The FED Weekly

Lawrence: Welcome to The FED Weekly
for 20 - 26 July 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.

Section 1: Issues That Affect
Current and Retired Federal Workers

H.R.

1, The "One Big Beautiful Bill Act,"
Is Law: Separating Fact from Fear

The most significant event for the
entire federal community this week was

the finalization of the sweeping budget
reconciliation package known as H.R.

1, the "One Big Beautiful Bill Act."

After months of speculation and
anxiety, President Trump signed

the bill into law on July 4, 2025.

For both current and retired
federal employees, the primary

takeaway is one of relief: the most
feared proposals targeting federal

retirement benefits were ultimately
excluded from the final legislation.

Specifically, provisions that had
passed the House Oversight and Reform

Committee to change the annuity
calculation from an average of the

highest three years of salary to the
highest five, and to eliminate the

Federal Employees Retirement System
(FERS) annuity supplement, were stripped

from the bill before its final passage.

The FERS supplement is a crucial benefit
for those who retire before age 62,

designed to bridge the income gap until
they are eligible for Social Security.

Its preservation, along with the "high-3"
calculation, means the foundational

pillars of federal retirement
planning remain intact for now.

However, the threat of these cuts
had a profound and measurable

impact on the federal workforce
long before the bill became law.

The uncertainty drove a significant
number of retirement-eligible employees

to leave federal service prematurely.

According to data from the Office
of Personnel Management (OPM),

70,351 retirement applications
were filed by the end of June 2025.

This represents a nearly 24% increase
over the 50,305 applications filed

during the same period in 2024.

This spike is attributed directly to
widespread concern among employees

that their earned benefits were on
the chopping block, prompting many to

retire to lock in the existing rules.

This sequence of events reveals a potent
strategy for workforce reduction that

operates on a psychological level.

The administration's stated goal has
been to shrink the federal bureaucracy.

By allowing proposals for deep
retirement cuts to circulate and

advance through initial legislative
stages, the administration fostered an

environment of fear and uncertainty.

This fear, in turn, prompted tens of
thousands of experienced employees

to voluntarily exit the workforce,
effectively achieving a significant

workforce reduction without the political
fallout that would have accompanied the

actual enactment of such unpopular cuts.

As retirement expert Tammy Flanagan has
cautioned, this rush to the exits means

many individuals may have made hasty,
irreversible financial decisions without

adequate planning, potentially facing
income shortfalls in their later years.

While the core retirement formulas were
spared, the enacted version of H.R.

1 is a massive law that still reshapes
the financial landscape for federal

employees and retirees in numerous ways.

Key provisions that made it
into the final bill include:

Permanent Student Loan Repayment
Assistance: The law makes permanent

a provision from the CARES Act
that allows employers to provide

up to $5,250 per year in tax-free
student loan repayment assistance.

This is a significant, long-term
benefit for current employees

managing educational debt.

Enhanced Dependent Care Assistance:
For employees with families, the

bill increases the annual pre-tax
contribution limit for Dependent

Care Assistance Programs (DCAPs) from
$5,000 to $7,500, providing greater

tax relief for childcare expenses.

Broad Tax Cuts and Deductions: The law
makes many of the 2017 Tax Cuts and

Jobs Act (TCJA) provisions permanent,
including lower individual income tax

rates and a doubled standard deduction.

It also introduces new tax relief
measures, such as eliminating federal

income tax on tips and overtime pay.

For retirees, a new "senior deduction"
of $6,000 could significantly reduce

or eliminate the tax burden on
Social Security income for millions.

Healthcare and Other Spending: The bill
includes a temporary, one-year 2.5%

increase to the Medicare physician
fee schedule for fiscal year 2026,

a measure intended to support
healthcare providers and which may

affect access for the millions of
federal retirees who rely on Medicare.

These benefits are funded in part by
significant spending cuts to domestic

programs like the Supplemental
Nutrition Assistance Program (SNAP)

and massive funding increases of
over $170 billion for immigration

enforcement and border security.

Section 2: Issues That Affect
Current Federal Workers

The Great Reduction: An Unprecedented
Week in Workforce Restructuring

For current federal employees, this
week marked a dramatic escalation

of the administration's campaign
to reshape the civil service.

The catalyst was a Supreme Court
ruling on July 8, 2025, which reversed

lower court injunctions that had
been blocking the administration

from carrying out mass layoffs.

Observers described the decision as
a "major reversal" of the long-held

conventional wisdom regarding federal
job protections, effectively giving the

administration a green light to proceed
with large-scale Reduction-in-Force

(RIF) actions across the government.

