high 3 vs high 5, the 'big, beautiful bill', and 'the fork in the road' question,...

[Wind]

If this is not appropriate for this forum, i'm not offended at its removal,..

but I can't get more info than just casual swirl of rumors that the 'big beautiful bill' includes changes to long-standing civil service agreements such as switching the retirement annuity calculation from 'high 3' years to 'high 5'; potentially reducing retirement benefits for most future retirees.

If the big beautiful bill passes with provisions like this, will it become law in time to affect the employees that accepted the fork in the road agreement and remain in employ through september?

thanks,

Wind

[Bubba]

I'm a bit confused, because in other places I found the high 3 to high 5 to be in the bill. Here its stating that is not the case. So, you'll have to look a bit more into that

https://www.fedweek.com/issue-briefs/re ... ding-bill/

[PhilJohn]

I believe it takes effect Jan 01, 2028, for all Federal Employees.

[Wind]

Thanks for the link! I guess all together - it is wait and see :/

[Aitrus]

If this is not appropriate for this forum, i'm not offended at its removal,..

So long as the discussion applies to how it affects retirement and doesn't devolve into political bashing / personal attacks, we're good to go.

*takes off Moderator hat*

Here's the most thorough article I've seen regarding what's in the version that's passed the House and is currently sitting at the Senate.

https://www.fedsmith.com/2025/05/28/imp ... ding-bill/

TLDR - Of the six items that were originally proposed, two were cut. These four things are still in the bill passed by the House (no idea about how likely these are to stay in the final Senate's version):

- Elimination of the SSA Supplement for early retirees
- 9.4% retirement contribution into FERS unless the worker accepts at-will employment to reduce the contribution to 4.4% (would apply only to new hires)
- A $350 fee to file a complaint with MSPB
- Audits of FEHB dependents (make sure only those receiving coverage are actually eligible)

The items that were cut:
- The High 3 to High 5 calculation
- The idea to make everyone - current workers as well as any new hires - pay at least 4.4% into FERS

[IRQVET]

Thanks Aitrus, I haven’t been following this as closely as I probably should.

[Aitrus]

Here's an update regarding the civil service benefits changes (and a couple of others) that have been proposed in the Senate. Please note: these are not approved changes in the Senate bill. These come from a committee, and the Senate needs to go through the process to include or reject them. Think of this as "These are the things the Senate is thinking about in their version. A final bill would still need to be agreed upon in both House and Senate."

1 - CHANGE: All new hires pay 9.4% towards FERS, and pay an extra 5% if they want to be part of a union (total 14.4%). The original proposal was for all new hires to pay 4.4%, with an extra 5% (total 9.4%) for union membership, so this is flat increase of 5% from the House version.

2 - REMOVED: The proposal to eliminate the FERS Annuity Supplement (SSA payments if you retire early) is gone.

3 - NO CHANGE: The MSPB filing fee of $350 to discentivize "baseless claims" stays the same.

4 - NO CHANGE: Verify eligibility of all family members upon enrolling into FEHB, conduct an audit of all current dependents, and disenroll all who aren't eligible (unchanged from the House bill).

5 - NEW ITEM: A 10% additional fee to cover administration costs for any optional disbursements from one's paycheck to non-profit organizations. Meaning: You donate money directly from your paycheck to a union or to a charitable organization (an example would be the annual Combined Federal Campaign). You would also pay an additional 10% of whatever you donate to cover the business overhead of having the government process that donation from your paycheck instead of you just cutting a check and mailing it yourself / VENMO / PayPal / etc.

6 - NEW ITEM: An incentive payment for cost cutters in the government. If a civil service worker does something to save the taxpayer money (comes up with an efficiency, cuts a program that doesn't need to exist, etc.), then they get either 1% of the amount saved or a flat $10,000, whichever is less.

