Federal officials propose slashing benefits for public employees to finance tax reductions for businesses and high earners
In a move that could significantly impact federal workers, the House Oversight and Reform Committee has proposed a budget reconciliation package that includes a new round of cuts to federal workers' retirement benefits. This package, which aims to extend and expand tax cuts for the ultra-wealthy, first implemented during President Trump's first term, is expected to be considered by the committee in the fall of 2025.
The proposed changes, if enacted, could result in a reduction in federal spending of up to $35.2 billion. One of the key modifications is the potential elimination of the FERS supplement for federal workers retiring before age 62, except for law enforcement officers and employees with mandatory early retirement. This change would affect a wide range of public servants, including those who ensure Social Security checks are delivered on time, help veterans, safeguard national defense, care for the sick and injured, help parents, and more.
New hires into government would face a 5 percentage-point hike in their FERS contribution to 9.4% of basic pay, unless they elect to serve on an at-will basis. Existing federal workers would see their FERS employee contributions increase from 4.4% to 4.4%. The proposal also includes the imposition of a new pension surcharge unless a new hire elects to serve on an at-will basis.
The calculation for federal retirees' annuity payments may change from the average of their highest three years of salary to a new formula averaging the highest five years of salary. Additionally, the planned increases to the cost of federal workers' defined benefit annuity come alongside proposals to reduce the value of the pension benefit.
Chairman James Comer, in a statement, emphasized the committee's commitment to President Trump's "America First" agenda and ensuring taxpayer dollars are used effectively, efficiently, and responsibly. He described the House Oversight Committee's reconciliation proposal as a "substantial win for fiscal responsibility."
However, Ranking Member Gerry Connolly criticized the committee's reconciliation proposal, calling it a "billionaire giveaway." He accused the committee of targeting federal programs and public servants, arguing that the proposed changes are designed to subsidize tax giveaways for billionaires.
In a separate development, Connolly announced he will step aside from his role on the panel due to a cancer relapse. His departure from the committee leaves a significant gap in the representation of federal workers' interests in the ongoing discussions about the proposed changes.
Meanwhile, President Trump is expected to announce a pay freeze in 2026, setting up agency employees for an effective pay decrease next year. Furthermore, the Office of Personnel Management has been ordered to conduct a comprehensive audit of the Federal Employee Health Benefits Program to identify dependents no longer eligible for benefits.
These proposed changes, if enacted, could have a profound impact on federal workers and their retirement benefits. The exact date for the committee markup has not been specified yet, but preparation and advocacy efforts are ongoing following the July 4 enactment of the budget reconciliation law.
