Big Changes Coming to FERS: If you’re a federal employee, pay close attention — big changes are on the way for the Federal Employees Retirement System (FERS). Recent legislation has passed in the U.S. House of Representatives that could shake up retirement plans, job security, and the entire system federal workers rely on. Whether you’re planning to retire soon, just starting your career, or somewhere in between, it’s crucial to understand what’s happening.
In this article, we’ll break down the changes in simple, everyday language with real-world examples, expert advice, and practical tips. Whether you’re a career fed or just curious about how this might affect you or someone you know, this guide will give you the tools you need to stay ahead of the game.
Big Changes Coming to FERS
The big changes coming to FERS mark a pivotal moment for federal workers. From the loss of the annuity supplement to optional at-will employment, these changes will impact financial planning, job security, and retirement decisions. By staying informed, preparing early, and seeking expert guidance, federal employees can navigate these shifts with confidence and resilience.
| Change | Effective Date | Impact |
|---|---|---|
| Elimination of FERS Annuity Supplement | January 1, 2028 | Early retirees may lose income bridging to Social Security |
| Optional At-Will Employment for New Hires | Upon enactment | New hires choose between job security or lower contributions |
| $350 MSPB Filing Fee | Upon enactment | Filing fee for appeals; refundable upon success |
| Digital Retirement Processing | June 2, 2025 | Retirement applications must be online |
A Quick History of FERS
Let’s rewind a bit. FERS was established in 1987, replacing the old Civil Service Retirement System (CSRS) to create a more flexible retirement plan. It includes three components:
- Basic Benefit Plan (similar to a pension)
- Social Security
- Thrift Savings Plan (TSP), which works like a 401(k)
This system was designed to offer more portability and balance, but the upcoming changes might alter this balance in ways that both new and seasoned federal workers should understand.
1. Elimination of the FERS Annuity Supplement
Starting January 1, 2028, the FERS annuity supplement will be eliminated. This supplement currently provides income to employees who retire before age 62, bridging the gap until they can claim Social Security. If you plan to retire early after this date, you may lose this key source of income.
Example: If you’re 57 in 2029 and plan to retire, you won’t get the supplement, potentially reducing your expected income by several thousand dollars per year.
Pro Tip:
Start crunching numbers now.
2. Optional At-Will Employment for New Hires
New federal hires will have a choice:
- Contribute 9.4% of salary to maintain traditional civil service protections.
- Contribute 4.4% of salary but become an at-will employee, meaning you can be fired without notice or appeal rights.
This is a major shift that could impact recruitment, retention, and the overall quality of federal service.
Example: A new GS-9 hire in 2026 could save 5% in contributions but risk job security.
Pro Tip:
Weigh the trade-off. If stability is crucial for you, paying the higher contribution might be worth it.
3. $350 MSPB Filing Fee
The bill introduces a $350 filing fee for federal employees appealing to the Merit Systems Protection Board (MSPB). While refundable if your appeal succeeds, it could deter legitimate claims of discrimination or wrongful termination.
Example: If you feel wrongfully terminated, the upfront fee might make you hesitate to fight for your rights.
4. Digital Transition of Retirement Processing
Starting June 2, 2025, the Online Retirement Application (ORA) system becomes mandatory for federal retirement processing. Paper applications will no longer be accepted after July 15, 2025.
Example: If you plan to retire in late 2025, make sure you’re comfortable using the ORA system.
Pro Tip:
Get familiar with the ORA system ahead of time
Current Legislative Status
The House has passed the budget reconciliation bill containing these provisions. Now it heads to the Senate, where it may face amendments or delays.
Real-World Impacts
Imagine a long-time federal worker named Linda, planning to retire in 2029 at age 58. Under the current rules, she would receive the annuity supplement, making her transition to retirement smoother. With the new rules, she’d need to either delay retirement or make up for the lost income, possibly by working part-time or tapping into her TSP early.
Expert Tips for Navigating the Big Changes Coming to FERS
- Start planning now: Work with a Certified Financial Planner (CFP) familiar with federal benefits.
- Stay informed: Follow updates from OPM, FedSmith, and GovExec.
- Consider your employment options: If you’re new to federal service, think carefully before choosing at-will status.
- Prepare for digital processing: Set up your ORA account well before retirement.
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House Reconciliation Bill Passes; Federal Employees Brace for Major Retirement Shake-Up
How AFGE Just Stopped Devastating Retirement Cuts for Federal Workers; What It Means for You
Frequently Asked Questions (FAQs)
Q1: Who’s affected by the FERS annuity supplement change?
A1: Federal employees retiring on or after January 1, 2028, who aren’t already eligible, will lose this benefit.
Q2: What does at-will employment mean?
A2: It means you can be terminated at any time without notice or right to appeal, in exchange for contributing less to retirement.
Q3: Is the $350 MSPB fee refunded if I win my case?
A3: Yes, it’s refundable upon a successful appeal.
Q4: How do I access the ORA system?
A4: Log in at OPM’s Services Online portal.
