On April 30, 2025, the U.S. House Oversight and Government Reform Committee advanced a slate of measures related to the GOP's budget reconciliation package.

The Committee voted on six proposals that impact the Federal Employee Retirement System (FERS) with no transition period, meaning all current workers — regardless of how close they are to retirement — would likely see a reduction in their pension benefits. If adopted into the final version of the reconciliation legislation, the proposals would make the following changes:

• Increase the FERS employee contribution requirements to 4.4% across the board; this would align the amount employees are required to contribute for the same benefits between the three federal retirement systems (FERS, FERS Revised Annuity Employee, and FERS Further Revised Annuity Employee) phased in over four years beginning Jan. 1, 2026;

• Eliminate the FERS annuity supplement (a temporary income bridge for federal employees who retire before becoming eligible for Social Security at age 62), except for those in occupations subject to mandatory early retirement;

• Change the calculation of both the legacy Civil Service Retirement System and FERS pensions from an average of the three highest years of compensation to an average of the five highest years (applicable to individuals who retire after the date of enactment);

• Consider all new federal employees as "at-will” (meaning that employees or employers can terminate employment for any reason provided the termination isn't illegal) in exchange for a lower mandatory employee contribution into FERS. If new federal employees choose to proceed with associated protections (or fail to choose), an employee would see an increase of 5% in required employee contributions to FERS, bringing the contributions percentage to 9.4% of their pay; this applies to individuals initially appointed to positions in the civil service on or after the date of enactment;

• Charge federal employees a $350 fee to file an appeal with the Merit Systems Protection Board, which would be refunded to workers who win their appeals; and

• Require the Office of Personnel Management to audit the Federal Employees Health Benefits program enrollees for ineligible participants.

In addition, a majority (60%) of public service employees say their retirement plans or other benefits make them more inclined to stay with their current public sector employer, according to the MissionSquare Research Institute. This remains a critically important consideration for employers seeking to recruit and retain their workforce.

MissionSquare will provide updates as these proposals evolve and possibly advance in the broader reconciliation package.

For additional information, please contact Irica Solomon, Head of Government Affairs.