The FED Weekly

(Ep 69) The FED Weekly 20-26 Sep 2026
===

[00:00:00]

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

Welcome to The FED Weekly for 20-26 September 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
---

Issues That Affect Current and Retired Federal Workers

[00:00:47] 2027 Pay Raise Push
---

The 2027 federal pay debate returned to Capitol Hill this week. On 21 September 2026, a bipartisan group of 110 members of Congress — 98 House members and [00:01:00] 12 senators — sent congressional leaders a letter urging them to reject President Trump's proposed pay freeze for most civilian federal employees in 2027. Regular listeners will remember that we covered the President's alternative pay plan in Episode 65. The administration's plan would keep General Schedule base pay and locality pay at 2026 levels for most civilian employees while providing a 3.8 percent increase for qualifying federal law-enforcement personnel.

This week's development is the organized congressional response. The lawmakers are asking congressional leadership to provide civilian federal employees with a raise of at least 3.8 percent, matching the administration's proposed increase for federal law-enforcement personnel. They also reiterated support for the larger 4.1 percent increase previously proposed in federal pay legislation. The lawmakers' argument is largely about [00:02:00] recruitment and retention. The President's alternative pay plan justified the law-enforcement increase in part by citing the government's need to recruit and retain qualified personnel in those occupations.

The congressional letter argues that the same recruitment and retention concerns apply more broadly throughout the civil service. Federal agencies have experienced significant workforce reductions since January 2025, while some organizations are now attempting to rebuild staffing in specialized occupations. That makes the pay debate more than simply a question of whether employees receive a larger paycheck next year. It is also a debate over whether agencies can recruit and retain employees in areas such as cybersecurity, engineering, information technology, acquisition, science, health care, and other occupations where government competes directly with private employers.

It is important, however, to distinguish advocacy from [00:03:00] enacted policy. The 21 September letter does not itself change federal pay. Unless Congress passes legislation providing a different adjustment, the administration's alternative pay plan remains the governing proposal for 2027. Congress still has the authority to override that plan through appropriations or other legislation. So the pay question is not completely settled. For federal employees planning their 2027 budgets, however, the safest assumption remains that most civilian workers are currently facing a pay freeze unless Congress acts.

[00:03:35] Shutdown RIF Settlement
---

A significant federal workforce lawsuit reached a settlement on 25 September 2026. The Trump administration and federal employee unions settled litigation challenging reduction-in-force plans developed in connection with the 2025 government shutdown. Under the agreement, the administration has rescinded the remaining guidance and directives associated with those [00:04:00] shutdown-related RIF plans. Agencies must be informed that the remaining shutdown RIF plans have been abandoned. They also have 30 days to remove remaining references to that guidance from agency websites and shutdown contingency plans.

And there is another important protection. If an agency later decides to revise its shutdown-related RIF planning, federal unions covered by the settlement must receive 30 days' advance notice. This dispute dates back to September 2025, when the Office of Management and Budget directed agencies to prepare for possible workforce reductions in connection with the impending funding lapse. Several agencies subsequently moved forward with RIF planning, and approximately 4,000 federal employees received layoff notices. Federal employee unions challenged those actions, arguing that the administration could not use a government shutdown itself as the justification for [00:05:00] permanently eliminating federal positions.

A federal judge blocked the layoffs from taking effect, and the injunction was later expanded. This week's settlement brings that particular litigation to an end.

It does not prohibit agencies from conducting legitimate reductions in force under federal personnel law. And it does not undo the separate government-wide RIF regulations that OPM has implemented this year. Those are different issues. What the settlement does is formally close the chapter on the RIF directives specifically connected with the 2025 shutdown. That distinction is important because, as we have discussed in recent episodes, OPM's new reduction-in-force system is already in effect and agencies still retain substantial authority to reorganize and reduce staffing when they follow applicable law and regulations.

[00:05:54]  Issues That Affect Retired Federal Workers
---

Issues That Affect Retired Federal Workers

[00:05:57] COLA Countdown Update
---

No New COLA Number — But October Is Now the [00:06:00] Key Month

For federal retirees, there is no new 2027 cost-of-living adjustment number this week. Episode 67 covered the August CPI-W figure, which gave us the second of the three months used in the COLA calculation. The September CPI-W will be released on 14 October 2026. That will allow us to calculate the final 2027 adjustment. Based on the July and August figures available today, the projected adjustment is approximately 3.5 percent for CSRS retirees and Social Security beneficiaries. If that percentage remains above 3 percent after September is included, eligible FERS retirees would generally receive one percentage point less under the FERS COLA formula.

