Federal employees are no strangers to policy shifts, but new legislation has sparked serious concern across the workforce. On May 22, 2025, the House passed the One Big Beautiful Bill Act, a sweeping budget reconciliation package that includes significant proposed changes to federal retirement benefits. While the bill still faces Senate review, what’s already in the package could have real consequences for current and future retirees.
If you’re a Fed keeping an eye on the One Big Beautiful Bill Act, now’s the time to get clear on what’s in the House-passed version — and what steps you can take to protect your future.
Key Proposed Changes to Retirement Benefits
While the legislation is not yet final, the bill under consideration could reshape retirement planning for many federal employees. Here’s what’s currently in the bill:
- FERS Annuity Supplement Elimination: Lawmakers are proposing to eliminate the FERS annuity supplement — a benefit that helps certain retirees cover the gap between their retirement date and when they become eligible for Social Security. For many who plan to retire before age 62, losing this income could make early retirement far less affordable.
- Change from “High-3” to “High-5”: Another proposed change involves shifting from the “high-3” to a “high-5” salary average when calculating pension benefits — effectively reducing retirement income for many by averaging in lower-earning years.
- New Fees and Audits: The bill introduces Merit Systems Protection Board (MSPB) filing fees, which could deter some employees from challenging adverse employment actions. It also allocates funds for audits of Federal Employee Health Benefits (FEHB) eligibility — a move that could impact dependents or former spouses still on your plan.
- New Hire Retirement Options: Provisions for newly hired employees include more limited retirement options that may reduce long-term benefit protections.
How This Could Affect You
Let’s say you’re a career Fed with 26 years of service, planning to retire in your early 60s. Under the current system, the FERS annuity supplement could provide several hundred dollars per month until Social Security kicks in at 62. If eliminated, you’d need to draw more heavily on personal savings or delay retirement.
Similarly, switching from high-3 to high-5 salary averages could cut your pension by thousands over the course of your retirement — especially if your highest earning years were recent.
It’s important to note that the bill still faces negotiation and potential revision. However, the uncertainty it creates makes proactive planning essential.
Learn more about your retirement benefits at our No-Cost webinars, featuring Ed Zurndorfer -
Who Might Be Exempt
Not all federal employees will be affected equally. Here’s where exemptions may apply:
- Mandatory Early Retirement Employees: Those in special categories (e.g., law enforcement, air traffic control) may be shielded from certain cuts, like eliminating the FERS supplement.
- Grandfathering Provisions: Some current employees could be “grandfathered” into the current rules based on service time or retirement eligibility as of a certain date, but the timeline and criteria are still under discussion.
Keeping an eye on implementation dates and eligibility windows is key.
What You Can Do Right Now
It’s tempting to react with frustration or fear, but the best move is to get informed and prepare. Here’s where to start:
- Get a benefits review: A federal benefits-trained CERTIFIED FINANCIAL PLANNER™ professional can help model how these changes could impact your retirement timeline and income.
- Use free resources: The CFP Board offers free tools to help you find a vetted financial advisor.
- Educate yourself: Stay up to date through trusted sources, not social media rumors.
Stay Informed and Stay Ready
While this bill isn’t final, it reflects a growing push to reduce long-term federal spending, and retirement benefits are in the crosshairs. Whether these changes are adopted in full, in part, or not at all, preparing for a range of scenarios puts you in the best position to protect your future.
Reach out to the team at Serving Those Who Serve at [email protected] for a personalized review of how potential changes may affect your federal benefits — and how you can respond with confidence.
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
