Understanding Congress’s 2025 Proposals
Congress is considering measures to reduce the value of federal employee retirement and benefits, primarily to achieve budget savings. The proposed cuts would significantly impact both FERS and FEHB programs.
In April 2025, Congress passed a budget resolution directing the House Oversight and Government Reform Committee to cut $50 billion in mandatory spending. As the committee oversees federal workforce matters, these cuts would largely come from employee benefits programs. These proposals are part of a budget reconciliation process, which means changes could be implemented with just 51 Senate votes instead of the usual 60.
Federal employee unions (including NTEU and NAGE) and the National Active and Retired Federal Employees Association (NARFE) strongly oppose these cuts. They argue the changes would not only break promises to current employees but also reduce the appeal of federal service. This would exacerbate workforce challenges amid planned reductions in force (RIFs).
While these proposals aren’t yet law, they represent a serious threat to your benefits. Your engagement with congressional representatives could help shape the final outcome. We encourage you to stay informed and contact your congressional representatives if you oppose these cuts.
Below is a summary of the key proposals based on available information, as of April 17, 2025.
1. Increasing FERS Contribution Rates
Proposal: Standardize FERS employee contributions at 4.4% of salary for all employees, regardless of hire date. Currently, contribution rates vary:
- 0.8% for employees hired before 2013
- 3.1% for those hired in 2013
- 4.4% for those hired in 2014 or later
Impact: This effectively reduces take-home pay, especially for pre-2013 hires, as it increases contributions without additional benefits. It’s projected to save $44 billion over 10 years but at a significant cost for affected federal employees.
2. Eliminating the FERS Special Retirement Supplement (SRS)
Proposal: The FERS supplement—which bridges the gap until Social Security at age 62—would be eliminated. This especially impacts:
- Law enforcement officers
- Firefighters
- Air traffic controllers
- Other employees required to retire early at age 57
Impact: Loss of this supplement could create an income gap for early retirees, disproportionately affecting special provisions employees. Estimated savings range from $5 billion to $13 billion over 10 years.
3. Changing Annuity Calculations (High-3 to High-5)
Proposal: Base FERS annuity calculations on the average of the highest five years of salary instead of the current highest three years.
Impact: This would reduce annuity payments, as it includes lower-earning years in the calculation. The reduction could be significant in some cases, especially when you factor in a long retirement.
4. Reforming or Eliminating Cost-of-Living Adjustments (COLAs)
Proposal: Either eliminate or reduce annual COLAs for both FERS and CSRS retirees. Current COLAs help maintain purchasing power by adjusting payments based on inflation.
Impact: Your retirement income would gradually lose value to inflation. For example, with 3% annual inflation and no COLA, a $50,000 pension would have the purchasing power of just $37,000 after 10 years.
5. Shifting FEHB to a Voucher Model
Proposal: Replace the current FEHB system, where the government pays 72% of your premiums, with a fixed-dollar voucher. This voucher would grow more slowly than actual healthcare costs.
Impact: Employees and retirees would bear a higher share of health insurance costs, reducing affordability.
6. Eliminating FEHB for New Hires or Retirees
Proposal: End FEHB eligibility for new federal hires and/or future retirees, aligning benefits more closely with private-sector standards where post-retirement health insurance is rare.
Impact: This would significantly reduce the attractiveness of federal employment and affect long-term financial planning for new hires.
7. Reforming the Thrift Savings Plan (TSP) G Fund
Proposal: Lower the G Fund’s interest rate to match short-term Treasury bills instead of the current longer-term rate calculation.
Impact: This would lower returns on the G Fund, reducing retirement savings growth.
8. Ending FERS for New Hires
Proposal: Eliminate the FERS pension completely for new federal employees. They would rely solely on Social Security and TSP contributions for retirement.
Impact: This would shift new employees to a defined-contribution system, reducing guaranteed retirement income and aligning federal benefits with private-sector trends. It would also significantly reduce the attractiveness of federal employment and affect long-term financial planning for new hires.
9. At-Will Employment Trade-Off
Proposal: Require new hires to choose between current merit-based civil service protections with higher FERS contributions or at-will employment with lower contributions (4.4% or less).
Impact: This creates a difficult choice between job security and take-home pay. Those choosing job security would have reduced paychecks, while those choosing higher pay would lose traditional civil service protections.
Impact on Federal Employees & Workforce Competitiveness
These proposals aim to align federal benefits with private-sector standards, where defined benefit pensions and retiree health insurance are less common. However, federal employees already earn an estimated 25% less than private-sector counterparts for similar roles, and benefits are a key recruitment and retention tool.
Increasing contributions without enhancing benefits effectively acts as a pay cut while reducing annuities or health coverage could deter talent, especially amid workforce downsizing. The focus on short-term savings may also overlook long-term costs, such as higher turnover or reduced government efficiency.
What You Can Do
Remember: These are still just proposals, not law. Your actions now can help shape the final outcome:
Contact Your Representatives
- Call or write to your congressional representatives
- Share specific examples of how these changes would affect you
- Join letter-writing campaigns organized by employee groups
Get Involved with Employee Organizations
- Join or increase participation in federal employee unions, including NAGE and NTEU
- Support NARFE’s advocacy efforts
- Follow updates from your agency’s employee organizations
Stay Informed
- Monitor congressional budget discussions
- Subscribe to federal employee news services
- Follow your union’s updates on legislative actions
Plan Ahead
- Review your retirement planning assumptions
- Consider adjusting your TSP contributions
- Document your career timeline and how these changes might affect it
The more federal employees who speak up, the better chance of influencing these proposals. Your voice matters.
If you need assistance understanding your current federal benefits or want information about joining a federal employee union, please fill out the form below. We are here to help you navigate these potential changes.