That would mean approximately 2.5 percent if the current estimate held. Those figures remain projections. There is no reason to recalculate them this week because no new CPI-W data were released during this reporting period. [00:07:00] The important date remains 14 October 2026.

[00:07:04] Open Season Prep Guide
---

Federal retirees should also begin preparing for the upcoming Federal Benefits Open Season. The 2026 Open Season for coverage beginning in 2027 will run from 9 November through 14 December 2026. There is no major new premium announcement to report during this week's coverage period, so we will not speculate about what individual plans will cost. OPM will publish plan, premium, and coverage information as Open Season approaches. Retirees should pay particular attention this year because several issues we have covered in recent episodes could affect benefit decisions.

OPM is examining whether the FEHB program should eventually offer a different number or mix of plan choices. That review does not change the 2027 Open Season. OPM is also strengthening family-member eligibility verification. And questions [00:08:00] continue over the government's collection and retention of detailed FEHB and Postal Service Health Benefits claims information. None of those issues requires retirees to change plans today. The practical task right now is simply preparation. When 2027 premium information becomes available, retirees should compare more than the monthly premium.

Look at deductibles, copayments, coinsurance, prescription-drug coverage, provider networks, catastrophic limits, and — for Medicare-eligible retirees — how each plan coordinates with Medicare. For now, there is no new government-wide retirement-policy action required this week.

[00:08:39]  Issues That Affect Current Federal Workers
---

Issues That Affect Current Federal Workers

[00:08:42] Performance Rating Cap
---

OPM Sets a 40 Percent Cap on the Top Two Performance Ratings

The biggest workforce-policy development this week came from OPM's implementation of the government's new performance-management system. We have followed this issue closely in recent episodes. Episode [00:09:00] 64 covered OPM's decision to apply the new calibration system to the current fiscal year 2026 appraisal cycle. Episode 67 discussed how performance ratings now directly influence retention during reductions in force. The new development this week is the number.

In a memorandum dated 21 September 2026, OPM directed agencies to impose a government-wide ceiling under which generally no more than 40 percent of covered employees may receive the top two performance ratings combined. For a traditional five-level appraisal system, that means ratings at Level 4 and Level 5 together generally cannot exceed 40 percent of covered employees agency-wide. OPM emphasizes that 40 percent is a ceiling, not a target. Agencies are not expected to automatically give exactly 40 percent of employees high ratings. The percentage can be lower.

There are also circumstances in which an agency can [00:10:00] ask OPM for permission to exceed the cap. An agency may seek approval to raise the ceiling by as much as 10 percentage points, to 50 percent, based on exceptional agency performance and evidence that its ratings process has sufficient integrity. Requests for that exception are due to OPM by 30 October 2026. The new 40-percent ceiling also applies to career members of the Senior Executive Service and Senior Professionals.

Why does this matter? Because historically, federal performance ratings have been heavily concentrated near the top. Under five-level appraisal systems, a substantial majority of employees have often received ratings in the two highest categories. OPM argues that this makes it difficult to distinguish truly exceptional employees from employees who are simply performing successfully. The new system is intended to force agencies to make sharper distinctions. For employees, that means a supervisor's [00:11:00] initial recommendation may not necessarily become the final rating.

Agency calibration panels can compare proposed ratings across organizations and determine whether the documentation supports the distinctions being made. And because performance ratings now carry greater weight in reduction-in-force retention calculations, the consequences extend beyond awards. Your rating can potentially affect both your compensation and your job security.

[00:11:29] Bigger Cash Awards
---

OPM Ties Higher Ratings to Larger Cash Awards

OPM's performance-rating changes are directly connected to another development this week: larger potential employee awards. OPM is telling agencies that a smaller pool of employees receiving the highest ratings should allow agencies to concentrate more of their award money on top performers. Under the new guidance, agencies should direct at least 60 percent of their performance-award pool to employees receiving Level 4 [00:12:00] and Level 5 ratings. OPM recommends that employees rated at Level 5 receive awards worth at least 7 percent of salary, while Level 4 employees should receive at least 4 percent.

Employees rated at Level 3 should generally receive no more than a 3 percent award. Employees rated below fully successful are not eligible for performance awards and should be placed into the appropriate performance-improvement process. There is another significant change. OPM has delegated greater authority to agencies to approve large individual cash awards. Previously, agencies generally needed OPM approval for awards above 10,000 dollars. Agencies can now approve awards of up to 25,000 dollars without obtaining OPM's prior approval when the employee's accomplishment or contribution meets the applicable exceptional standard.

