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Major Federal Retirement Cuts Proposed: What They Are, What They Do, and What They Mean for You

Sweeping changes are on the horizon for federal retirement benefits. A new proposal advanced by House Republicans is poised to alter the landscape of the Federal Employees Retirement System (FERS). Here's what each proposed change is, what it does, and what it means for current federal employees and retirees.


1. Elimination of the FERS Annuity Supplement

Is: The FERS annuity supplement is an additional benefit paid to retirees under age 62 who retire with full benefits, bridging the gap until Social Security eligibility.

Does: The proposal eliminates this supplement for most retirees under age 62, effective January 1, 2028.

Means: If you're planning to retire before 62, you'll need to plan for a significant income gap. This could require adjusting your retirement timeline, increasing TSP contributions, or building other savings to cover the shortfall.


2. Increase in FERS Employee Contributions to 4.4%

Is: Currently, most FERS employees contribute between 0.8% and 4.4% of their salary to the pension system, depending on their hire date.

Does: This change standardizes the contribution rate to 4.4% for all employees, regardless of hire date.

Means: Expect a decrease in your take-home pay if you currently contribute less than 4.4%. Review your budget and consider adjusting other deductions or spending habits to compensate.


3. Switch from "High-3" to "High-5" Annuity Calculation

Is: FERS pensions are currently calculated using the average of an employee's highest three consecutive years of salary.

Does: The proposal would change this calculation to the highest five consecutive years, starting January 1, 2028.

Means: This could reduce your pension benefit, particularly if your salary peaked toward the end of your career. You may want to consider working longer or negotiating higher earnings earlier in your career to mitigate the impact.


4. New Hire Option: Pay Extra or Lose Civil Service Protections

Is: New federal hires would face a choice: pay an extra 5% of their salary to retain traditional civil service protections or become at-will employees.

Does: This introduces a tiered system where new hires must decide between financial cost and job security.

Means: For future employees, this could deter federal employment or alter career planning. For current employees, it may impact hiring dynamics and workforce morale, potentially affecting team structures and workloads.


What You Can Do Now

  • Stay Informed: Follow updates from reliable sources like Federal News Network and FedSmith.

  • Review Your Retirement Plan: Speak with a financial advisor who understands federal benefits.

  • Increase Your TSP Contributions: Offset potential losses with more aggressive retirement savings.

  • Consider Your Retirement Timeline: You may benefit from adjusting your plans based on the proposed implementation dates.


Conclusion:

These proposed changes could significantly alter the retirement outlook for many federal workers. Understanding what each change is, how it operates, and its practical impact will empower you to make informed decisions. Planning ahead is your best defense.Need personalized advice? Schedule a consultation with a federal retirement specialist today.

Sources:

House Republican Budget Proposal, FY2025

Additional reporting from: Federal News Network, FedSmith

Disclaimer:

The information presented here reflects proposed legislation as of June 16, 2025 and is subject to change. These changes have not been passed into law. For updates, refer to official government sources or speak with a qualified advisor familiar with federal benefits.

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