introduced the Federal Adjustment of Income Rates (FAIR) Act, which seeks to implement an average 4.1 percent pay raise for the federal workforce in calendar year 2027. The bill proposes a 3.1 percent across-the-board base pay increase combined with a 1.0 percent average increase for locality pay. Walkinshaw stated that the raise is necessary because federal employees have endured a decade of government shutdowns, pay freezes, and sequestration-related furloughs, with current data suggesting federal salaries lag nearly twenty-five percent behind the private sector.

The bill has received strong support from major labor unions, including the National Treasury Employees Union and the American Federation of Government Employees. This proposal, however, faces a difficult path forward. The President's Fiscal Year [00:18:00] 2027 Budget Request, released on 3 April 2026, remains silent on a civilian federal pay increase, effectively proposing a pay freeze for civil servants in 2027 while recommending a 5.0 to 7.0 percent pay increase for military personnel. Furthermore, the budget proposes steep cuts for critical agencies, including a 1.4 billion dollar cut to the Internal Revenue Service, a fifty percent reduction for the Environmental Protection Agency, a 15.8 billion dollar cut to the Department of Health and Human Services, and a 1 billion dollar cut to the National Park Service.

These proposals align with the goals of the President's Management Agenda, which calls for a smaller federal workforce. The impact of these policies is reflected in data from the Federal Harms Tracker, which indicated that as of 19 May 2026, over 214,000 civil servants had left the federal [00:19:00] workforce through voluntary and involuntary separations. Despite these structural challenges, federal employee workplace scores showed some quarterly improvements at the beginning of 2026, following a year in 2025 characterized by widespread burnout and lower overall job satisfaction.

Reduction in Force (RIF) Regulatory Reforms

[00:19:23] RIF Rules and Real Impacts
---

The procedures governing workforce downsizing are also undergoing major regulatory revisions. On 5 March 2026, the Office of Personnel Management published a proposed rule under docket 2026-04377 (91 FR 10904) to restructure Reduction in Force regulations. The comment period for this proposed rule, managed under the authority of OPM representative Mr. Noah Peters, concluded on 4 May 2026. Under the OPM proposal, an employee's three most recent performance ratings would become the primary factor in [00:20:00] determining retention standing on a Reduction in Force register. This would elevate subjective performance evaluations over traditional factors like tenure and length of service, while reducing veterans' preference to a minor numerical add-on and completely excluding probationary employees from RIF competition.

This regulatory proposal has drawn significant opposition from labor unions and public policy organizations. In public comments published on 7 May 2026, the Partnership for Public Service criticized the rule, arguing that using performance as the primary retention factor is deeply flawed because the current federal performance management system is highly inflated. This is supported by OPM Director Scott Kupor's testimony, in which he noted that 99.7 percent of federal employees are currently rated at or above expectations annually, while only 0.3 percent are rated below expectations. Consequently, [00:21:00] utilizing performance as the primary retention factor could lead to arbitrary outcomes or manipulation.

The legal advocacy group Democracy Forward similarly warned that the proposed rule weakens critical merit-based guardrails against politically motivated downsizing, as performance ratings remain highly subjective and less open to administrative review. These regulatory changes are being discussed as active RIF actions proceed across the government. On 5 May 2026, the Department of State published guidelines addressing employees separated via a RIF on 5 May 2026. The guidelines state that civil service employees will receive their final paycheck on 28 May 2026, with biweekly severance starting on 11 June 2026, while foreign service employees will receive a single lump-sum severance within ninety days of separation.

For employees separated by a RIF who are not yet [00:22:00] eligible to retire, the Department of Health and Human Services highlighted critical reemployment transition benefits, including selection priority for vacancies within their agency via the Career Transition Assistance Program prior to their separation date, or priority at other agencies for one year after separation via the Interagency Career Transition Assistance Program. Additionally, separated employees can register for their former agency's Reemployment Priority List for up to two years.

The transition guidelines also establish that standard healthcare coverage through the Federal Employees Health Benefits Program and life insurance through the Federal Employees' Group Life Insurance will terminate upon separation, with a thirty-one-day cost-free extension, while the Federal Employees Dental and Vision Insurance Program terminates immediately upon separation with no extension.

These active RIF actions are occurring [00:23:00] after a period of intense legal and legislative intervention. Section 120 of the Continuing Appropriations Act of 2026 had previously implemented a strict ban on using federal funds to execute Reductions in Force between 12 November 2025 and 30 January 2026, forcing agencies to rescind RIF notices and restore affected employees to their 30 September 2025 status. This statutory pause was reinforced by a preliminary injunction that required the Department of State to rescind RIF actions executed on or after 1 October 2025, returning affected employees to active pay status with full retroactive back pay.

Telework Policies and Return-to-Office Mandates

[00:23:47] Telework Return-to-Office Clash
---

Active federal employees are also engaged in major disputes over remote work policies. On 21 May 2026, National Treasury Employees Union President Doreen Greenwald sent a letter [00:24:00] to OPM Director Scott Kupor requesting the immediate reinstatement of telework and remote work programs to provide relief from surging gasoline prices. Greenwald urged OPM to instruct agencies to utilize the "Telework Exceptions" clause in the Return to In-Person Work Presidential Memorandum to grant telework exemptions until gas prices fall below three dollars per gallon.

