Fed Saw Inflation, Jobless, Stability Risks at May Meeting, Minutes Show

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Fed Saw Inflation, Jobless, Stability Risks at May Meeting, Minutes Show

WASHINGTON, May 28 (Reuters) – U.S. Federal Reserve officials at their last meeting acknowledged they could face “difficult tradeoffs” in coming months in the form of rising inflation alongside rising unemployment, an outlook buttressed by concerns about financial market volatility and Fed staff warnings of increasing recession risk, according to minutes of the May 6-7 session. The foreboding outlook has likely shifted since then following President Donald Trump’s decision just a week after the meeting to postpone the severe import tariffs Follow link to read more from Reuters. https://www.reuters.com/world/us/fed-minutes-saw-rising-inflation-jobless-risks-may-meeting-2025-05-28/

Recap: Legislative Proposal May 18, 2025

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Legislative Proposal May 18, 2025

Federal Employee Cuts: Key Changes in New Bill

FERS Contribution Increase (Withdrawn):

  • Original Proposal: Raise the Federal Employees Retirement System (FERS) employee contribution to 4%. Update: This increase has been eliminated from the current version of the proposal.

FERS Annuity Supplement:

  • Change: Elimination of the FERS annuity supplement.

Effective Date: January 1, 2028.

Note: This change will not affect current employees or retirees before that date.

High-3 to High-5 Average Salary Calculation:

  • Change: Retirement annuity calculations will shift from the highest 3 consecutive salary years (“High-3”) to the highest 5 years (“High-5”).

Effective Date: January 1, 2028.

Impact: Estimated 3% reduction in annuity payments for future retirees.

  • “At-Will” Employment for New Hires:

Proposal: New federal hires may be subject to “at-will” employment, meaning fewer job protections.

Status: Implementation date is currently uncertain.

Please reach out to our office if you have any questions or would like to discuss. 856-401-1101

Sources:

Federal News Network

The White House

National Association of Federal Veterinarians

 

 

 

 

 

The One Big Beautiful Bill

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The One Big Beautiful Bill Act (H.R. 1), Was Approved Sunday Night and Contains Some Important Changes of Interest To Federal Employees

 The “One Big Beautiful Bill Act” (H.R. 1), narrowly passed by the U.S. House of Representatives on May 22, 2025, includes several provisions that significantly impact federal employees, particularly concerning retirement benefits and healthcare.

Key Changes Affecting Federal Employees:

 Retirement Benefit Adjustments

The bill proposes modifications to federal retirement benefits, which may include:

  • Increased Employee Contributions: Federal employees might be required to contribute more toward their retirement plans.
  • Reduced Pension Calculations: Adjustments in how pensions are calculated could potentially lower future retirement payouts. Ostberg Sinclair+2Tax Foundation+2Seeking Alpha+2
  • Changes to COLA: Cost-of-Living Adjustments (COLA) for retirees may be altered, affecting the annual increases in retirement benefits.

These changes aim to reduce federal spending but could lead to decreased retirement income for federal workers.

  1. Healthcare and Social Program Reforms

The legislation introduces stricter work requirements for programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP). While these changes primarily target low-income populations, they could indirectly affect federal employees who rely on these programs or work in agencies administering them. AP News+1The Guardian+1

 Tax Provisions

The bill makes permanent the tax cuts introduced in 2017, which could affect federal employees’ take-home pay and retirement planning. Additionally, it includes tax incentives such as deductions for auto loan interest on American-made vehicles and expanded child tax credits. KPMG+9Seeking Alpha+9The Washington Post+9AP News+5Representative Nicole Malliotakis+5The Times+5

 Next Steps

The bill now moves to the Senate, where it is expected to face further debate and potential amendments. Federal employees should stay informed about these developments, as the final version of the bill could include additional changes impacting their employment and benefits.

For a detailed breakdown of the bill’s provisions, you can refer to the section-by-section summary provided by the House Ways and Means Committee. Ways and Means

 

What Does the Latest Legislative Proposal Mean for Federal Employees? 

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What Does the Latest Legislative Proposal Mean for Federal Employees? 

