What Federal Benefit Cuts Could Mean for Your Pension and Job Rights
May 08, 2025Congress is weighing proposals that could significantly impact federal retirement and job security. While none of the changes are law yet, they’ve sparked real anxiety—especially for FERS employees planning to retire in the next few years. Here’s what’s actually on the table, what it means for you, and how to respond mindfully, not fearfully.
1. “High-3” Becomes “High-5” Pension Calculation
Under the proposed changes, your federal pension could be calculated using your highest five consecutive earning years instead of the current “high-3.” For those with a recent salary spike, this could lower your annuity significantly. If enacted, this shift would apply to anyone retiring on or after January 1, 2027, including CSRS employees still in service.
✅ What to do now: Review your most recent annuity estimates. If your retirement plans hinge on recent promotions or overtime-heavy years, consult a professional to assess how the “high-5” rule might impact you.
2. Elimination of the FERS Annuity Supplement
This supplement bridges the income gap for early retirees until Social Security eligibility at age 62. The proposed law would eliminate it immediately for anyone not already receiving it. Mandatory retirement employees (e.g., law enforcement) may be exempt, but that’s not guaranteed.
✅ If you’re considering early retirement (VERA/VSIP or DRP), this is a critical time to get clarity. Many employees have already filed paperwork and now face uncertainty—you're not alone.
3. Increased FERS Contributions for All Employees
All current employees could see phased increases to their retirement contributions, capped at 4.4% of basic pay by 2027. Those hired before 2013 could see their contributions double or more.
✅ What this means: Your take-home pay could shrink in the coming years—another reason to revisit your financial planning now, not later.
4. At-Will Employment Trap for New Hires
New hires may be forced to choose between paying 4.4% and giving up civil service protections—or paying 9.4% to keep them. If no active choice is made by the end of probation, they default to at-will status: no notice, no appeal, no protection.
✅ This isn’t just for new hires: If you mentor, manage, or onboard new employees, you need to understand this risk and educate others accordingly.
5. MSPB Filing Fee Introduced
The Merit Systems Protection Board (MSPB) has always allowed federal employees to file appeals for free. Under the proposal, it would now cost $350 to file—unless you win.
✅ Why this matters: This could chill whistleblower protections and disproportionately hurt lower-grade employees. If you’re a union rep, EEO counselor, or advocate, stay alert.
What You Can Do Now
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Pull your SF-50s and retirement estimates from your eOPF.
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Talk to your benefits counselor—but understand they may not have the full picture yet.
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Understand the risks of at-will status if you're in or advising someone in probation.
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Stay informed. We track these developments daily for our clients.
If you want steady updates with legal clarity—not spin—our free Power Hub Newsletter offers deeper guidance as this unfolds.
Legal Disclaimer: The information provided in this article is for informational purposes only and should not be construed as legal advice. While I am a federal employment attorney, this post does not create an attorney-client relationship. Every situation is unique, and legal outcomes depend on specific facts and circumstances.