The House Budget Committee met last night to vote on the budget bill that had originally failed to pass out of the Committee on Friday. The bill, dubbed the One Big Beautiful Bill Act, was approved Sunday night and contains some important changes of interest to federal employees.
The legislative process is complex and not designed to make it easy for those who are impacted to understand or read laws being considered or passed. I have tried to distill it down as best I can.
Proposed Cuts to Federal Employees’ Retirement Benefits
Here is a quick recap: These proposals were put forth by the House Committee on Oversight and Government Reform in its part of the 2025 budget legislation. The proposals related to items within the Committee’s purview and were put on the table to achieve the Committee’s stated goal of eliminating at least $50 billion from the federal deficit.
The House Oversight Committee held a markup hearing on April 30 in which it passed the package of proposals. They then became part of a larger budget bill that went to the House Budget Committee for further consideration.
Changes in Latest House Budget Legislation
After the House Budget Committee advanced the legislation last night, these are the key changes to the package of proposals impacting federal employees.
Increased Retirement Contributions Eliminated
I reported last week that the proposal to raise retirement contributions for some federal employees was in jeopardy because it was facing opposition from some House Republicans. That proposal has been struck from the latest draft of the legislation.
This proposal would have raised the amount that some federal employees, Members of Congress, and Congressional staffers have to contribute to the Federal Employees Retirement System (FERS) regardless of when they were hired. Law enforcement officers (LEOs) and related groups would be exempt. For more details about what this proposal contained, see Pension Reform Showdown: Lawmakers Oppose FERS Contribution Hike.
The important point here, though, is that this proposal is apparently off the table since it was struck from the version of the bill passed by the House Budget Committee.
Elimination of the FERS Annuity Supplement
This is a proposal that many readers are asking about.
The FERS annuity supplement, a.k.a. the special retirement supplement (SRS), is a benefit paid until age 62 to certain federal employees under the Federal Employees Retirement System (FERS) who retire before age 62 and who are entitled to an immediate annuity. It approximates the value of FERS service in a Social Security benefit.
The general purpose of the supplement is to provide a portion of income before age 62, similar to what retirees would have received in a Social Security benefit had they attained age 62 and applied for Social Security benefits.
The legislation approved by the House Budget Committee modifies this proposal in some important ways.
It now appears to grandfather in current recipients of the annuity supplement. It would not apply to individuals who were already entitled to an annuity supplement under Title 5 Section 8421 of the US law code before the enactment date of this legislation.
Additionally, the modified language says that if the legislation were to become law as currently written, it would not take effect until January 1, 2028, and would not apply to any individuals entitled to the annuity supplement under law prior to that date.
The text of this section of the legislation now reads:
SEC. 90001. ELIMINATION OF THE FERS ANNUITY SUPPLEMENT FOR CERTAIN EMPLOYEES.
(a) IN GENERAL.— Section 8421(a) of title 5, United States Code, is amended—
(1) in paragraph (1), by inserting “ separated from service under section 8425 or entitled to an annuity under subsection (d) or (e) of section 8412 of this title ” after “ individual ”; and
(2) in paragraph (2), by inserting “ separated from service under section 8425 or entitled to an annuity under subsection (d) or (e) of section 8412 of this title ” after “ an individual ”.
(b) APPLICABILITY.— The amendments made by this section shall begin to apply on January 1, 2028, and shall not apply with respect to any individual entitled to an annuity supplement under section 8421 of title 5, United States Code, prior to such date.
Change From High-3 to High-5
The key change on this proposal is that instead of taking effect on January 1, 2027, it would now take effect one year later on January 1, 2028.
Other Proposals Remain in Place
The other proposed changes, the option to elect at-will employment for new hires in exchange for lower retirement contributions, the MSPB filing fee, and the FEHB integrity audits are still in place in the modified legislation with few significant changes.
For more information on these proposals, see my other articles:
- Additional Details Regarding Proposed Cuts to Federal Employee Benefits
- Benefits Cuts on the Table in House Budget Legislation
- Federal Retirement Reforms: Winners, Losers, and the Bottom Line
Conclusion
I know many of you have questions about these proposed legislative changes and how they would impact you in your situation specifically. Some of you have also asked if or when these would become law. I cannot answer those questions directly, unfortunately, and cannot predict if, when, or how these changes will be reflected in any final legislation that may pass.
What I can do is provide updates on the status of the proposed changes to keep you informed so that you can make the best decisions for you and your situation. Any decisions you choose to make regarding your federal employment or retirement should be considered carefully and made with your family, financial and benefits advisors, or other key stakeholders in the process.
I’ve been saying all along that these proposals are likely to change or be dropped entirely as they move through the legislative process. We have seen that happen here, and more changes are possible as the legislation continues to work its way through Congress. There is still a long way to go in the process, namely that the legislation has to be considered by the House of Representatives as a whole as well as the Senate, so more changes are certainly possible. FedSmith will continue to provide more updates as they become available.
