Federal Retirement Benefit Changes in 2025: What’s Proposed, What’s Changed, and What Federal Employees Need to Know

In early 2025, federal employees and retirees faced significant uncertainty as Congress debated major changes to federal retirement and health benefits. Many of these ideas originated in H.Con.Res. 14, the House Republican budget resolution passed on February 25, 2025, by a narrow 217–215 vote along party lines. The resolution set reconciliation instructions to pursue $4.5 trillion in tax cuts, increased funding for border security and immigration enforcement, and roughly $2 trillion in spending reductions, including at least $50 billion in cuts assigned to the House Committee on Oversight and Government Reform.

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Because federal retirement and health benefits are the primary mandatory spending programs under that committee’s jurisdiction, federal employees and retirees immediately became a focal point of concern.

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The National Active and Retired Federal Employees Association (NARFE) strongly opposed this approach. In a letter to the House, NARFE National President William “Bill” Shackelford warned that cutting earned benefits, especially during a period of downsizing and workforce instability, would further undermine the federal civil service and the government’s ability to recruit and retain qualified employees.

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Proposed Federal Retirement Changes: What Was Considered

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As reconciliation language developed, several proposals emerged that alarmed federal employees. Over time, some were softened, others removed entirely, and a few survived in modified form.

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1. High-3 vs. High-5 Pension Calculation

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What was proposed:
One of the most controversial ideas was changing the FERS pension calculation from the highest three consecutive years of salary (high-3) to the highest five years (high-5). This change would have reduced lifetime pension benefits for most future retirees.

Current status:
This proposal was removed during the legislative process. The final legislation does not replace high-3 with high-5, and there is currently no enacted change to the FERS pension calculation methodology.

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2. Elimination of the FERS Annuity Supplement (Effective 2028)

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What remains in law:
While some proposals were dropped, the elimination of the FERS annuity supplement remains the most significant enacted change affecting future retirees.

The FERS annuity supplement is designed to bridge the income gap for employees who retire before age 62, replacing the Social Security benefit they would have received had they waited until Social Security eligibility.

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Under the enacted legislation:

• The FERS annuity supplement is scheduled to be eliminated beginning January 1, 2028.
  
• Employees who are already “entitled” to retire with the supplement before that date are expected to retain eligibility.
  
• The exact definition of “entitled” remains an area of uncertainty and may require future regulatory guidance.
  
  

How the FERS Supplement Works Today

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• It is payable until the earlier of:
  
  • The month before eligibility for Social Security, or
    
  • The month the retiree reaches age 62.
    
• It is calculated as if the retiree were age 62 and applying for Social Security, based only on FERS-covered civilian service.
  
  

Example:
If a retiree’s estimated full-career Social Security benefit is $2,000 per month and they completed 30 years of FERS service, the calculation would be:

• 30 ÷ 40 = 0.75
  
• $2,000 × 0.75 = $1,500 per month (before reductions)
  
  

Earnings Test

The FERS supplement is subject to an earnings test similar to Social Security:

• For 2025, the commonly referenced earnings limit is $23,400.
  
• Benefits are reduced $1 for every $2 earned above the limit.
  
  

Who Is Less Likely to Be Affected

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You generally do not need to worry about the 2028 change if you are:

• Already receiving the FERS annuity supplement
  
• Age 62 or older by December 31, 2027
  
• Retiring under disability, deferred retirement, or MRA+10 provisions (which do not include the supplement)
  
• Planning to earn enough post-retirement income that the supplement would be reduced or eliminated by the earnings test
  

Mandatory retirement employees (such as certain law enforcement officers, firefighters, and air traffic controllers) were addressed separately during the legislative process, and clarifications preserved supplement eligibility in specific mandatory-retirement scenarios.

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3. Increased FERS Retirement Contributions

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What was proposed:
Another option discussed was increasing retirement contribution rates, potentially requiring all FERS employees to contribute 4.4% of their salary, regardless of hire date.

Current status:
Contribution increases for current employees were ultimately not enacted. Existing contribution structures remain unchanged as of now.

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4. Federal Employee Health Benefits (FEHB) Changes

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What was discussed:

Early proposals included restructuring FEHB funding, including concepts resembling a voucher-style system.

Current status:
No broad FEHB restructuring affecting current retirees or employees was enacted as part of this legislation.

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Potential Implications for Federal Employees

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Even though several major proposals were removed or softened, the 2025 process highlighted key realities:

• Federal retirement benefits are not immune to future budget negotiations.
  
  
• Late-career employees face the greatest uncertainty during periods of legislative change.
  
  
• Retirement decisions should be based on current law, not draft proposals or headlines.
  
  

Federal Retirement Basics (Still Unchanged)

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CSRS vs. FERS

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• CSRS applies primarily to employees hired before January 1, 1984, and is a pension-based plan.
  