Following the court's
decision, events moved swiftly.

On July 24, a court filing provided
the public with its first granular

look at the administration's
specific targets for these RIFs.

The document listed the precise offices
within 17 federal agencies that were

slated for layoffs as of early 2025.

While some plans may have since
evolved, the list offers a rare

and chilling insight into the
administration's strategic priorities.

The scope of the planned cuts is vast,
including agency-wide RIFs at the

Department of Commerce and the National
Archives and Records Administration.

The list also details deep cuts within
specific, critical divisions at other

agencies, such as the Food Safety and
Inspection Service and Forest Service

research stations at the Department of
Agriculture; the Centers for Disease

Control and Prevention and the Office
of the Secretary at the Department

of Health and Human Services; and the
Taxpayer Advocate Service at the IRS.

A closer examination of the targeted
offices suggests a strategy that

extends beyond simple cost-cutting.

The administration's stated goal
is to eliminate "waste, bloat,

and insularity" and "unproductive
and unnecessary programs".

However, the RIF list disproportionately
targets the government's

internal oversight, scientific,
and policy-making functions.

Offices responsible for human
resources, general counsel, and

departmental equal opportunity are
slated for cuts at the Department

of Housing and Urban Development.

Scientific bodies like the Natural
Resources Conservation Service's

Climate Division and policy hubs
like the Center for Nutrition Policy

and Promotion are also on the list.

These are not typically the
largest or most expensive

parts of an agency's budget.

They are, however, the components
responsible for enforcing rules,

ensuring accountability, conducting
independent research, and

developing evidence-based policy.

Targeting them suggests an ideological
strategy aimed at weakening the

government's regulatory and scientific
capacity, thereby reshaping the

federal government to align with the
administration's broader policy goals.

These RIFs are just one
component of a multi-pronged

effort to shrink the government.

Other tools in this effort include:

Schedule F and Schedule G: An
executive order from January 2025

created "Schedule F," stripping job
protections from thousands of employees

by reclassifying them into a new
category that makes them easier to fire.

A more recent order on July 17, 2025,
established "Schedule G" to expand

the number of non-career political
appointees in policy-making roles.

Probationary Firings: A February
directive from OPM instructed agencies

to dismiss probationary employees—those
with less than a year of service—citing

inadequate performance without needing
to provide supporting evidence.

Voluntary Separation Programs: The "Fork
in the Road" memo from January introduced

a "deferred resignation" program,
which about 75,000 employees accepted.

The Department of Defense announced
its own version with Voluntary

Early Retirement Authority (VERA)
and Voluntary Separation Incentive

Payment (VSIP) options in April.

On the Floor: A Trio of Bills
Poised to Reshape Federal Employment

While the executive branch pursues
these actions, allies in Congress

have introduced a slate of bills
that could make these changes

permanent and fundamentally alter
the nature of federal employment.

First, for federal firefighters, H.R.

759, the Federal Firefighters Families
First Act, was introduced on January 28,

2025, by Representative Gerald Connolly
of Virginia and has bipartisan support.

Representative Connolly
passed away on May 21, 2025.

The bill aims to address
two long-standing issues.

It would direct OPM to establish
a new maximum workweek for federal

firefighters not to exceed an average
of 60 hours, a significant reduction

from the grueling 72-hour standard.

More importantly, it would
amend Title 5 of the U.S.

Code to ensure that all regularly
scheduled overtime pay is included in

the "average pay" calculation for both
FERS and CSRS retirement annuities.

This would not only improve work-life
balance but also substantially

increase the retirement pensions
for this high-stress workforce,

aiding in recruitment and retention.

The bill currently resides
in the House Committee on

Oversight and Government Reform.

Second, H.R.

236, the Federal Employee
Return to Work Act, represents

a direct challenge to telework.

Introduced on January 7, 2025, by
Representative Dan Newhouse of Washington,

the bill has 21 Republican cosponsors
and an identical version in the Senate.

Its provisions are stark: any federal
employee who teleworks at least one

day per week, or 20% of their time on
an alternative work schedule, would

be prohibited from receiving both the
annual across-the-board pay adjustment

and their locality pay adjustment.

This would create a severe financial
penalty for teleworking, effectively

freezing the pay of a large segment of
the workforce and pressuring employees

to return to physical offices full-time.

The bill has been referred
to the House Committee on

Oversight and Government Reform.

Third, H.R.

201, the Federal Employee Performance
and Accountability Act of 2025, seeks to

upend the General Schedule pay system.

