Fed-Employee Unions Up In Arms As House’s Big Beautiful Bill Targets Pensions

Millions of federal employees are monitoring the progress of President Trump’s longed-for “Big Beautiful Bill,” as it contains provisions targeting their generous, taxpayer-subsidized pensions. The final version narrowly passed by the House of Representatives on Thursday morning pared back some of the elements of the proposal that came from the House Oversight and Reform Committee in April, and cut near-retirees some slack, but it retained provisions that have government unions shrieking. 

First, here’s what’s been slashed from the Oversight Committee’s version that we reported on last month: 

• There’s no more increase in the pension premiums that longer-tenured feds would have had to contribute to the Federal Employee Retirement System (FERS). The original proposal would have made all employees pay 4.4% of their salary. The final House bill will allow those hired in 2013 to continue paying 3.1% and those hired earlier to keeping paying a paltry 0.8%; those hired in 2014 and after already pay 4.4%. (Below, we’ll detail a proposed change for new hires)
• Pensions will continue to be calculated using the average of the employee’s highest three years of earnings. The Oversight version would have changed that to using an average of the highest five years.  

However, a significant pension-reduction measure survived all the House horse-trading. Today, long-serving federal employees who retire with a full pension before Social Security age currently receive a supplemental payment on top of that calculated pension. The “FERS Annuity Supplement” is supposed to approximate their age-62 Social Security income attributable to their federal employment.  The head-scratchingly lavish goal: Saving early retirees from having to make do with less total money than they’ll eventually rake in at age 62 – even though they’re fortunate enough to receive a full federal pension in the interim. 

As recommended by the Oversight committee, the House reconciliation bill kills the FERS Annuity Supplement — however, the final version rolls back the effective date to Jan. 1, 2028, so as to avoid a last-minute change for feds who are on the brink of retirement. The language says any fed who is “entitled” to retire with a supplement on that date will hang on to their eligibility — apparently meaning there will be no incentive for them to rush to retire by the deadline. The bill keeps the supplement for employees subject to mandatory early retirement — mostly federal law enforcement and air traffic controllers. 

The House bill also kept a major change that would present all new federal hires with a critical choice about the nature of their government employment. If they want their pension premium rate to be 4.4% (the rate currently paid by employees who entered service in 2014 or after), future hires would have to agree to become “at-will” employees. If they want to have civil service job protection, their pension-contribution rate would soar to 9.4%.  

Republicans just snuck another harmful proposal into their tax package that would force federal employees to choose between paying more for their pensions or losing critical labor protections. You can count on me to vote against this blatant attack on working people. pic.twitter.com/vAT5JZ30UD

— Rep. Nikki Budzinski (@RepNikkiB) May 20, 2025

Government unions are screeching about that one. In a letter to House members, American Federation of Government Employees (AFGE) President Everett B. Kelley called the 9.4% rate “unaffordable” and said: 

“This provision is an un-American, anti-union, morally bankrupt attempt to charge workers for exercising their basic rights…. If enacted, this change will lead to the eventual extinction of the merit-based, nonpartisan civil service, which is certainly its true purpose.” 

Kelley also condemned the proposed eradication of the FERS Annuity Supplement, saying it would leave the average early-retiring employee with a pension that would lie “below the federal level for a family” — ignoring employees’ duty to put away their own savings to round out their retirement income. Note that feds have access to the government’s 401k-style Thrift Savings Plan, which has some very generous government-contribution provisions of its own.   

The American Postal Workers Union (APWU) also cried out in pain, laying out a scenario that’s supposed to elicit empathy but which will be utterly unmoving to any private-sector citizen: 

“If the FERS annuity supplement is eliminated, many postal workers aged 57 to 62 who are eligible to retire will have a choice — take less in retirement without this supplement or continue working years longer until they can collect Social Security.”

In other words, postal workers and other federal employees would have to make retirement decisions that more closely resemble the trade-offs faced by people who contribute to the economy — not counting, of course, their INFLATION-ADJUSTED PENSIONS kicking in while they’re in their fifties. We’ll have to wait and see if that rhetoric is persuasive in the Senate.

Given the GOP’s demonstrated disinterest in cutting spending, don’t be surprised if the AFGE and APWU get their way.