The Latest Buzz
- Tammy Flanagan
- 2 days ago
- 15 min read
Life Goes On During the Shutdown
Thank you for signing up to receive the Retire Federal newsletter! This edition of The Latest Buzz focuses on the effects of the Deferred Resignation Program (DRP), insurance issues, and potential changes in 2026, as well as what you need to know for a smooth transition to retirement.
Retire Federal exists to educate you on navigating the maze of your retirement benefits and provide the assistance you need to make informed decisions that lead to fewer delays and greater satisfaction in retirement, knowing you are receiving the benefits you have earned. Please visit our website for more information on our services. Click on the "Get In Touch" button to receive details about one-on-one consultations, including topics, required intake information, and scheduling information options.
Voluntary and Involuntary Separations
Thousands of employees have applied and been accepted into the Deferred Resignation Program (DRP) across various departments and agencies.
More than 150,000 federal employees left the U.S. government payroll on the last day of the fiscal year, September 30th. This was the most significant single-year exodus of civil servants in nearly 80 years, triggering what unions and government experts warn is a damaging loss of institutional expertise. The Office of Personnel Management (OPM) expects to receive an additional 60,000 retirement applications after September 30 to process, resulting from the mass exodus of workers who left federal service, in addition to the 88,062 applications already received as of August 30th. To learn about the emotional toll this is taking on federal employees, read ‘I Am Going Through Hell’: Job Loss, Mental Health, and the Fate of Federal Workers.
As Congress could not agree on keeping the government funded past September 30th, the Office of Management and Budget (OMB) provided special instructions for agencies affected by a lapse in appropriations. Some employees affected by a lapse in appropriations may have also received a notice of reduction in force (RIF) with a future effective date. OMB has directed agencies to consider issuing RIF notices to all employees in programs, projects, or activities (PPAs) that satisfy the following conditions (1) discretionary funding lapses on October 1, 2025; (2) another source of funding, such as H.R. 1 (Public Law 119-21) is not currently available; and (3) the PPA is not consistent with the President’s priorities. Any future change in law would supersede these instructions. The Center for Budget Policies and Priorities wrote that the Administration's Plans for Mass Firings in a Shutdown are Not Justified by Law or Prudent Management.
Those retiring will find that the 2025 Special Edition Newsletter contains important information, including guidance on what documents to save and links to webinars on retirement preparation. Most federal employees will complete their retirement application using the Online Retirement Application (ORA). OPM has prepared a video introduction to this new system.
2026 Changes
Roth in-plan conversions coming to the TSP in January 2026 — Starting in January 2026, you’ll be able to convert money in your traditional (pre-tax) balance to your Roth (after-tax) balance in your TSP account. This is referred to as a “Roth in-plan conversion.” If you don’t have a Roth balance in your TSP account, your first Roth in-plan conversion will create one.
Beginning in 2026, eligible catch-up contributions to your TSP account must be Roth contributions if your wages from TSP-eligible positions are above a certain threshold. The IRS wage threshold will be adjusted for inflation and announced by the IRS each year. (When this law was passed in 2022, the original wage threshold was set at $145,000 for 2023 wages.)
In general, the wages that determine whether this rule applies to you are equal to the Medicare wages listed in box 5 of your W-2(s).
For future planning: This means, if your wages for 2025 are greater than the wage threshold and you’re eligible to make catch-up contributions, any catch-up contributions you make for 2026 will go to your Roth balance. Because Roth contributions go into the TSP after tax withholding, you’ll pay taxes on that amount at your income tax rate.
Employees using the Dependent Care Flexible Savings Account (DCFSA) will be able to set aside up to $7,500.
In 2026, the cap on Medicare Part D out-of-pocket prescription drug costs will increase to $2,100, a $100 increase over the 2025 limit of $2,000. That means you'll be liable for an additional $100 in drug costs over the year in 2026.
The Centers for Medicare and Medicaid Services (CMS) will implement prior authorization requirements for certain traditional fee-for-service Medicare services in six states starting next year.
In 2026, the FRA will reach 67 for those born in 1960 or later — a threshold that will mark the culmination of the 42-year-long shift in raising the retirement age. Full Retirement Age (FRA) for Social Security retirement benefits, by birth year.
Social Security caps the amount of income that is subject to taxation and gives credit for it when calculating benefits. The Social Security tax limit for 2025 is $176,100, an increase of $7,500 from the 2024 limit of $168,600. The tax limit is indexed to inflation and is therefore estimated to rise in 2026.
The 2025 Social Security Board of Trustees Report (PDF) estimates the maximum taxable earnings limit will be $183,600 in 2026, an increase of $7,500 from the 2025 ceiling of $176,100. The increase in the wage base would result in an additional $465 annually, for a total tax of $11,383.20. Social Security will stop withholding taxes once you reach the maximum income amount for the year. However, there is no cap on Medicare taxes, meaning your total wages are subject to the 1.45% tax.