The latest legislative proposals for fiscal year 2025 signal significant changes for federal employees, encompassing reductions in pay and benefits, diminished job protections, and organizational restructuring. These measures are part of broader efforts to reduce federal spending and reshape the civil service. FedSmith.com Government Executive+1National Treasury Employees Union – NTEU+1

Proposed Cuts to Pay and Benefits

  1. Increased Retirement Contributions and Reduced Pensions

The House Budget Committee has advanced a reconciliation bill that includes provisions to: Federal News Network+5Federal News Network+5United Benefits+5

These changes aim to cut federal spending by $50 billion. FedSmith.com+4National Treasury Employees Union – NTEU+4NARFE+4

 Shift to Voucher-Based Health Insurance

Proposals suggest replacing the current Federal Employees Health Benefits (FEHB) cost-sharing model with a voucher system. This would provide a fixed-dollar contribution toward health insurance premiums, potentially leading to higher out-of-pocket costs for employees as healthcare expenses rise. U.S. Office of Personnel Management+2FedImpact+2U.S. Office of Personnel Management+2

  1. Pay Freeze and Performance-Based Increases

Legislation such as the Federal Freeze Act proposes a one-year freeze on federal pay increases and workforce caps over a three-year period. Additionally, the Federal Employee Performance and Accountability Act of 2025 introduces a pilot program where pay increases for certain employees would be contingent on job performance. FedSmith.comCongress.gov

Erosion of Job Protections and Union Rights

  1. Reinstatement of “Schedule F”

The Social Security Administration is considering reclassifying certain positions under a proposed “Schedule F,” designating them as “policy-influencing” and thereby removing civil service protections. This change would make it easier to dismiss employees and is part of broader federal budget cuts. Business Insider  

  1. Restrictions on Collective Bargaining

An appeals court has allowed the implementation of an executive order that limits collective bargaining rights for federal workers. This order affects multiple agencies and is part of efforts to streamline the federal workforce. AP News

Organizational Restructuring and Oversight

  1. Reorganizing Government Act of 2025

This act extends presidential authority to propose executive branch reorganization plans, requiring Congress to vote on these plans within 90 days without the possibility of a filibuster. The aim is to streamline government operations. dailyfed.com

  1. Department of Government Efficiency (DOGE) Initiatives

The Department of Government Efficiency, led by Elon Musk, has implemented cost-cutting measures within the Social Security Administration, including staff reductions and technology overhauls. These actions have led to service disruptions and increased workloads for remaining employees. Business Insider+2The Washington Post+2FedSmith.com+2

Potential Positive Developments

  1. Expanded Eligibility for Dental and Vision Benefits

The Office of Personnel Management (OPM) proposes to expand the definition of a “member of family” under the Federal Employees Dental and Vision Insurance Program (FEDVIP) to include individuals up to 26 years of age. This aligns dental and vision coverage with medical benefits extended under the Affordable Care Act. U.S. Office of Personnel Management

  1. Enhanced Oversight of Human Resources

OPM seeks statutory authority over approximately 40,000 federal employees working in human resources positions government-wide. This would allow OPM to manage training and development across all agencies, aiming to improve HR practices and employee support. Federal News Network

These legislative proposals collectively represent a significant shift in federal employment policies, with potential implications for job security, compensation, and organizational structure. Federal employees and stakeholders are advised to stay informed and engaged as these developments unfold.

 

Moody’s Ratings Downgrades United States Ratings To Aa1 From Aaa; Changes Outlook to Stable

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Moody’s Ratings Downgrades United States Ratings To Aa1 From Aaa; Changes Outlook to Stable

On May 16, Moody’s Ratings downgraded the U.S. credit rating, citing an inability of the nation to address large and growing deficits. This downgrade means that for the first time ever, all three major credit ratings agencies have downgraded U.S. credit below their top rating. Moody’s warning comes as lawmakers are considering budget reconciliation legislation that would make America’s fiscal situation significantly worse.

The new report from Moody’s downgrades the U.S. credit rating from the top level of Aaa (negative) to Aa1 (stable). In its announcement, Moody’s stated the following primary reasons for doing so:

  • Growing debt caused by increased federal spending and reduced revenues from tax cuts. Moody’s includes the assumption that extension of the 2017 TCJA provisions will add $4 trillion to the debt over the next decade. 

Follow link to read more from The Peter G. Peterson Foundation. Moody’s Downgrades U.S. Credit Rating, Warns Recent Policy Decisions Will Worsen Fiscal Outlook