The package largely reflects a policy options paper that has been in circulation among Capitol Hill Republicans since early in the year when leadership first plotted a course for a multi-year budget. Image: iStock.com/dkfielding
By: FEDweek StaffUPDATED: A House committee has passed a Republican leadership-crafted package that would degrade the value of benefits for newly retiring federal employees—in one case on enactment and in another starting in 2027—while requiring about half of FERS employees to pay more toward those benefits in starting in 2026.
The Oversight and Government Reform Committee action follows the recent passage by both the House and Senate of a budget outline through 2034 reflecting Trump administration priorities on tax and spending policies. That measure requires that committee to produce $50 billion in deficit reduction over that period.
Its recommendations, along with those of other committees, are then to be assembled into a wide-ranging “reconciliation” bill that will require only a simple majority vote in the Senate for approval, rather than the usual 60-vote threshold for major legislation there.
The package narrowly passed along a party-line vote in the committee, and largely reflects long-running Republican proposals regarding federal employee pay and benefits. It also mirrors a policy options paper that has been in circulation among Capitol Hill Republicans since early in the year when leadership first plotted a course for a multi-year budget.
The provisions and their projected savings to the government—and therefore cost to employees—are (in the words of a summary from committee chairman Rep. James Comer, R-Ky.):
- “Raise FERS Employee Contribution Requirements. –– Raises the FERS retirement contribution rate for many existing federal civilian employees and postal employees up to the new rate of 4.4% of their salary. ($30.716 billion revenue increase for deficit reduction)
- “Elimination of the FERS Annuity Supplement. –– For new federal retirees, this reform eliminates the additional retirement annuity payment that those eligible to retire before age 62 currently receive until they reach the age of Social Security retirement eligibility benefits. Exempt from this reform are those in federal occupations subject to mandatory early separation (i.e., retirement). ($10.113 billion in savings)
- “High-5 Average pay for Calculating CSRS and FERS Pension. –– Reduces federal pension benefit spending by basing a retiree’s annuity payment on their average highest five earning years (instead of highest three). ($4.750 billion in savings)
- “Election For At-Will Employment and Lower FERS Contributions for New Federal Civil Service Hires. –– Gives new Federal employee hires the option to elect to serve “at will” in exchange for higher take-home pay. ($4.541 billion in net savings)
- “Filing Fee for Merit Systems Protection Board Claims and Appeals. –– To reduce frivolous employee appeals to the Merit Systems Protection Board (MSPB) regarding agency disciplinary adverse actions, this reform would charge a modest fee for MSPB filings that would be refunded to those employees who win their appeals. ($2 million revenue increase for deficit reduction)
- “FEHB Protection. –– Requires a comprehensive audit of employee dependents currently enrolled in FEHB plans—such as verifying marriage certificates and birth certificates—and requires any ineligible individual found to be receiving FEHB coverage be disenrolled. ($1.5 billion in net savings)”
Slightly more than half of FERS employees have less than 10 years of service and already are paying at the 4.4 percent rate. From its inception in the 1980s, the rate (apart from their required contribution toward Social Security) was 0.8 percent of salary. That was raised in 2012 to 3.1 percent for those hired starting in 2013 and then raised again in 2013 to 4.4 percent for those hired in 2014 and after.
A more detailed committee document now posted shows that for those currently paying 0.8 percent of salary, the increase would come in two stages: a 1.8 percentage point boost in calendar year 2026, to 2.6, and a further 1.8 percentage point increase starting in calendar year 2027, to 4.4. For those currently paying 3.1 percent, there would be a 1.3 percentage point boost in 2027.
There was no mention of raising the required pay-in by CSRS employees, who now make up only about 1 percent of the workforce and who generally pay 7 percent of salary. They get a more generous civil service annuity but do not earn Social Security benefits through their federal employment.
However, the increase to a high-5 annuity calculation base would apply to those retiring under both FERS and CSRS on or after January 1, 2027—creating an incentive for those eligible to retire by that date to do so.
The elimination of the FERS supplement would apply to anyone who becomes eligible for that benefit after “the date of enactment of this act” except for those subject to mandatory retirement—primarily meaning law enforcement officers, firefighters and air traffic controllers. The supplement, which duplicates the value of Social Security benefits accumulated during FERS-covered employment, is payable up to age 62 for those who retire under FERS before that age; it stops at age 62 when eligibility to begin drawing Social Security benefits is reached.
Notably absent from the list is changing the cost sharing between the government and enrollees in the FEHB, which currently results in the employer share being about 70 percent on average. The options paper—and previous GOP proposals—had suggested instead changing to a voucher system in which the government share would be set at a flat rate and increased over time by an inflation measure that typically falls below inflation in the health insurance sector.
Proponents argued that such a change would encourage enrollees to look into lower-cost plans but opponents argued that the intent and result would be to shift more of the cost onto enrollees over time. The options paper had not mentioned the parallel PSHB program for postal employees and retirees, where the employer share is paid by the USPS, not out of the Treasury.
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See also,
Top 10 Provisions in the Big Beautiful Bill of Interest to Federal Employees
A Pre-RIF Checklist for Every Federal Employee, From a Federal Employment Attorney
Work Longer or Take the FERS Supplement Now: Which is Better?
Doubling Your TSP (C Fund vs G Fund)