Awards above 25,000 dollars remain subject to presidential [00:13:00] approval. Agency heads may also delegate this expanded authority to certain senior officials, including a chief of staff, chief human capital officer, or bureau or component head. Taken together, these policies reveal the basic structure OPM is trying to create. Fewer employees receive the highest ratings. Those who do receive those ratings can receive substantially larger rewards. And those ratings also carry more weight if the agency later conducts a reduction in force. For federal employees, performance documentation has therefore become unusually important.

[00:13:35] Removal Rules Comments
---

OPM Reopens Comments on Federal Employee Removal Rules

Another OPM development came into focus on 21 September 2026. OPM reopened the public-comment period on proposed regulations that would change how agencies handle performance-based actions, adverse actions, and certain nondisciplinary separations. The agency is seeking additional feedback because new [00:14:00] workforce data show that, despite the administration's numerous personnel-policy changes, the number of federal employees being removed for poor performance or misconduct has not increased dramatically.

As of June 2026, OPM reported 3,105 terminations and separations involving poor performance or misconduct during fiscal year 2026. That compares with 3,492 during all of fiscal year 2025, excluding the Postal Service, intelligence agencies, and certain other entities. OPM is asking for additional public input on how its proposed rules could better encourage managers to address poor performance and misconduct. The reopened comment period is brief — just two additional weeks. These rules are not yet final.

That is important because the Merit Systems Protection Board has already finalized its own related changes governing how it reviews disciplinary penalties, which we discussed in Episode 66. [00:15:00] OPM's portion of the broader overhaul remains pending.

[00:15:04] Reservist Pay Lawsuit
---

Federal Reservists Sue for Years of Differential Pay

A major new class-action case filed this week could affect thousands of federal civilian employees who also serve in the military reserves. On 24 September 2026, five current and former federal civilian employees asked the Merit Systems Protection Board to order agencies to provide reservist differential pay they say has been unlawfully withheld going back to 2009. Reservist differential pay is designed to protect eligible federal civilian employees from losing income when they are called to qualifying active military duty.

If an employee's military compensation is lower than the civilian federal salary the employee otherwise would have received, the government may owe the difference. The dispute stems from the government's historically narrow interpretation of which active-duty [00:16:00] service qualifies. But in Feliciano v. Department of Transportation, the Supreme Court ruled that qualifying federal employees called to active duty during a national emergency can receive differential pay even when their particular military duties are not directly connected to that emergency.

The employees filing this week's MSPB case argue that agencies still have not fully implemented that ruling or paid workers all of the money they are owed. The current case names the Departments of Defense, Justice, and Veterans Affairs. The plaintiffs are seeking class treatment and potentially years of retroactive compensation.

This is litigation, not a final award. But it is an important case for federal employees who simultaneously serve in the National Guard or reserves, particularly those who were activated during periods covered by a declared national emergency.

[00:16:55] DoD Civilian Staffing Return
---

Air Force and Space Force Plan to Restore Civilian [00:17:00] Staffing

Finally, the Defense Department is providing another example of how workforce reductions are being reassessed at the agency level. The Air Force and Space Force are planning to restore thousands of civilian positions in fiscal year 2027 after determining that staffing in some areas had fallen below established requirements. Budget documents call for adding back the equivalent of more than 4,300 full-time civilian positions across approximately 30 occupational areas, at a projected cost of roughly 291 million dollars. The largest increase involves base-support functions, with more than 1,600 full-time-equivalent positions.

Other areas include logistics, communications, intelligence, special operations support, civilian education, property maintenance, and support for strategic and nuclear missions. The department has cautioned that these are not necessarily one-for-one restorations of [00:18:00] employees who previously departed. Some positions may be newly aligned or redistributed according to current mission requirements. But the underlying development is significant.

After extensive civilian workforce reductions, the Air Force and Space Force are acknowledging through their budget plans that some staffing levels fell below validated requirements. Congress must still approve the fiscal year 2027 funding necessary to support the proposed positions. For Defense civilians, this illustrates something we are likely to see more often as agencies move beyond the initial workforce-reduction phase. The question is no longer simply how many federal positions can be eliminated.

Agencies are increasingly having to determine which positions they cannot operate effectively without.And that’s a wrap on this week’s Federal Workforce Roundup.

[00:18:54] Wrap Up and Subscribe
---

The landscape for federal employees and retirees is constantly shifting, with major decisions being [00:19:00] 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. Subscribe wherever you get your podcasts​