The FED Weekly

(Ep 65) The FED Weekly 23-29 Aug 2026
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[00:00:00] Weekly Briefing Intro
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Welcome to The FED Weekly for 23-29 August 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

[00:00:47] Deferred Resignation Fallout
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Deferred Resignation Programs Come Back Into the Spotlight

One of the most interesting workforce analyses released during this reporting period looked backward at the government’s deferred resignation [00:01:00] programs and asked an important question: How many of the employees who left were effectively replaced? An analysis released by the Partnership for Public Service and reported on during the week found that, by June 2026, nearly 20,600 employees had been hired into the same agency subcomponents and occupational series where employees had previously departed under the deferred resignation programs.

The deferred resignation initiative was one of the primary tools used by the Trump administration to reduce the size of the federal workforce. Employees who accepted the program generally agreed to leave government service while remaining on the payroll for a specified period. The new analysis concluded that some agencies subsequently hired workers in occupational categories affected by those departures. The newly hired employees also entered government at an average of roughly 1.4 General Schedule grades below the [00:02:00] employees who had left.

OPM strongly disputed the suggestion that this amounted to widespread replacement of deferred-resignation participants. OPM Director Scott Kupor argued that the occupational classifications used in the analysis were too broad to demonstrate that a new employee had actually replaced a particular departing employee. He also emphasized another finding in the data: approximately 85 percent of the deferred-resignation reductions had not been replaced. That distinction matters.

The administration views the program as evidence that agencies permanently reduced staffing while creating opportunities to bring younger and less-senior employees into the workforce. Critics argue that paying experienced employees to leave and then hiring replacements raises questions about whether some departures actually produced meaningful long-term savings.

For current employees, the larger issue is what this [00:03:00] tells us about the federal workforce that is emerging after the large reductions of 2025. The government is not simply shrinking uniformly. Agencies are making decisions about which positions can disappear permanently, which capabilities must be rebuilt, and where experienced employees may eventually be replaced by employees entering at lower grades.

For retirees who departed through one of these programs, there is no new action required. But this week's analysis provides a clearer picture of what happened after those departures.

[00:03:35] Retiree Policy Quiet
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[00:03:35]  Issues That Affect Retired Federal Workers
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Issues That Affect Retired Federal Workers

A Quiet Week for Federal Retirement Policy

For federal retirees, the period from 23 August through 29 August 2026 produced relatively little major new policy activity. There were no significant new laws enacted during the reporting period changing the Civil Service Retirement System or Federal Employees Retirement System annuity [00:04:00] formulas. There were also no major new OPM announcements during the week changing retiree eligibility rules, survivor benefits, or cost-of-living adjustment procedures.

Likewise, no major new Federal Employees Health Benefits policy announcement specifically affecting annuitants met the criteria for this episode, and there was no significant new Thrift Savings Plan legislation or regulatory action during the reporting period that warranted repeating issues already discussed in previous episodes.

That is worth emphasizing because The FED Weekly deliberately avoids filling airtime by repeating retirement information simply because it remains important.

Federal retirees should continue watching several developing areas as we move into the fall, particularly future announcements involving 2027 health insurance costs, Medicare coordination, Social Security and federal retirement cost-of-living adjustments, [00:05:00] and the upcoming federal benefits Open Season.

But for this particular reporting period, there was no sufficiently significant new retiree-specific development to justify presenting an older story as though it were new.

So rather than recycle previous coverage, we will move directly to the area where most of this week’s activity occurred: policies affecting the current federal workforce.

[00:05:26]  Issues That Affect Current Federal Workers
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Issues That Affect Current Federal Workers

[00:05:29] 2027 Pay Freeze Plan
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White House Formally Proposes a 2027 Civilian Federal Pay Freeze

The biggest pay story of the week came when President Donald Trump formally transmitted his 2027 alternative pay plan to Congress. Under that plan, most civilian federal employees would receive no increase in either base General Schedule pay or locality pay in 2027. The President stated that civilian base and locality pay would remain at 2026 levels, citing fiscal [00:06:00] responsibility and economic conditions.