7 - NEW ITEM: A requirement that the union reimburse the government back whenever employees use official time and resources (office space, computers, 'net access, hours worked, etc) to engage in union activities.

8 - NEW ITEM: Revoke the $1b in funds given to the USPS under the Inflation Reduction Act for purchasing electric vehicles and installing the infrastructure to support them.

My read on all of this is that these are bargaining tactics that are starting high (like the 14.4% to be a union member) in order to achieve something in the middle.

Source: https://www.fedsmith.com/2025/06/13/sen ... iful-bill/

[Bubba]

Here's an update regarding the civil service benefits changes (and a couple of others) that have been proposed in the Senate. Please note: these are not approved changes in the Senate bill. These come from a committee, and the Senate needs to go through the process to include or reject them. Think of this as "These are the things the Senate is thinking about in their version. A final bill would still need to be agreed upon in both House and Senate."

1 - CHANGE: All new hires pay 9.4% towards FERS, and pay an extra 5% if they want to be part of a union (total 14.4%). The original proposal was for all new hires to pay 4.4%, with an extra 5% (total 9.4%) for union membership, so this is flat increase of 5% from the House version.

2 - REMOVED: The proposal to eliminate the FERS Annuity Supplement (SSA payments if you retire early) is gone.

3 - NO CHANGE: The MSPB filing fee of $350 to discentivize "baseless claims" stays the same.

4 - NO CHANGE: Verify eligibility of all family members upon enrolling into FEHB, conduct an audit of all current dependents, and disenroll all who aren't eligible (unchanged from the House bill).

5 - NEW ITEM: A 10% additional fee to cover administration costs for any optional disbursements from one's paycheck to non-profit organizations. Meaning: You donate money directly from your paycheck to a union or to a charitable organization (an example would be the annual Combined Federal Campaign). You would also pay an additional 10% of whatever you donate to cover the business overhead of having the government process that donation from your paycheck instead of you just cutting a check and mailing it yourself / VENMO / PayPal / etc.

6 - NEW ITEM: An incentive payment for cost cutters in the government. If a civil service worker does something to save the taxpayer money (comes up with an efficiency, cuts a program that doesn't need to exist, etc.), then they get either 1% of the amount saved or a flat $10,000, whichever is less.

7 - NEW ITEM: A requirement that the union reimburse the government back whenever employees use official time and resources (office space, computers, 'net access, hours worked, etc) to engage in union activities.

8 - NEW ITEM: Revoke the $1b in funds given to the USPS under the Inflation Reduction Act for purchasing electric vehicles and installing the infrastructure to support them.

My read on all of this is that these are bargaining tactics that are starting high (like the 14.4% to be a union member) in order to achieve something in the middle.

Source: https://www.fedsmith.com/2025/06/13/sen ... iful-bill/

Thanks for the update. When they removed the language of making us pay extra into the FERS system and they were backing off from hurting us with healthcare...I took a sigh of relief. Obviously everything's still up in the air and the supplement piece sucks quite a bit.

One interesting tidbit is that I began investigating how much the government actually pays into FERS. In the end, they pay over 13% per employee (assuming that employee is at the regular 0.8%). That amount for a 1% annuity is a terrible return. I calculated that if you took the 4.4% and invested that in a variable annuity with Fidelity (or Vanguard)...in the SPX...then you would have a greater amount of money sitting in your pot than getting the FERS annuity based on the amount you paid into the system. An exception here could be if you entered into the system as a GS 5 and retire as a 14, then the 4.4% doesn't sting as much. Either way, the FERS deal is pretty good when you pay 0.8%. Anything above that is not as good of a deal...

