Key Takeaways:
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The transition from FEHB to PSHB changes how postal retirees manage their healthcare, especially for those eligible for Medicare Part B.
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Retirement benefits, contributions, and eligibility rules have undergone major adjustments in 2025, impacting both current employees and retirees.
Understanding the Big Shifts in 2025
If you’re a postal worker or retiree, 2025 is shaping up to be a year of significant changes to your retirement and healthcare benefits. These shifts will affect your long-term financial planning, healthcare options, and retirement security. Staying informed and preparing accordingly will help you avoid surprises. Let’s break down the five major changes you need to know.
1. The Switch from FEHB to PSHB is Official
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As of January 1, 2025, the Postal Service Health Benefits (PSHB) Program has replaced the Federal Employees Health Benefits (FEHB) Program for postal employees and retirees. This is a huge shift in how your health insurance works.
What Does This Mean for You?
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If you’re a current postal employee, you are now covered under a PSHB plan instead of FEHB.
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If you’re a retiree, you can only keep your PSHB plan if you meet the new Medicare Part B enrollment requirement.
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If you were enrolled in an FEHB plan before 2025, you were automatically transferred to a corresponding PSHB plan, unless you made a different selection during Open Season.
The Medicare Part B Requirement
For postal retirees who are eligible for Medicare, enrollment in Medicare Part B is now mandatory if you want to keep your PSHB plan. This is a major change from FEHB, which allowed you to stay enrolled without signing up for Medicare. This shift aims to align postal retiree healthcare with Medicare’s structure, but it also means an additional cost for retirees who had planned to stay with their previous setup.
What If You Delay Enrollment?
If you don’t enroll in Medicare Part B when first eligible, you may face a late enrollment penalty that increases your premium permanently. Additionally, failure to enroll could result in losing your PSHB coverage, leaving you without a federal health insurance option.
How PSHB Affects Family Coverage
If you have a spouse or dependents on your plan, you need to review their coverage. While active employees can continue covering family members as usual, retirees who fail to meet the Medicare Part B requirement could jeopardize their dependents’ coverage under PSHB.
2. Changes to Retirement Contributions and Pensions
In 2025, contribution rates for postal employees have increased to sustain the retirement system. This means:
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Higher deductions from your paycheck for FERS contributions.
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Adjustments in how your annuity is calculated, especially for those close to retirement.
What About Locality Pay?
A proposed change is currently under discussion that could exclude locality pay from the calculation of your high-3 average salary. If passed, this would reduce the pension amount for employees in high-cost areas. Since locality pay boosts salaries in regions with higher living costs, removing it from annuity calculations could lead to a lower-than-expected pension for many postal employees.
How This Impacts Retirement Planning
The shift in contribution rates means that younger postal employees will need to adjust their financial planning to account for increased deductions from their paychecks. Meanwhile, those nearing retirement should reassess their expected pension benefits, especially if the locality pay change goes into effect.
Understanding the High-3 Average Salary
Your high-3 average salary is the highest average basic pay you earned over any three consecutive years of service. Changes in locality pay inclusion could significantly affect future retirees who work in high-cost cities, as their pensions may be lower than anticipated.
3. Premiums and Out-of-Pocket Costs Have Shifted
With PSHB in place, many enrollees are experiencing different premium structures and out-of-pocket costs than what they had under FEHB.
Key Cost Adjustments in 2025
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In-network deductibles, coinsurance, and copayments have changed depending on the PSHB plan you selected.
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Some plans now offer reimbursement for Part B premiums, but others may not.
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Prescription drug costs have been altered under the Medicare Part D Employer Group Waiver Plan (EGWP) for retirees.
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Some postal workers may see reduced coverage for certain healthcare services, while others may gain access to additional benefits not previously covered under FEHB.
Impact on Retirees and Active Employees
If you have family coverage, be sure to check how your spouse’s and dependents’ coverage has been impacted. The shift to PSHB also means that retirees must weigh the cost of Medicare Part B against any potential savings from their new plan. Comparing coverage options and understanding how these changes affect your overall medical expenses is essential.
4. Postal Retirement Eligibility and COLA Adjustments
Retirement eligibility remains a key concern, and 2025 brings some modifications to cost-of-living adjustments (COLA) and retirement rules.
What’s Different?
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COLA adjustments have changed, with FERS retirees receiving a lower percentage increase than CSRS retirees.
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Early retirement options are shifting, with some reductions in annuity percentages for those who retire before reaching full retirement age.
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The FERS Annuity Supplement remains available but ends at age 62, regardless of when you claim Social Security.
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A potential increase in the retirement age for new postal employees is being discussed, which could affect future workforce planning.
How to Prepare for Retirement Under These New Rules
If you’re nearing retirement, reviewing your benefits calculation under these new conditions is crucial. Consider meeting with a retirement specialist or financial planner to understand how your pension will be affected by the COLA adjustments, FERS contribution changes, and potential locality pay removal.
What You Should Do Next
With so many changes happening at once, it’s critical to stay informed about how they affect your retirement and healthcare benefits. Take the time to:
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Review your current PSHB plan and compare it with available options.
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Ensure your Medicare enrollment is complete if you’re a retiree.
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Check your retirement contributions and estimated annuity under the new rules.
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Stay updated on legislative changes, especially regarding locality pay and future retirement funding adjustments.
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Attend benefits webinars or consult a financial expert to understand the long-term implications of these changes.
If you’re unsure about how these changes impact you, get in touch with a licensed agent listed on this website to discuss your options and ensure you’re making the best decisions for your future.