There is, however, a major exception. Federal law-enforcement personnel are expected to receive a 3.8 percent increase beginning in January 2027. OPM will determine which federal law-enforcement positions qualify for that increase. This alternative pay plan is important because of the process established under the Federal Employees Pay Comparability Act.

Without presidential or congressional action, statutory formulas could produce significantly larger adjustments. Presidents therefore traditionally submit an alternative pay plan before the statutory deadline when they determine that the formula-generated increase would be inappropriate because of economic conditions or national emergency considerations.

The President's action does not make the 2027 pay rates completely final. Congress retains the authority to legislate a different increase through the appropriations [00:07:00] process or other legislation. So far, however, Congress has not enacted a government-wide civilian raise overriding the administration's plan. Lawmakers have introduced the Federal Adjustment of Income Rates Act, commonly called the FAIR Act, which proposes a larger federal employee pay increase. But no version of that legislation has become law.

The final administrative step normally comes toward the end of the calendar year, when the President signs an executive order establishing the actual pay tables for the coming year. For most federal employees, though, the practical assumption for planning purposes is now straightforward: unless Congress intervenes, your basic and locality pay will remain unchanged in 2027.

Employees in qualifying federal law-enforcement positions should watch for OPM guidance identifying exactly which positions will receive the 3.8 percent increase.

[00:07:57] Unions Sue OPM
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Federal Unions Sue OPM Over [00:08:00] Performance Ratings and Suitability Rules

Another major development came on 24 August 2026, when a coalition of federal employee unions filed suit in the United States District Court for the Northern District of California challenging two major OPM regulatory changes. The lawsuit targets OPM's new rules governing employee performance ratings and suitability determinations.

One of those rules restructures federal performance management by allowing agencies to use a standardized distribution of ratings. Beginning with implementation of the new system, agencies will be limited in how many employees can receive ratings at the highest performance levels. The administration argues that the change is necessary because federal performance ratings have become inflated and fail to meaningfully distinguish exceptional performance from average performance. The unions disagree.

They contend that forcing agencies to distribute employees [00:09:00] across rating categories effectively requires employees to be compared with one another rather than judged solely against objective performance standards. Their lawsuit argues that this conflicts with requirements established by the Civil Service Reform Act of 1978. The second challenged regulation involves federal suitability determinations.

OPM has expanded its authority to consider post-appointment conduct when determining whether employees remain suitable for federal employment. The unions argue that this creates an improper alternative mechanism for removing federal employees while limiting independent review of those decisions. They are particularly challenging a structure in which OPM establishes suitability standards, can participate in suitability actions and also oversees the appeal process for those actions.

The unions are asking the federal court to stop implementation of the rules. For [00:10:00] employees, this case could become one of the most consequential civil-service lawsuits of the year. The underlying regulations potentially affect performance ratings, disciplinary actions, removals and employee appeal rights across large portions of the federal workforce.

Nothing in this week's lawsuit automatically suspends the regulations. Employees should therefore continue following their agencies' existing implementation instructions unless a court issues an injunction or OPM changes its guidance.

[00:10:32] EEOC Complaint Overhaul
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EEOC Proposes Major Changes to Federal Discrimination Complaints

The Equal Employment Opportunity Commission voted on 26 August 2026 to propose a substantial overhaul of the discrimination complaint process for federal employees and federal job applicants. The proposal would fundamentally change several longstanding elements of the federal-sector Equal Employment Opportunity process.

Under the current [00:11:00] system, employees alleging discrimination generally begin with pre-complaint counseling. After the formal complaint and agency investigation, an employee can request a hearing before an EEOC administrative judge. Under the proposed system, the pre-complaint counseling stage would be eliminated. Employees would instead file complaints directly with the EEOC within 60 days of the alleged discriminatory event.

Perhaps the biggest change concerns hearings. Federal employees would no longer have an automatic right to request a hearing before an EEOC administrative judge following the agency investigation. Instead, the EEOC would determine whether a hearing is warranted. Employees requesting one could be required to explain why a hearing is necessary. The proposal would also eliminate discovery in cases where hearings are granted.

Another major change involves class complaints. The EEOC would stop processing [00:12:00] federal-sector discrimination complaints as class actions. Employees with similar claims could have individual cases processed together, but workers seeking class-action treatment would ultimately need to pursue that avenue in federal court after exhausting their individual administrative remedies.