Introduced on January 3, 2025, by
Representative Claudia Tenney of

New York, the bill would establish a
five-year pilot program for employees

at the GS-11 level and above.

Participants would be removed from
the GS pay scale and its automatic

annual and locality raises.

Instead, their pay would be tied
directly to performance reviews.

Those who "significantly exceed"
metrics could receive a pay raise

of up to 10%, those who "meet"
metrics would receive no raise, and

those who rate "below expectations"
would have their pay cut by 10%.

This move toward a high-risk, high-reward
model aligns with recent OPM guidance

calling for more stringent performance
standards and quicker firings.

The bill is currently with the
House Committee on Oversight

and Government Reform.

Together, these executive actions
and legislative proposals represent

a coordinated, two-pronged effort
to reshape the federal workforce.

The executive branch is using
its authority to create immediate

"facts on the ground" through
RIFs and reclassifications.

Simultaneously, the legislative branch
is attempting to codify these changes

and rewrite the fundamental rules
governing federal pay and work conditions.

This creates an environment of
maximum pressure and uncertainty

for current employees.

A Victory for Employee Pay Rights:
OPM Finalizes Temporary Promotion Rule

Amidst the turmoil, there was one
significant pro-employee development.

On July 25, the Office of Personnel
Management finalized a new rule that

corrects a long-standing pay inequity
for employees on temporary promotions.

For two decades, a loophole allowed
agencies to detail an employee to a

higher-graded position indefinitely while
limiting the back pay for the improper

promotion to just the first 120 days.

This incentivized agencies to assign
employees to higher-level work without

providing the corresponding pay.

The new regulation, which
becomes effective on August

26, closes this loophole.

It stipulates that if an adjudicative
body finds an employee was improperly

detailed to a higher-graded job for
more than 120 days, that employee

is entitled to back pay for the
entire duration of the assignment.

This rule applies to both bargaining
unit and non-bargaining unit employees,

strengthening pay protections
across the federal government.

Section 3: Issues That Affect
Retired Federal Workers

A Sigh of Relief: Core Retirement
Benefits Withstand Legislative Challenge

For the nation's community of federal
retirees, the primary news from the

past week is overwhelmingly positive.

After months of concern,
the final version of H.R.

1, the "One Big Beautiful Bill Act,"
was signed into law without the proposed

cuts to federal retirement benefits.

Your core earned benefits—the "high-3"
salary calculation for FERS and CSRS

annuities and the FERS annuity supplement
for early retirees—have been preserved.

This outcome demonstrates the political
resilience of these foundational benefits,

but the legislative battle also serves
as a critical reminder of the political

volatility that can surround them.

Navigating the New Retirement
Landscape: A Cautionary Tale

The events leading up to the
bill's passage offer a powerful

lesson in financial planning.

The 24% spike in retirements, driven
largely by fears of benefit cuts

that never materialized, highlights
the danger of making irreversible

life decisions based on rumors or
preliminary legislative drafts.

Retiring earlier than anticipated can
mean a smaller Thrift Savings Plan (TSP)

balance, fewer years of high salary
to average into a pension calculation,

and a longer period over which
savings must last to cover expenses.

While your core benefits remain stable,
it is more important than ever for

retirees to remain vigilant and rely on
trusted, official sources for information.

OPM, your former agency's human
resources office, and reputable federal

news outlets should be the primary
sources for information about your

benefits, not social media speculation.

The focus for every retiree should
remain on sound financial planning,

including a clear understanding of
survivor benefits, Federal Employees'

Group Life Insurance (FEGLI) options,
and long-term care needs, all within the

context of a stable, but not entirely
inflation-proof, federal pension.

Paradoxically, the intense
political battle over federal

benefits this year reinforces the
immense value of the government's

defined benefit pension system.

In an era where private sector pensions
have become nearly extinct, replaced by

defined contribution plans like 401(k)s
that place all risk on the employee,

the federal system stands apart.

The fact that these benefits ultimately
survived a major legislative push from

a determined administration demonstrates
their political durability, even

as they remain a perennial target.

For retirees, this week's news is
a powerful affirmation that the

pension and health benefits they
are receiving are among the most

stable and valuable retirement assets
available in the United States today.

This stability will likely become an
even more critical recruitment and

retention tool for the government
in the years ahead, provided these

foundational promises to the federal
workforce continue to be upheld.

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.

We’ll be back next week to
track the latest developments

and what they mean for you.

Until then, stay engaged and be well.