[evilanne]

Bubba, Where did you come up with the 13%. Technically they match our contributions to Social Security & Medicare 7.65% and match up to 5% for TSP, which would be 8.65% - 12.65% depending on employee's contributions to TSP (up to 87% are getting full match) ++plus++ Agency Contributions to FERS
There are many references to the Unfunded Liability of Federal Retirement and the fact that when they switched from CSRS to FERS, they were required to pre-fund the pensions annually in 1986.
2022: https://www.fedweek.com/issue-briefs/re ... dy-peaked/
2012: https://www.fedsmith.com/2012/11/14/how ... nt-system/

The only references to a percentage I could find regarding government pre-funding of FERS https://www.congress.gov/crs-product/98-810 (addresses cost of FERS pensions) and https://stwserve.com/funding-fers-who-contributes-what/ It appears to vary between 16% & 23%

Studies from around 2019 found that the US government funding FERS with about 23% of the average fed’s salary to the retirement system. And then employees contribute either 0.8%, 3.1%, or 4.4% depending on the date of hire. For regular* FERS employees, the agency contributions did not change from prior levels, remaining at 18.4%. For regular* FERS-RAE workers, the agency contribution slightly decreased in October 2023, going from 16.6% to 16.5%.

More recently https://www.opm.gov/about-us/reports-pu ... report.pdf Page 16 states

The employer contribution rate is 18.4% during FY 2022 and FY 2023 for most participants who entered service before calendar year 2013.

One benefit that isn't addressed in FEHB. I know our rates have increased year over year but it is one of the best benefits. According to AI "The government covers approximately 72% of the premiums for the Federal Employees Health Benefits (FEHB) program."

After reviewing all this it seems like Federal Employees have a pretty good deal but I'm not sure exactly how they figure the costs and you may be right in that if you invested in stocks rather than Treasuries you may end up with move money over the long run

[Bubba]

Bubba, Where did you come up with the 13%. Technically they match our contributions to Social Security & Medicare 7.65% and match up to 5% for TSP, which would be 8.65% - 12.65% depending on employee's contributions to TSP (up to 87% are getting full match) ++plus++ Agency Contributions to FERS
There are many references to the Unfunded Liability of Federal Retirement and the fact that when they switched from CSRS to FERS, they were required to pre-fund the pensions annually in 1986.
2022: https://www.fedweek.com/issue-briefs/re ... dy-peaked/
2012: https://www.fedsmith.com/2012/11/14/how ... nt-system/

The only references to a percentage I could find regarding government pre-funding of FERS https://www.congress.gov/crs-product/98-810 (addresses cost of FERS pensions) and https://stwserve.com/funding-fers-who-contributes-what/ It appears to vary between 16% & 23%

Studies from around 2019 found that the US government funding FERS with about 23% of the average fed’s salary to the retirement system. And then employees contribute either 0.8%, 3.1%, or 4.4% depending on the date of hire. For regular* FERS employees, the agency contributions did not change from prior levels, remaining at 18.4%. For regular* FERS-RAE workers, the agency contribution slightly decreased in October 2023, going from 16.6% to 16.5%.

More recently https://www.opm.gov/about-us/reports-pu ... report.pdf Page 16 states

The employer contribution rate is 18.4% during FY 2022 and FY 2023 for most participants who entered service before calendar year 2013.

One benefit that isn't addressed in FEHB. I know our rates have increased year over year but it is one of the best benefits. According to AI "The government covers approximately 72% of the premiums for the Federal Employees Health Benefits (FEHB) program."

After reviewing all this it seems like Federal Employees have a pretty good deal but I'm not sure exactly how they figure the costs and you may be right in that if you invested in stocks rather than Treasuries you may end up with move money over the long run

I got that figure by calculating what the agency had paid for my FERS for last year. It's a bit off as it's actually more than 13%. I was putting that down as a conservative estimate.

I agree that FEHB is one of our greatest benefits. If they change some of it, then I also expect it to impact retirees.

So far, after all the DC talk, I've decided that FERS and SS are potential incomes. The TSP will be the thing that I have to rely on...

[IRQVET]

Makes me feel bad for the new hires, also makes me wonder if this would apply to FED's who got laid off and try to get rehired later?