The 2026 election and federal retirement

1. Why this dispatch — federal retirement is on the ballot

For most of the past decade, federal employee benefits were a quiet topic in election cycles. Pay raises got attention; pension formulas didn’t. That changed in 2025, and the 2026 election now makes federal retirement an active policy question.

Between January 2025 and May 2026, the federal workforce shrank by roughly 317,000 employees — the largest peacetime contraction in U.S. history. Most came through voluntary separation programs (the Deferred Resignation Program, VERA, VSIP), with a smaller fraction through formal Reductions in Force. At the same time, Congress took up a tax and spending package — the “One Big Beautiful Bill” (H.R. 1) — that included five specific reforms to FERS that would have reshaped pension benefits for current and future retirees. All five reforms were ultimately dropped before final Senate passage in July 2025. None of them are gone permanently.

The November 2026 midterms determine which proposals can move forward in the 120th Congress, and which ones lose viability. For federal employees and retirees, this makes an unusual election cycle — one where choices in Congress and the next administration directly affect specific dollar figures in your retirement plan. This dispatch is not partisan. It’s an inventory of what’s pending, what already happened, and what to do about it.

2. What happened in 2025 — the workforce contraction

The scale of the 2025 federal workforce reduction is unprecedented in peacetime. The breakdown:

The voluntary share — roughly 92.5% of departures — is what made the contraction politically sustainable. Few employees were involuntarily separated; many took meaningful separation packages and left on terms they negotiated. But the cumulative effect on the workforce is real: agencies are operating with significantly fewer employees, hiring is constrained by a 4-to-1 attrition ratio (one new hire allowed for every four departures), and the Schedule Policy/Career reclassification has affected roughly 50,000 policy-influencing positions that previously had full civil service protections.

As of January 2026, the total federal workforce stands at approximately 2.69 million employees (excluding active military). For context, that’s roughly 220,000 below where the workforce stood a year prior.

The RIF moratorium and what comes next. As part of the November 2025 continuing resolution that ended the 43-day government shutdown, Congress prohibited further RIFs through January 30, 2026. That moratorium expired. Agencies submitted restructuring plans to OMB by March 13, 2026, with implementation plans due April 14. Whether actual RIFs follow in 2026 depends substantially on what Congress does on appropriations — and on whether the political calculus shifts after the midterms.

The 2025 workforce reduction was structurally different from past federal downsizing — accomplished primarily through voluntary programs rather than involuntary separations. That distinction matters for what’s likely in 2026 and 2027. Voluntary programs require funding; involuntary RIFs require political appetite. Both depend on which party controls appropriations after November.

3. The FERS reforms that almost passed (and could come back)

In May 2025, the House Oversight and Government Reform Committee advanced five specific FERS-related provisions as part of the broader tax and spending reconciliation package (H.R. 1). All five were modified or dropped before the Senate passed the final bill in July 2025. The provisions, in their proposed form:

The High-3 to High-5 change alone would have reduced pension benefits for new retirees by approximately 5-8% on average — because the high-5 average of basic pay is typically lower than the high-3. The FERS Supplement elimination would have removed a benefit worth roughly $1,000 to $2,000 per month for employees retiring before age 62 with at least 20 years of service.

These weren’t theoretical reforms. They were drafted, scored by the Congressional Research Service, marked up in committee, and on a path toward enactment until the Senate parliamentarian’s Byrd Rule ruling and Senate process produced the final text. The committee work product exists. CBO scoring exists. If the next Congress needs deficit-reduction offsets for tax legislation, the FERS reforms are pre-positioned for reintroduction in a way most policy proposals are not.

What’s not on the table. Several things are politically off the table in any near-term Congress: changes to CSRS (the system has been closed for new entrants since 1984 and the remaining 44,000 CSRS-covered employees are a small target), elimination of Social Security for federal employees (no serious proposal exists), or retroactive changes to benefits already earned by current retirees. The reforms that move are forward-looking — they affect new hires or near-retirees, not those whose annuities are already in payment.

4. The 2026 working environment

The current year’s working environment for federal employees and retirees:

Pay raise: 1% across the board (smallest since 2021) for General Schedule employees. Law enforcement classes received 3.8% adjustments to match military pay. No locality pay adjustment for 2026.

FERS COLA: 2.0% for FERS retirees (the formula caps FERS COLA below CSRS when inflation is moderate). CSRS retirees received 2.8%, matching the Social Security COLA.

FEHB premiums: +12.3% average increase. PSHB +11.3%. Premium pressure continues for the second consecutive year after 2025’s 13.5% jump.

TSP changes: Elective deferral limit $24,500 ($8,000 catch-up for age 50+, $11,250 super catch-up for ages 60-63 under SECURE 2.0). Roth in-plan conversion became available in TSP in late January 2026 — a long-requested feature.

ORA in operation: OPM’s Online Retirement Application reached its second year of use and is the standard path for most retirement applications. Digital submissions are processing in roughly half the time of paper, though the post-submission visibility remains limited.

OPM RIF rule revision: OPM published proposed RIF regulations in March 2026, with a comment period ending May 4. The proposed rule prioritizes performance over tenure/length of service when determining retention — a significant departure from the long-standing veterans preference plus seniority framework. The final rule will land sometime in 2026.

5. How to plan around the midterm outcome

Four practical moves for federal employees and retirees regardless of how the midterms go:

1. Plan as if some version of the dropped FERS reforms could pass in 2027. The most consequential for near-retirees is the FERS Supplement elimination. If you’re planning to retire under MRA+30 or age 60 with 20 years (the typical pre-62 retirements that depend on the supplement), running your numbers without the supplement gives you the worst-case-resilient plan. If the supplement survives, the plan still works.

2. Maximize TSP while you can. The 2026 elective deferral limit is $24,500, with up to $11,250 in super-catch-up for ages 60-63. If FERS pension benefits face future reductions, TSP is the lever you control. Roth contributions in particular hedge against future tax-rate changes.

3. Document your service record now. A workforce in flux is one where individual records get harder to reconstruct. Pull your eOPF, verify your Service Computation Date, confirm any military buyback or redeposit status, and address discrepancies while the people who can fix them are still in place. For the full pre-filing checklist, see the federal retirement application guide.

4. Watch appropriations, not campaign rhetoric. The most important federal employee policy decisions of 2026 happen in continuing resolutions and appropriations bills, not stump speeches. The deadlines that matter: the next CR expiration, and the FY2027 budget cycle that begins immediately after the midterms.

The midterm outcome will shape what’s possible in 2027 and 2028 — particularly whether the dropped FERS reforms return, whether the workforce contraction continues, and whether the OPM RIF rule survives court challenges. Federal employees and retirees can’t control the outcome, but they can position their plans to withstand more than one scenario. That’s the move regardless of November.

We’ll publish a post-election dispatch in mid-November summarizing what the results mean for federal benefits going into the next Congress.