The Commission describes the proposal as an attempt to make a system that can take years to resolve cases faster and simpler. Critics argue that removing guaranteed administrative hearings, discovery and the existing class-complaint procedure could substantially reduce employees' ability to develop and present discrimination cases.

Importantly, this is not yet a final rule. The proposal will go through the federal rulemaking process, including a 30-day public-comment period following publication in the Federal Register. The EEOC has also stated that the proposed changes are prospective and would not alter complaints already being processed. [00:13:00] Federal employees involved in existing EEO cases therefore should not assume that their current procedures have changed.

[00:13:07] Critical Pay Expansion
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OPM Finalizes Expanded Critical Position Pay Authority

OPM finalized another important compensation rule on 26 August 2026, changing the government's Critical Position Pay authority. Critical Position Pay allows agencies to offer unusually high salaries when they need to recruit or retain exceptionally qualified individuals for positions requiring extremely high levels of scientific, technical, professional or administrative expertise. Under the final rule, Level I of the Executive Schedule becomes the default maximum critical-position pay rate.

OPM may approve salaries above that level when an agency provides sufficient justification, including market-based compensation information and evidence demonstrating recruitment or retention needs. The rule also removes several previous non-statutory [00:14:00] restrictions and approval criteria. Agencies may require employees receiving critical-position pay to sign service agreements governing future payments.

However, if an employee's critical pay is reduced or terminated, the employee generally does not have a right to challenge that pay decision through the grievance or adverse-action appeal process solely on that basis. Critical-position pay remains basic pay for many important purposes, including retirement and life-insurance calculations.

There are statutory limits on how broadly the authority can be used. OPM and the Office of Management and Budget may approve critical pay authority for no more than 800 positions government-wide at any one time, with additional restrictions applying to Executive Schedule positions. The final rule became effective 26 August 2026.

For most federal employees, this will not directly change their salaries. Critical Position [00:15:00] Pay is intended for a relatively small number of highly specialized positions. But it demonstrates the administration's broader effort to give agencies more flexibility to compete with private-sector compensation for difficult-to-recruit expertise.

[00:15:16] AI in Federal Hiring
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OPM Encourages Agencies to Use Artificial Intelligence in Federal Hiring

OPM issued another significant workforce policy on 27 August 2026, this time focusing on artificial intelligence. The memorandum, titled “Use of Artificial Intelligence in the Federal Hiring Process,” gives agencies guidance on incorporating AI into different stages of federal recruitment and hiring. OPM says the average federal hiring process currently takes about 87 days, while the administration's Merit Hiring Plan calls for reducing time-to-hire to 80 days.

The new guidance is designed in part to address agency concerns that using AI during hiring automatically makes an application a [00:16:00] high-impact AI system subject to the government's strictest risk-management requirements. OPM says that is not necessarily the case. For example, AI could help identify relevant portions of a résumé for a human reviewer without actually making the hiring decision. In that situation, OPM argues, AI is assisting human judgment rather than serving as the principal basis for the employment decision.

Agencies must nevertheless evaluate their AI applications to determine whether they qualify as high-impact or presumed high-impact uses. Where AI is considered high-impact, agencies generally must apply required risk-management practices unless an appropriate waiver is granted. OPM is also planning additional AI-supported capabilities for USAJOBS, USA Staffing and USA Hire.

Those efforts are expected to include better search tools, clearer job titles and descriptions, and additional technology designed to connect applicants with federal [00:17:00] vacancies more efficiently. For current federal employees, this matters for two reasons. First, employees applying for promotions or transfers may increasingly encounter AI-assisted federal hiring systems.

Second, human-resources professionals and hiring managers should expect agency policies governing AI-assisted résumé review, applicant screening and hiring workflows to continue evolving. The federal government is clearly moving toward broader AI use in personnel management, but agencies will have to balance speed and efficiency against requirements involving fairness, privacy, transparency and human oversight.

[00:17:40] Wrap Up and Takeaways
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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 from pay and job security to retirement benefits and the very structure of the civil service. Staying informed is your best tool. [00:18:00] Subscribe wherever you get your podcasts​