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Proposed Benefits Changes Come into Sharper Focus

Dailyfed Staff

May 7, 2025

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As federal employees await the outcome of proposed cuts to their federal benefits, a committee document has provided some additional details.

Increased FERS Contributions

One proposal to help trim the budget is to increase FERS contributions to a uniform 4.4%. For those currently paying 0.8%, the increase would come in two stages: a 1.8 % increase in calendar year 2026, followed by another 1.8% increase in calendar year 2027. Feds who are currently contributing at 3.1% would see a 1.3% increase in 2027. 

Change to the Annuity Calculation

Another proposal targeting federal benefits involves changing the annuity calculation from the current “high-3” to a “high-5.” The conversion to a “high-5” annuity calculation base would apply to those retiring on or after January 1, 2027. If you’re not sure of the impact this would have on your annuity, it might be a good time to get a comprehensive benefits analysis. This can help you make an informed decision about the best time to retire.

FERS Retirement Annuity Supplement

According to language in the committee document, elimination of the FERS supplement would apply to anyone becoming eligible for that benefit after “the date of enactment of this act.” This does not apply to those subject to mandatory retirement, including law enforcement officers, firefighters, and air traffic controllers. The Retirement Annuity Supplement is intended to act as a Social Security benefit until retirees reach age 62 and are eligible to file. Many employees who accepted the deferred resignation offer and agreed to retire at the end of September might need to adjust their retirement date to beat the clock or re-run the numbers to see how losing this added money will affect them. 

FEHB Premiums

One widely discussed benefit cut was not on the list: overhauling cost sharing between the government and FEHB enrollees, which currently results in the government paying an average of 70% of premiums. Previous proposals had suggested 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. The government will, however, be conducting a thorough audit of FEHB dependents, including verifying marriage and birth certificates, to ensure eligibility.

These proposals are likely to throw many retirement plans into disarray. A comprehensive federal benefits analysis will give you a clear snapshot of where you stand and how benefit changes will impact your retirement. Speak with a Federal Retirement Consultant (FRC℠) who can help you maximize your benefits and design a retirement plan that best fits your needs.

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