• FERS applies to most current employees and consists of:
  
  • A defined benefit pension
    
  • Social Security
    
  • The Thrift Savings Plan (TSP)
    
    

FERS Pension Formula

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• Standard: 1% × high-3 salary × years of service
• Enhanced: 1.1% factor for employees retiring at age 62 or later with at least 20 years of service
  
  

Other Key Retirement Components

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Social Security

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Federal employees contribute 6.2% of pay to Social Security, with a matching employer contribution. Claiming age decisions significantly affect lifetime benefits.

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Thrift Savings Plan (TSP)

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The TSP remains a cornerstone of federal retirement planning, offering:

• High contribution limits
  
• Employer matching (where applicable)
  
• Lifecycle and core fund options
  
  

FEHB in Retirement

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Eligible employees can continue FEHB into retirement. While premiums may feel higher, the change often reflects fewer annual deductions rather than a true increase in cost.

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Survivor Benefits and FEGLI

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Survivor elections and life insurance choices (FEGLI) vary significantly between CSRS and FERS and require careful planning to avoid unintended benefit reductions.

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Final Takeaway: Don’t Panic Plan

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One consistent lesson from decades of federal retirement policy is this: proposed legislation changes frequently, and acting too early can be costly.

For employees nearing retirement, the most important steps are:

• Confirm eligibility timelines
  
• Understand exposure to the 2028 FERS supplement change
  
• Model retirement income with and without the supplement
  
• Avoid irreversible decisions based solely on proposals
  

A federal career can still offer long-term security but only when retirement decisions are made with clarity, patience, and accurate information.

Frequently Asked Questions:

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What are the FERS retirement changes for 2025?

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As of 2025, most core FERS retirement benefits remain unchanged, but there are important legislative developments federal employees should understand.

Key points for 2025:

• The High-3 pension calculation remains in place; proposals to move to High-5 were removed.
• FERS employee contribution rates have not increased for current employees.
• The most significant change is the scheduled elimination of the FERS annuity supplement beginning January 1, 2028, for employees not yet “entitled” to retire with the supplement by that date.
• FEHB, TSP matching, and basic pension formulas continue under existing rules.

In short, 2025 is more about future planning than immediate benefit cuts, but employees nearing retirement should review their timelines carefully.

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What are the new retirement rules for 2025?

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There are no brand-new retirement eligibility rules that take effect in 2025 for federal employees. However, Congress passed legislation in 2025 that changes the long-term outlook, especially for employees planning to retire before age 62.

Important clarifications:

• Minimum Retirement Age (MRA) rules remain the same
• FERS pension formulas remain unchanged
• Social Security eligibility rules are unchanged
• The law introduces a future change (2028) to the availability of the FERS annuity supplement

For most employees, retirement rules in 2025 operate under existing law, but retirement strategies may need adjustment due to changes coming later in the decade.

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What is the retirement benefit for 2025?

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Federal retirement benefits in 2025 continue to be based on the three-part FERS structure:

1. FERS Pension
   • Generally calculated as 1% × high-3 average salary × years of service
   • Increases to 1.1% for employees retiring at age 62 or older with at least 20 years of service
2. Social Security
   • Employees contribute 6.2% of pay (with employer match)
   • Benefits depend on lifetime earnings and claiming age
3. Thrift Savings Plan (TSP)
   • Includes employee contributions, agency automatic contributions, and matching (up to 5%)
   • Investment options and contribution limits continue under existing rules

For employees retiring in 2025, benefits are calculated the same way they have been in recent years, subject to individual service history and retirement timing.

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Will retirement age change in 2026?

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As of now, there is no law changing the federal retirement age in 2026.

• The Minimum Retirement Age (MRA) remains based on year of birth (between ages 55–57).
• There is no enacted increase to the retirement age for FERS or CSRS employees.
• While retirement age changes are occasionally discussed in policy circles, no approved legislation raises the retirement age for 2026.

Federal employees should always monitor proposals, but retirement planning should be based on current, enacted law not speculation.

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Content Disclaimer

This article is for educational and informational purposes only and is not intended as legal, tax, or individualized retirement advice. Federal retirement rules are complex and subject to legislative and regulatory change. Individual outcomes depend on factors such as age, length of service, retirement type, earnings, and benefit elections. Federal employees should consult with a qualified federal retirement or financial professional before making retirement or employment decisions.

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Content References & Source Framework

• U.S. House budget resolution H.Con.Res.14 (118th Congress)
• Public Law 119-21 (H.R. 1, 2025 reconciliation legislation)
• Congressional Budget Office (CBO) cost estimates
• Office of Personnel Management (OPM) retirement guidance
• National Active and Retired Federal Employees Association (NARFE) legislative updates
• Pew Research Center analysis on federal budgeting and appropriations
• OPM FERS Handbook and Social Security coordination materials

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