How federal retirement benefits have changed over the years

It has been more than 20 years since I began writing this “retirement planning” column and more than 40 years since I started studying federal benefits so that I could teach and counsel federal employees about their retirement and insurance benefits. As the old saying goes, “time flies when you’re having fun!” During the past four decades, I have seen changes in federal retirement and insurance benefits due to changes in laws and policies. As I look back to 1985 (the year I was assigned to work in the Federal Bureau of Investigation’s “retirement office”), here are some of the changes that have stood out that impact the Federal Employees Retirement System (FERS), which was being created and implemented in the 1980s, and the older Civil Service Retirement System (CSRS), which dates back to its creation in 1920:

Federal Employees Retirement System Act of 1986 — Title I: Federal Employees Retirement System

Establishes FERS for federal employees, postal employees and members of Congress who began service after Dec. 31, 1983. Declares that benefits payable under the system are in addition to those payable under the Social Security Act. Includes the following provisions:

• Eligibility for an annuity after five years of creditable service

• Entitlements to retirement based on age and years of service

• Formulas for computing an annuity

• Survivor election reductions

• Funding

The FERS Act also provided for:

• Mandatory retirement for air traffic controllers, law enforcement officers and firefighters

• A Thrift Savings Plan under which participants make contributions from their basic pay

• A formula to determine the appropriate contribution by the employing agency

• Payment of benefits, lump sum or annuity, at separation from service

• Establishment of the Thrift Savings Fund in the Treasury

• Investment of funds

• Survivor annuities under FERS

• Disability benefits for employees with 18 months of creditable service

• The Office of Personnel Management to administer benefits and adjudicate claims

• Annual adjustments in basic pensions based on increases in the Consumer Price Index

• Withholding of state income taxes from retirement annuities

• Protection of annuities, survivor annuities and disability benefits from legal process, unless otherwise provided by federal law

• Creation of the Federal Retirement Thrift Investment Board to oversee the Thrift Savings Fund

• Creation of an Employees Thrift Advisory Council

• Appointment of an executive director to carry out board policies and administer the plan

Public Law 103-353, the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)

Approved Oct. 13, 1994, this law made two substantial amendments to FERS and CSRS provisions under Title 5. It made certain National Guard service creditable and addressed service credit deposits required for certain military service that interrupts civilian federal service. Both provisions apply to certain past service.

Bailey v. State of North Carolina (1998)

This class-action lawsuit resulted in a North Carolina Supreme Court decision that affected taxation of certain retirement benefits. As a result, North Carolina may not tax certain retirement benefits received by retirees of the state who meet specific criteria. The ruling applies to certain defined benefit plans, including FERS and CSRS, for qualifying service. It also applies to certain state retirement plans. Retirees are advised to check with their state tax office regarding how their benefits will be taxed.

The National Defense Authorization Act for Fiscal Year 2010 (Public Law 111-84)

Signed Oct. 28, 2009, this law provided several changes under CSRS and FERS, including:

• Credit for unused sick leave under FERS, with phased implementation (50 percent effective Oct. 28, 2009, and 100 percent effective Jan. 1, 2014)

• Expanded ability to use actuarial reductions instead of cash redeposits for certain prior service

• Changes to annuity calculations for part-time service

• Authority to deposit refunds under FERS

• Credit for certain District of Columbia service transferred to federal service

• Retirement equity adjustments for employees in non-foreign areas, allowing a phased shift from cost-of-living allowances to locality pay

Public Law 112-96, the Middle Class Tax Relief and Job Creation Act of 2012

Established FERS-Revised Annuity Employee (FERS-RAE). Employees hired after Dec. 31, 2012, who were not excluded from FERS coverage became subject to higher employee contribution rates. While most benefits did not change, the law increased contributions and included exceptions allowing some employees to remain under original FERS rules.

The Social Security Fairness Act (2025)

Signed into law on Jan. 5, 2025, this act ended the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These provisions had reduced or eliminated Social Security benefits for millions of workers who also received pensions from non-covered employment, including many federal employees under CSRS.

Future changes

• H.R. 1522, the Federal Retirement Fairness Act, would allow civilian service in temporary positions after Dec. 31, 1988, to be creditable under FERS. It has been proposed for years but has not gained broad support.

• Recent proposals in the “big beautiful bill” of 2025 included potential changes to federal retirement and benefits, such as:

  • Reducing the federal government’s contribution to FEHB plans through a voucher model

  • Eliminating cost-of-living adjustments for FERS retirees

  • Reducing COLAs for CSRS retirees by 0.5 percent

  • Reducing returns on the Thrift Savings Plan G Fund

  • Increasing employee retirement contributions

  • Converting new employees to at-will status unless they accept higher contributions

  • Charging fees for Merit Systems Protection Board appeals

  • Calculating annuities based on the highest five years of salary instead of three

  • Eliminating the FERS annuity supplement

Employee and retiree organizations continue to play a significant role in shaping these outcomes. Groups like AFGE and NARFE have successfully influenced legislation and helped prevent proposed cuts to federal retirement and insurance benefits.