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Federal Benefits Are Changing in 2025—Here’s What’s Real and What’s Just Hype

Joshua Melendez
May 17, 2025

Key Takeaways

In 2025, federal benefits are undergoing real structural changes, especially in areas like health coverage and retirement planning.
While some rumors are exaggerated, there are notable shifts that may affect your long-term financial planning if you’re a government employee or retiree.

What’s Actually Changing in 2025

Let’s clear the air: 2025 is not business as usual for public sector benefits. You’ve probably heard whispers about sweeping reforms, but what’s true and what’s just speculation? Here’s a breakdown of confirmed updates you should be paying attention to.

Postal Service Health Benefits (PSHB) Program Is Now Live

If you work for or retired from the Postal Service, you’re no longer covered under the FEHB. The Postal Service Health Benefits (PSHB) program officially replaces FEHB for postal employees and retirees beginning January 1, 2025. Here’s what that means:

You must be enrolled in a PSHB plan to maintain health coverage.
Plans offer similar coverage types as FEHB but come with a few distinctions like integrated Medicare Part D for eligible annuitants.
Medicare Part B enrollment is mandatory for most annuitants and their eligible family members unless you retired on or before January 1, 2025.
Prescription drug coverage is automatically provided through a Medicare Part D Employer Group Waiver Plan (EGWP).

Higher Premiums for FEHB Enrollees

If you’re not part of the Postal Service, your FEHB premiums have likely increased. In 2025, enrollee contributions rose an average of 13.5%, a significant jump from past years. This affects both active and retired government employees.

Government still covers about 70% of your total premium.
Review your plan’s new cost-sharing structure, especially if you’re coordinating with Medicare.

Retirement Planning Shifts You Need to Know

Social Security Adjustments

Social Security benefits rose by 3.2% in 2025 due to the COLA increase. That means your monthly checks may have gone up by around $59 on average. But that’s not the only thing changing:

The maximum taxable earnings limit is now $176,100.
The earnings limit for those under full retirement age (FRA) has increased to $23,480.

Also, if you’re under FERS, the Special Retirement Supplement still ends at age 62, even if you delay your Social Security claim.

Medicare Part B and D Cost Updates

In 2025:

The standard Medicare Part B premium is now $185 per month.
The annual Part B deductible is $257.
The Part D prescription drug deductible is capped at $590.
A new $2,000 annual out-of-pocket cap for prescription drugs is in effect.

This $2,000 cap eliminates the former coverage gap, often referred to as the “donut hole.” You won’t pay more than this cap for covered drugs for the rest of the calendar year.

What’s Being Proposed—but Not Final (Yet)

You might have heard about several proposals that could affect your future retirement or benefits. Here’s what’s on the table, but not yet approved.

Locality Pay May Be Excluded from High-3 Calculation

There’s a 2025 bill under review that proposes removing locality pay from your High-3 average salary calculation. If passed:

Your future annuity could be lower, especially if you worked in a high-cost region.
The bill hasn’t passed, but it’s something to monitor if you’re planning to retire within the next few years.

Shift to Flat-Rate Contributions for FEHB

Another major proposal involves changing how the government contributes to FEHB plans:

Instead of covering a percentage, a flat-dollar voucher system may be introduced.
This could increase your out-of-pocket healthcare costs if your plan’s premiums rise more than the voucher amount.

For now, FEHB remains percentage-based. But the shift, if passed, could take effect in future enrollment seasons.

TSP G Fund Subsidy Elimination

Lawmakers are debating a measure to eliminate the subsidy for the TSP G Fund:

This would likely lower the return rate for conservative investors who rely on the G Fund’s stability.
No timeline has been announced yet, but it’s a development worth watching.

New Notifications and Tools Rolling Out

Mid-Year Benefit Use Notifications

Starting in 2025, Medicare Advantage enrollees receive a mid-year notice listing unused supplemental benefits. This change is designed to help you:

Use benefits you may not have realized were available.
Avoid wasting value you’ve paid for throughout the year.

This notice arrives between June 30 and July 31 and is personalized.

More Transparent PSHB Enrollment

For Postal Service annuitants, the KeepingPosted.org portal is now your go-to source. It gives you:

Access to plan brochures and comparisons.
Guidance on Medicare integration.
Details on exceptions for Medicare Part B requirements.

You should receive annual reminders during the Open Season (from November to December) to review or change your PSHB plan.

What’s Not Changing—Despite the Buzz

Let’s pause and separate facts from fiction. Here’s what remains untouched in 2025 despite public rumors.

No Change to FERS Basic Benefit Formula

Despite speculation, the basic FERS annuity formula remains the same:

1% of your High-3 average salary multiplied by years of service, or
1.1% if you retire at age 62 or older with 20+ years of service.

This structure is consistent across most agencies and hasn’t been revised in 2025.

No Shift to Mandatory Roth TSP Contributions

Some rumors suggested that all future TSP contributions would need to be Roth-only. That’s not true:

You can still choose between Traditional and Roth TSP options.
Employer contributions still go into the Traditional side.

Continue using your preferred strategy unless future legislation states otherwise.

No Elimination of FEDVIP or FLTCIP

You can still enroll in dental and vision plans through FEDVIP. Also, current long-term care insurance policies under FLTCIP remain in place, although new enrollments are still suspended.

You’re still covered if you enrolled before the suspension.
No announcement has been made about lifting the suspension.

Financial Planning in the 2025 Landscape

Given all the moving parts, it’s crucial to revisit your financial and retirement strategy this year. Here are a few suggestions:

Recalculate your retirement income with the updated COLA and Medicare costs.
Review your health plan during Open Season—especially PSHB or FEHB plan costs and benefits.
Monitor legislation that could affect your annuity, TSP, or health benefits in coming years.
Coordinate your Medicare enrollment carefully to avoid penalties and maximize savings.

You don’t want to be caught off-guard by policies that directly affect your income or healthcare access.

Speak with a Licensed Agent for Clarity

There’s a lot of noise out there. Between real updates and unconfirmed proposals, the federal benefits landscape in 2025 requires careful attention. If you’re uncertain about how any of these changes apply to your situation—or how to prepare for what’s next—it’s wise to get professional advice.

You can speak with a licensed agent listed on this website to ensure your financial plans align with what’s actually happening in 2025, not just what’s rumored.