Proposed Changes... we will know for sure soon!
The Cost of Living Adjustment (COLA) for Social Security and CSRS retirees and survivors is estimated to be approximately 2.6 - 2.8%. If that is the case, a 2% COLA would be granted for FERS retirees and survivors. We'll know the exact amount later in October.
The upcoming Medicare Open Enrollment period runs from October 15, 2025, to December 7, 2025. THIS IS NOT THE FEHB/PSHB Open Season (OPM will announce 2026 FEHB/PSHB information before the November 10 - December 8 Open Season)
In 2025, the monthly Part B premium rate is $185.00, which is higher than the 2024 monthly premium of $174.70. The estimated monthly premium for 2026 is $206.20.
The IRS will announce the TSP annual elective deferral limits in October or November
Pay increases for General Schedule (GS) employees may include 1% cross-the-board increase, according to a pay plan the White House quietly transmitted to Congress.
At the end of August, it was announced that an additional 2.8% pay raise for law enforcement officials is in line with the president’s proposal to grant military service members a 3.8% pay raise next year. In an FAQ document, OPM indicated the initiative would take the form of a special pay rate, an authority typically set aside for positions that are difficult to recruit for and retain.
The special salary rates are subject to salary caps required by 5 U.S.C. 5305, which establishes level IV of the Executive Schedule (projected to be $197,200) as the maximum special rate. This will reduce the increase in some limited circumstances.
What Retirees Need to Know
Your Federal Retirement Benefits
The Office of Personnel Management (OPM) mailed to your home address a personalized booklet summarizing Your Federal Retirement Benefits shortly after they finalized your annuity. OPM also provides a current version updating your Federal Employee Health Benefits (FEHB) plan, value of your Federal Employees Group Life Insurance (FEGLI), any payable survivor benefit amount. Previously, only a paper version was available. OPM announced the retirement booklet is now online, https://www.servicesonline.opm.gov/. You can find it under "Message" and on the Services Online Dashboard after selecting "Documents".
Insurance Issues
Open Season: November 10 - December 8
New Process for Making an FEHB election for Retiring Employees
This new process will impact retiring Federal employees who submit an Open Season FEHB election that will become effective after their retirement date. Under a new process, agencies will submit a certified SF 2809, Health Benefits Election Form, to the health insurance Carrier with remarks about the employee’s retirement. This new process allows the open season change to take effect on January 1st rather than on January 11, 2026 (when Open Season changes typically take effect for most federal employees). Retiring employees should not submit an FEHB Open Season enrollment change through the agency’s electronic enrollment system (i.e., Employee Express, myPay, Employee Personnel Page, etc.).
Note: This process does not affect U.S. Postal Service (USPS) employees, annuitants, or compensationers subject to Postal Service Health Benefits (PSHB) coverage. Postal Service employees' Open Season elections take effect on January 1, 2026, under the new Postal Service Health Benefits (PSHB) Program.
Qualifying Life Events (QLE)
Retirees can make specific changes (see QLEs listed below) outside of an Open Season.
For employees, Premium Conversion enables eligible employees (not annuitants) to pay their share of premiums with pre-tax dollars. All employees automatically receive premium conversion tax benefits, unless they opt out of participation. When an employee experiences a Qualifying Life Event (QLE) as described below, specific changes to the employee’s FEHB coverage (including changes to Self-Only and cancellation) and premium conversion election may be permitted, provided they are a result of and consistent with the QLEs. For more information about premium conversion, please visit www.opm.gov/healthcare-insurance/healthcare.
Here are some of the common QLEs:
Retirees may cancel or change their enrollment from Self and Family or Self Plus One to Self Only at any time.
Enrolled survivor annuitants: A change in family status based on additional family members can only occur if the additional eligible family members are family members of the deceased employee or annuitant
Change coverage from one plan or option to another at any time beginning on the 30th day before becoming eligible for Medicare. (This may be used only once in a lifetime.)
Changes in family status, such as marriage, birth, death of a family member, adoption, or divorce. Note: Survivors cannot change plans because of the death of the annuitant.
Re-enrollment of an annuitant who suspended FEHB Program enrollment to enroll in a Medicare Advantage plan, Medicaid or similar State-sponsored program, or to use TRICARE (including Uniformed Services Family Health Plan and TRICARE for Life), Peace Corps, or CHAMPVA, and who later involuntarily loses this coverage under one of these programs.
Loses FEHB Program coverage due to termination, cancellation, or change to Self Plus One or Self Only of the covering enrollment.
Loses coverage under another group insurance plan
An employee, annuitant, or covered family member in a Health Maintenance Organization (HMO) moves outside the geographic area from which the carrier accepts enrollments, or if already outside this area, moves farther away from it.