This request stands in direct opposition to the administration's aggressive efforts to eliminate remote work programs, a push that is supported by updated administrative guidance from the Equal Employment Opportunity Commission. Released on 11 February 2026, the guidance, titled "Frequently Asked Questions from the Federal Sector about Telework Accommodations for Disabilities," provides a legal roadmap for agencies to re-evaluate and potentially rescind existing telework accommodations. The guidance clarifies that telework is not a guaranteed right in [00:25:00] perpetuity and establishes that in-person physical presence can be considered an "essential function" of many jobs, particularly interactive positions requiring teamwork and direct supervision.

Furthermore, the guidance notes that agencies are not required to grant telework if an alternative in-office accommodation, such as assistive technology or environmental modifications, is deemed effective, and it permits agencies to require employees to try in-office alternatives before granting remote work. Southworth PC published an employee-friendly legal guide on 19 February 2026 to assist federal employees facing immediate returns to the office, telework accommodation denials, or disciplinary threats like AWOL and conduct actions.

Workplace Technology and Employee Surveillance

[00:25:50] Tech Hiring and Surveillance
---

The working conditions of active civil servants are also being shaped by rapid technological change and increased digital monitoring. During a Fox Business [00:26:00] appearance, OPM Director Scott Kupor discussed the launch of "U.S. Tech Force," a new public-private partnership aimed at recruiting 1,000 software engineers into two-year federal service terms to modernize core administrative and security systems across major agencies, including the Department of Health and Human Services and the Department of War. This initiative coincides with the replacement of OPM's outdated FedScope tool with the new Federal Workforce Data portal, which delivers monthly updates and real-time demographic insights.

Modernization of agency leadership also continues, as seen in the appointment of Clark Minor as the Chief Information Officer for the Department of Health and Human Services, bringing executive experience from Palantir Technologies where he managed core software systems. However, the integration of technology has also raised significant privacy and workplace surveillance concerns. On [00:27:00] 18 May 2026, reports revealed that Palantir Technologies was awarded an initial 3.9 million dollar contract to implement workforce tracking and surveillance systems. The program kicks off an administration initiative to track employees at the Social Security Administration, the Department of Agriculture, and the Department of Veterans Affairs, marking a highly controversial shift toward intense digital oversight of civilian workers.

Additionally, security experts at a public sector conference on 18 May 2026, including Dan Richard, the Associate Deputy Director of the CIA's Digital Innovation Directorate, highlighted that advanced artificial intelligence tools like Anthropic's Mythos and OpenAI's GPT-5.5 are rapidly outpacing existing cybersecurity rules, forcing agencies to constantly re-evaluate how sensitive data is managed.

These technological shifts are occurring alongside adjustments [00:28:00] to entry-level federal roles, including positions within the United States Postal Service. For individuals entering the postal service, City Carrier Assistants start at hourly wages between 19 and 22 dollars, while career Mail Carriers can earn up to 36 dollars an hour based on tenure, with full-time career employees receiving federal health insurance, pension benefits, and Thrift Savings Plan contributions.

Legislative Reforms Reported Favorably

[00:28:30] House Bills for Workers
---

In legislative matters, the House Oversight Committee reported several key bills favorably during its 20 May 2026 markup that specifically target active personnel. These include H.R. 8801, the DC Rejecting Oppressive Automotive Driving Surcharges (DC ROADS) Act, sponsored by Representative Scott Perry. The bill amends the D.C. Home Rule Act to prohibit the D.C. Council from enacting or enforcing congestion traffic tolls within the District [00:29:00] of Columbia, a measure explicitly intended to protect commuting federal employees who live in surrounding lower cost-of-living jurisdictions.

The committee also reported H.R. 8844, the U.S. Customs and Border Protection Officer Retirement Technical Corrections Act, sponsored by Representatives Brian Fitzpatrick and Jared Golden. The bill corrects a pension benefit administrative error by providing enhanced retirement benefits to a specific group of Customs and Border Protection officers who planned their careers around benefits promised by the agency but later denied by the Office of Personnel Management. It also requires a Government Accountability Office study to evaluate benefit management practices at the agency.

Furthermore, the committee advanced H.R. 8096, the Duplication Scoring Act of 2026, introduced by Representatives Tim Burchett and Melanie Stansbury. This bill amends [00:30:00] Title 31 of the U.S. Code to establish reporting requirements for duplicative federal programs, requiring the Comptroller General of the United States to proactively analyze reported legislation before it becomes law to prevent overlapping agency offices and initiatives.

FEMA Staffing Reversal and Judicial Proceedings

[00:30:20] FEMA Reversal and Fraud Case
---

Finally, the week of May 17-23, 2026, saw significant operational adjustments and legal developments within the federal workforce. On 18 May 2026, the administration reversed staffing cuts at the Federal Emergency Management Agency, reinstating critical disaster response staff in a major victory for the American Federation of Government Employees and labor allies who had legally challenged the workforce reductions.

In a separate matter of institutional accountability, former Centers for Disease Control and Prevention supervisor Gwendolyn Brandon pleaded guilty on 21 May 2026 to [00:31:00] theft of government funds. Brandon admitted to fabricating forty-six fraudulent invoices totaling 190,461.50 dollars between August 2023 and February 2025, using her supervisory role to enrich herself. As part of her plea agreement, Brandon agreed to resign from the agency and is permanently barred from seeking future federal employment or contracting opportunities. Her sentencing is scheduled for 3 September 2026 before U.S. District Judge Steven D. Grimberg.

[00:31:33] Wrap Up and Next Week
---

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. [00:32:00] We’ll be back next week to track the latest developments and what they mean for you. Until then, stay engaged and be well.