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What Federal Employees Are Watching Closely in Congress This Year—And Why It Matters

Missy E
November 14, 2025

Key Takeaways

Legislative proposals in 2025 could significantly alter retirement benefits, healthcare contributions, and Thrift Savings Plan returns for government employees.
Proactive planning and staying informed can help you safeguard your retirement income against unpredictable policy changes.

The Year 2025 Is a Turning Point for Public Sector Benefits

The legislative agenda in 2025 carries serious implications for your future retirement, and public sector employees like you are paying close attention. While some changes aim to tighten government spending, others are focused on modernizing outdated systems. Either way, the impact on your paycheck, benefits, and post-retirement income could be substantial.

As Congress debates new bills, many of these proposals could reshape the core of your financial planning. Let’s walk through what’s currently on the table and why you should care.

1. The Push to Exclude Locality Pay from Pension Calculations

One of the most closely watched proposals is the exclusion of locality pay from your high-3 salary calculation. This directly affects how your FERS pension is determined.

What it Means for You:

The high-3 average salary currently includes base pay and locality adjustments.
Removing locality pay would lower your pension calculation if you work in a high-cost area like New York, San Francisco, or D.C.
Your monthly annuity in retirement could drop by hundreds of dollars.

This is especially concerning if you’re in the final years of service and counting on your locality-enhanced income to support a comfortable retirement.

2. Flat-Rate FEHB Contributions Under Review

Another major proposal targets the Federal Employees Health Benefits (FEHB) Program. Lawmakers are reviewing a shift from percentage-based contributions (where the government pays around 70%) to a flat-rate model.

Why It Matters:

Under a flat-rate contribution, the government would pay a fixed dollar amount regardless of plan costs.
As premiums rise annually—by 11.2% on average in 2025—you’d shoulder more of the increase.
Retirees and employees in family coverage tiers would feel this most, especially if they prefer comprehensive plans.

Your healthcare costs in retirement could rise faster than expected, cutting into your fixed income.

3. Threats to the G Fund’s Government Subsidy in TSP

Congress is also revisiting the subsidy that guarantees returns in the TSP’s G Fund. This fund is popular for its stability, offering Treasury-based returns without market risk.

Legislative Intent:

The proposal would remove the subsidy, causing G Fund interest rates to track closer to short-term Treasury yields.
This could significantly reduce returns, especially in low-rate environments.

If you rely on the G Fund as a conservative component in your retirement portfolio, this shift could lower your long-term growth and reduce your future withdrawals.

4. Social Security Fairness Act’s Ripple Effects

In January 2025, Congress repealed the Windfall Elimination Provision (WEP), which had long reduced Social Security benefits for employees receiving a government pension.

Key Changes:

Your Social Security benefits are no longer subject to the WEP offset.
This is especially beneficial if you worked part of your career in private-sector jobs covered by Social Security.

However, the Government Pension Offset (GPO) still applies to spousal and survivor benefits. Advocacy groups are now pressuring Congress to take up GPO repeal next.

5. Postal Service Reform and the PSHB Program

The Postal Service Health Benefits (PSHB) Program went into effect on January 1, 2025, replacing FEHB for Postal Service employees and annuitants.

If You’re a Postal Worker or Retiree:

You must be enrolled in PSHB to maintain coverage.
Medicare-eligible enrollees are required to have Part B unless they qualify for a statutory exemption.
Prescription drug coverage is now provided through an integrated Part D EGWP.

You need to watch how Congress supports or adjusts funding for the PSHB, especially regarding future retiree coverage and Medicare coordination.

6. Cost-of-Living Adjustment (COLA) Debates Intensify

The 2025 COLA increase was 3.2%, helping offset inflation, but some lawmakers argue that COLA should be reduced or means-tested for high-income retirees.

What’s Being Proposed:

Pegging COLAs to the Chained CPI, which generally yields lower increases.
Creating income thresholds beyond which COLAs are phased out or eliminated.

If either change is passed, your future annuity increases could lag behind real-world costs, eroding your purchasing power in retirement.

7. Reforms to Federal Long Term Care Insurance Program (FLTCIP)

The FLTCIP has been closed to new enrollees since 2022, but there’s pressure to revamp the program.

Current Proposals:

New underwriting rules
Recalibrated premiums
Limited open seasons

Congress is considering whether the government should resume offering access to long-term care insurance at scale. If you’re approaching retirement, you may soon have new options to protect yourself from costly care later in life.

8. Early Retirement Rules Under Scrutiny

Programs like MRA+10 and special provisions for law enforcement officers are also under review.

Potential Adjustments:

Higher penalties for early withdrawal
Narrowing eligibility for Special Retirement Supplement

If you’re planning to retire early, especially under FERS, legislative changes in 2025 could force you to reassess your timeline.

9. TSP Modernization Act Follow-Ups

The original TSP Modernization Act allowed greater flexibility in withdrawals. Now, Congress is evaluating new updates.

Ideas Being Discussed:

Automatic annuitization after a certain age
Required financial counseling before full withdrawals

These proposals aim to ensure long-term sustainability of retirement funds but may limit your control over how and when you access your money.

10. Retirement Age and Service Credit Proposals

Lastly, some legislators are pushing to raise the minimum retirement age or adjust how service credit is calculated for part-time or temporary federal workers.

Possible Changes:

Raising the MRA from 57 to 59
Excluding certain categories of service from pension eligibility

If you have mixed service history, it’s important to keep documentation and understand how future rules may impact your retirement eligibility.

What This Means for Your Retirement Outlook

These 2025 congressional actions have the power to reshape every phase of your retirement journey—from how your pension is calculated to how your TSP grows and your medical costs are covered. Any one of these shifts could cost you thousands over time.

Whether you’re just entering government service, mid-career, or within five years of retirement, this is the year to stay alert.

Review your projected retirement income under multiple scenarios.
Factor in potential changes to FEHB and COLA adjustments.
Rebalance your TSP portfolio with potential G Fund changes in mind.

This isn’t a time for passive planning. Speak with a licensed professional listed on this website who can walk you through the implications based on your personal timeline, service record, and goals.