3 Big Legislative Proposals That Could Reshape the Federal Workforce—And What They Mean for You

Missy E
November 14, 2025

Key Takeaways:

Legislative changes can have a direct impact on your retirement benefits, pay, and job security, so it’s important to stay informed.
Understanding these proposals helps you prepare for potential shifts in pension calculations, healthcare contributions, and retirement eligibility.

How New Legislation Could Change Your Retirement and Benefits

Congress is once again considering major proposals that could redefine federal employment as we know it. If you work for the government—or plan to retire soon—you need to be aware of these potential changes. Some proposals could adjust pension calculations, while others could impact healthcare contributions and job security. Staying informed now can help you prepare for what’s ahead.

Here’s a look at three major legislative proposals that could reshape federal employment and retirement benefits in 2025 and beyond.

1. Raising the Minimum Retirement Age (MRA) for Federal Employees

One of the biggest proposals on the table is an increase in the Minimum Retirement Age (MRA) for federal workers under the Federal Employees Retirement System (FERS). Currently, the MRA ranges from 55 to 57, depending on when you were born. Some lawmakers are pushing to raise it to 60 or higher, citing increased life expectancy and budget concerns.

What This Means for You

Longer working years: If passed, you may need to work additional years before you can retire with full benefits.
Impact on early retirement: The MRA+10 option, which allows reduced annuities for early retirees, could be pushed back, forcing some to rethink their plans.
Possible grandfathering: If the law changes, current employees close to retirement may be exempt, but newer hires could face the new age limits.

If you were planning to retire in the next few years, a change to the MRA could shift your entire timeline. Be sure to track this proposal closely and consider financial strategies to adapt to possible delays.

2. Potential Changes to Pension Calculation Formulas

FERS retirees receive a pension based on their high-3 average salary, which calculates annuities using the average of their three highest-earning years. One proposed change would switch the calculation to a high-5 formula, using the highest five years instead of three.

Additionally, a bill introduced in January 2025 aims to exclude locality pay from the high-3 average salary calculation. If enacted, this would mean that locality pay would no longer contribute to your pension calculation, potentially reducing future retirees’ annuity amounts.

Why This Matters

Lower monthly pension checks: A high-5 formula would likely reduce your pension, since it spreads the calculation over a longer period, including lower-earning years.
Impact on career decisions: Employees planning to boost their earnings in the last few years before retirement might see a smaller benefit than expected.
Exclusion of locality pay: If this proposal is approved, employees who rely on locality adjustments to increase their retirement earnings could see significant reductions in their annuities.
Long-term financial planning adjustments: If these changes are enacted, you may need to increase Thrift Savings Plan (TSP) contributions or delay retirement to maintain your expected income.

A shift from a high-3 to a high-5 system wouldn’t be unprecedented—many states have already made similar adjustments to control pension costs. If this legislation passes, it could go into effect within the next few years, so it’s important to plan ahead.

3. Increased Healthcare Contributions for Retirees

Federal employees benefit from the Federal Employees Health Benefits (FEHB) program, and retirees can continue coverage into retirement. However, one proposal under discussion would require retirees to pay a higher percentage of their healthcare premiums, potentially shifting more costs onto annuitants.

A separate proposal suggests shifting to a flat-rate voucher model for FEHB, which could decrease the government’s share of premium costs over time. This change may lead to higher out-of-pocket expenses for both current employees and retirees, making healthcare benefits less affordable.

The Key Takeaways

Higher out-of-pocket healthcare costs: If enacted, this proposal could raise the amount retirees must pay for health insurance coverage.
Potential impact on Medicare coordination: If you plan to enroll in Medicare, the increased costs could change the way you balance FEHB and Medicare benefits.
Flat-rate voucher model: Under this model, the government’s contribution to FEHB would be capped, meaning you could face greater premium increases over time.
Possible phase-in period: Congress may implement gradual changes to ease the financial burden on current retirees, but new retirees might feel the full impact sooner.

Healthcare is one of the biggest expenses in retirement, and even small changes in premium contributions can significantly affect your financial well-being. If you’re planning for retirement, make sure to keep an eye on these potential shifts.

4. Potential Elimination of the TSP G Fund Subsidy

Another proposal under review is the elimination of the Thrift Savings Plan (TSP) G Fund subsidy. The G Fund is a low-risk investment option that provides steady returns, but the proposed change would remove the subsidy that helps maintain its stability.

How This Could Impact Your Retirement Savings

Lower returns on TSP investments: If the subsidy is removed, G Fund returns may decrease, prompting participants to consider other TSP options.
Risk assessment: Federal employees who rely on the G Fund for safe, predictable growth may need to reassess their investment strategy.
Diversification considerations: If this proposal passes, it may become more important to explore other funds within the TSP to maintain retirement savings growth.

The TSP is a key component of your retirement security, so understanding how changes to the G Fund could impact your savings is essential for long-term planning.

What You Can Do Now to Prepare

While these legislative proposals are still in discussion, you don’t have to sit back and wait. Here are some proactive steps to safeguard your retirement:

1. Stay Updated on Legislative Changes

Government policies affecting federal workers can change quickly. Keep an eye on updates from OPM, your agency, and organizations that advocate for federal employees and retirees.

2. Review Your Retirement Timeline

If any of these proposals pass, your retirement plans might need an adjustment. Use retirement calculators to see how changes to the MRA or pension formula could impact your annuity.

3. Boost Your TSP Contributions

Your TSP is a critical piece of your retirement income. If pension calculations shift to a high-5 system or retirement ages increase, additional savings in your TSP can help offset potential financial shortfalls.

4. Assess Your Healthcare Strategy

If retiree health contributions increase, compare your FEHB options and consider how Medicare integration could help manage costs. Planning ahead now can help prevent unexpected expenses later.

What Happens Next?

While these legislative changes aren’t law yet, they have the potential to affect millions of federal employees and retirees. Many proposals evolve through negotiations, and some may never pass. However, staying informed and preparing for possible shifts can help you stay ahead.

If you have questions about how these changes might impact you, consider speaking with a licensed agent listed on this website. They can help you navigate your options and ensure you’re making informed decisions about your benefits.