Annuity is not sufficient to make withholding for the FEHB/ PSHB plan in which you are enrolled.
Retirees and survivors will find more details, timing, and additional QLEs on the OPM 2809 - Health Benefit Election Form.
Employees will find more details and additional QLEs on the SF 2809 - Health Benefits Election Form. Many employees must use an online portal to make elections.
Federal Employees Dental and Vision Insurance Program (FEDVIP)
FEDVIP information on plans, enrollment, etc., for employees, retirees, uniform services, and survivors is on the BENEFEDS' website. The website also lists the QLEs allowed as they are not the same as those with FEHB/PSHB.
Flexible Spending Accounts
FSAFEDS provides employees with a great opportunity to enroll or re-enroll in a flexible spending account (FSA) to pay for eligible health and dependent care expenses on a pretax basis. For every $100 you set aside in an FSA account, you will save approximately $30 in state, federal, FICA, and Medicare taxes. Employees (not annuitants) and their dependents are eligible to enjoy this benefit.
Many FEHB plans and most FEDVIP plans participate in the paperless reimbursement program. This helps with medical, dental, vision, and prescription copayments, as well as many over-the-counter items. Other favorite eligible expenses are prescription glasses, contacts, counseling, CPAP supplies, and even massage therapy. Learn more about this pretax benefit on FSAFEDS' website. Currently, employees can set aside up to $3,300 in a Healthcare FSA and roll over up to $660 into the following year, with a minimum enrollment of $100 in 2026 (approximately $ 5 per biweekly pay period). We'll know the maximum allowed in 2026 later in the fall.
The annual employee contribution limit for dependent care flexible spending accounts (FSAs) is increasing by 50% beginning next year. The maximum will increase to $7,500 in 2026, up from $5,000 this year.
Federal Long Term Care Insurance Program (FLTCIP)
The FLTIPC is not accepting new enrollment at this time. You can find a new webinar, How to Plan for Long-Term Care, archived at the NARFE Federal Benefits Institute.
Federal Employees Group Life Insurance (FEGLI)
Employees and retirees can always reduce their FEGLI coverage. Employees use the SF 2817 Life Insurance Election or agency electronic equivalent. Retirees can contact OPM to request a reduction in their coverage.
Employees (not annuitants) can increase their coverage by starting with SF 2822, Request for Insurance. Your HR Office completes a portion, and your doctor (at your expense) completes a portion. The Office of FEGLI (OFEGLI) will provide approval of your request.
Note: FLTCIP and FEGLI do not participate in the annual Open Season.
Medicare
If you are not receiving Social Security benefits at age 65, apply for Medicare Part A, whether you remain employed or have already retired. Your initial enrollment period (IEP) for Medicare begins three months before your 65th birthday and ends three months after your birthday (seven months total).
To continue contributing to a Health Savings Account (HSA) with a High Deductible Health Plan (HDHP), you may wish to delay Medicare A & B enrollment. See your HDHP Plan Brochure for more details.
Recent retirees over 65 and their spouses over 65 who are covered by "current employment" health insurance will have a Special Enrollment Period (SEP) to enroll in Medicare Part B that lasts up to eight months following the retirement date. Enrolling during the SEP will avoid the penalty for late enrollment.
There is a General Enrollment Period (GEP) every year from January 1st through March 31st, with coverage commencing the month after enrollment. A 10% permanent late enrollment surcharge (based on the standard Part B premium) is assessed every 12 months from the end of your IEP or the month after your health insurance coverage based on "current employment" has ended.
Records You Should Save
Your electronic Official Personnel Folder (eOPF) is where your agency maintains the records of your federal career. Once you separate from federal employment, you will lose immediate access to these records. It is a good idea to maintain a personal copy of these personnel documents will ensure that you have "evidence" of important actions and dates of changes during your federal career:
Notification of Personnel Action Statements (SF 50s) documenting beginning and ending dates, retirement coverage, change of work schedules, and the highest three years of salary rates (including locality pay)
Proof of enrollment for FEHB and FEGLI at least five years immediately before retirement/separation
Certification for LEO, Firefighters, ATC, Customs & Border Protection Officers, or other employees eligible for an enhanced retirement benefit. Verify your agency has provided certification documenting service requirements in your eOPF.
Designation of beneficiary forms for FEGLI (SF 2823), FERS (SF 3102), and unpaid compensation (SF 1152 while employed). (Check your account at TSP.GOV to see if you have a designated beneficiary on file with the TSP).
Other documents to keep with copies of your retirement application:
Last Earnings and Leave Statements
Marriage Certificates
Divorce degrees/Court Orders
Copies of your military records (DD 214, military discharge papers, retirement award letter, etc.)
Copy of payroll office record of military service credit deposit paid in full
Copy of your completed SF 2818 Life Insurance Election form
