Congress passed the 2025 budget reconciliation bill in July, but for many Feds, the biggest question remains: Is my pension safe?
Proposals to eliminate the FERS annuity supplement and switch to a high-5 calculation didn’t make it into the final law, but they came closer than expected.
The conversation around federal retirement reform is far from over, and future budget cycles may reopen the door. That’s why legal and legislative trends are still worth watching closely.
What Made It — and What Didn’t — in the 2025 Reconciliation Bill
The 2025 budget reconciliation bill passed in July stopped short of implementing sweeping retirement changes for Feds, but it didn’t leave things untouched either. Here's what was included, what was left out, and what might be revisited.
FERS Supplement Eliminated — Starting in 2028
Section 90001 of the final law eliminates the FERS annuity supplement starting in January 2028, but only for individuals who have not yet become entitled to it by that date. If you’re already receiving the supplement — or become eligible before 2028 — you’ll continue to receive it.
COLA Freeze Floated, but Not Enacted
Lawmakers debated a freeze on cost-of-living adjustments (COLAs), especially for FERS retirees who already receive reduced COLAs under current law. The proposal faced strong opposition and was not included in the final bill. COLAs remain unchanged for now, but future proposals could bring the issue back into play.
High-3 to High-5 and Contribution Hikes Dropped
Proposals to change the pension formula from “high-3” to “high-5” and to raise employee contributions were both cut during reconciliation. Neither appeared in the final legislation. Still, the fact that they advanced through early drafts is a clear sign: these cost-cutting ideas aren’t going away.
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Legal Decisions That Could Affect Your Benefits
Not all changes come from Congress. Some are coming from the courts.
Recent rulings have focused on TSP divorce award errors, where incorrect payment timing or order interpretation has led to disputes and underpayments. Other decisions have clarified how military time, temporary service, or leave without pay (LWOP) are counted toward retirement eligibility, prompting some agencies to adjust their credit calculations.
Even state-level pension cases, although not directly binding on federal plans, are being closely watched. Legal arguments around cost-of-living freezes and retroactive benefit cuts could shape future challenges if similar reforms reach the federal level.
For Feds nearing retirement, these decisions are a reminder: it’s not just legislation that can shift your benefits: It’s how the rules are applied.
What to Watch in Late 2025 and Beyond
The reconciliation bill may be settled, but the broader debate is far from over. Lawmakers have already hinted that some of the dropped provisions could return in future sessions, including COLA changes and pension formula adjustments.
There’s also a slow but steady shift in tone: a growing emphasis on individual responsibility for retirement. As pressure builds to cut costs, Feds may see fewer guaranteed benefits and more reliance on personal savings through the TSP and outside accounts.
Know the Landscape, Protect Your Future
For now, your pension remains intact — but that doesn’t mean it’s immune to future change. FERS legal changes and broader federal retirement policy updates are gaining traction in Congress and the courts, even if they haven’t fully landed yet.
That’s why staying informed matters. Knowing where things stand today helps you make better decisions for tomorrow, especially as more responsibility for retirement planning shifts to individual Feds.
Have questions about how recent developments may affect you? Reach out to the team at Serving Those Who Serve at [email protected]. We’re here to help you navigate it all.
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