It appears that nearly all proposed changes to federal employees’ pay and benefits may be off the table based on the latest legislative text for the One Big Beautiful Bill.
Politico reported that the provisions with the most direct impacts on federal employees in the reconciliation text from the Senate Committee on Homeland Security and Governmental Affairs (HSGAC) have been removed. The only remaining HSGAC governmental affairs provisions are the clauses on FEHB improvements, Pandemic Response Accountability Committee, and appropriation for the Office of Management and Budget.
Provisions Eliminated
The list of proposed benefits cuts has been effectively eliminated in this latest draft text compared to how the list looked when it first emerged in the House of Representatives back in April.
According to Politico, there is only one item remaining that is of any direct relevance to federal employees which is the clause on FEHB improvements. This provision requires implementing a process to verify the eligibility of family members added to Federal Employees Health Benefits (FEHB) plans upon enrollment, imposes an audit on the FEHB program for ineligible family members receiving benefits, and requires the disenrollment of any ineligible beneficiaries. The HSGAC previously estimated this would create $2 billion in savings for the government.
The following items are provisions that have been proposed in previous versions of the reconciliation text but are not included in the latest version reported by Politco on June 28.
At-Will Employment Option and Higher FERS Contribution Rates
This provision was floated in both the House and Senate and has changed a few times, but in short, it would have required newly hired federal employees to contribute more to the Federal Employees Retirement System (FERS) and/or become at-will employees in exchange for a smaller contribution amount.
A draft version of reconciliation text that Politico obtained floated the idea of dropping the at-will employment option and raising the total FERS contribution rate to 15.6% of federal employees’ annual salaries.
MSPB Filing Fee
This provision would institute a $350 filing fee for claims and appeals to the Merit Systems Protection Board. The fee would be refundable for successful claims.
Fee for Federal Employees’ Pay Deductions
This provision came out of the Senate Committee (HSGAC) and would impose a 10% fee to cover administrative costs for any optional payroll deductions for certain tax-exempt organizations, namely unions. Contributions from employees to organizations via methods that don’t require government resources, such as writing a check or transferring money via ACH, would not be affected.
This was proposed because the government incurs costs to establish and facilitate payroll deductions for federal employees so the HSGAC felt Uncle Sam should at least break even on those costs.
Bonuses for Cost Cutters
This provision pays bonuses to federal employees who report wasteful spending that tends to arise towards the end of the government’s fiscal year, i.e. the “use it or lose it” mentality.
Charging Unions for Use of Federal Resources
This proposal mandates that unions reimburse the government when official time and resources are used for union activities.
Rescinding USPS EV Funds
Another Senate provision, this would rescind over $1 billion in funds given to the Postal Service via the Inflation Reduction Act and require it to sell these remaining EVs and unused infrastructure.
Elimination of the FERS Annuity Supplement
This provision that originated in the House would do away with the FERS annuity supplement effective January 1, 2028. It was in the version of the One Big Beautiful Bill that passed the House.
Change to High-5
This provision that originated in the House would have changed from a high-3 to a high-5 for calculating FERS pensions.
What’s Next?
The legislative process for large spending bills such as this one is complex, and any proposals it contains are subject to change or elimination. We have certainly seen that with these provisions over the last couple of months, and even longer from a historical perspective; some of these proposals have been floated going back decades and have never come to fruition.
While this will be welcome news for federal employees who have been worried about these proposals because it appears they may be eliminated from the reconciliation bill going forward, the legislation is still subject to change as it continues to move through Congress, so it is still possible for them to still reappear and/or be modified. The final answers will ultimately come when the bill is signed into law.
As always, we will continue to provide updates as they become available.
