Issue 02 | June

THIS MONTH IN FEDERAL BENEFITS ADVISORS

The FERS Backlog Trap

Average FERS wait times drag to 76 days while OPM executes structural policy shifts and drafts more aggressive RIF guidelines.

01 • RETIREMENT OPERATIONS

The 76-Day Paperwork Bottleneck

OPM's retirement claims backlog continues to widen. Average processing time across all FERS claims now stands at 76 days but that top-line figure masks a stark digital divide in how claims are filed.

The Interim Annuity Gap

While OPM verifies decades of work records, retirees do not simply wait in limbo without income but they also do not receive their full annuity. Instead, OPM issues an interim annuity: a partial check equal to roughly 50%-80% of the eventual, fully-computed benefit.

This interim period typically runs 4 to 9 months, and in more complex cases; multiple agencies, military buy-back deposits, or incomplete personnel folders, it can stretch to a full year before the final annuity is set and back pay is released.

REAL-WORLD CASE STUDY

A recently separated federal retiree lived on a reduced interim annuity for nine months while OPM reconciled a multi-agency service history. When the final computation was completed, OPM issued a lump-sum back-pay check of $87,000 to true the account up to the full annuity rate. The math worked out in the end but the nine-month gap created a serious cash-flow risk: a household budgeting against 50-80% of expected income, for the better part of a year, with no guaranteed date of resolution.

ADVISOR NOTE

“The day you retire and the day your full pension begins are rarely the same. Most feds spend 4 to 9 months on a partial interim annuity. Without a structured income bridge, you are essentially forced to liquidate retirement assets in whatever market OPM hands you.”

02 • POLICY AND COMPLIANCE

OPM Structural Shifts and RIF Rules

FEVS Survey Delay & Data Scrub

Release of the annual Federal Employee Viewpoint Survey (FEVS) has been delayed as OPM strips all 13 DEIA-related questions, along with questions addressing gender identity, to comply with recent executive orders directing agencies to eliminate DEIA-focused data collection.

The change goes further than simply dropping future questions: OPM has retroactively flagged FEVS reports from 2012 through 2024 as methodologically “inconsistent” with the revised survey instrument, complicating year-over-year trend comparisons that agencies, unions, and researchers have relied on for over a decade.

Aggressive New RIF Rules Take Shape

Separately, OPM is quietly redrafting its governing guidance on Reductions in Force (RIFs) to weigh performance and tenure more heavily in retention decisions. Alongside this, performance evaluation frameworks are being restructured to rely on more objective, quantifiable metrics.

Taken together, the two efforts hand supervisors materially more leverage in RIF-retention decisions and performance-based separations, a shift federal employees and their advisors should track closely heading into any future reorganization cycle.

BOTTOM LINE

Tighter RIF rules + retroactively flagged FEVS data + more supervisor discretion = a materially different workforce-risk environment than 12 months ago.

03 • BENEFITS STRATEGY

Postponed vs. Deferred: The FEHB Consequence

OPM's Deferred Resignation Program (DRP 2.0) has now seen over 100,000 federal employees exit under its terms but a dangerous misunderstanding about health-insurance eligibility is leaving some retirees stranded without coverage.

THE TRAP

Employees who take a deferred resignation, resigning before reaching their Minimum Retirement Age permanently strip themselves of FEHB eligibility for life. There is no mechanism to buy back in once the annuity finally starts. Postponed retirement, by contrast, preserves the right to resume FEHB coverage the moment the annuity begins.

For anyone weighing an early exit, this single distinction can be worth hundreds of thousands of dollars in lifetime health-coverage value; make the FEHB impact the first question you answer, not the last.

04 • MARKET DYNAMICS

TSP Symmetrical Returns and Sequence Risk

Year-to-date Thrift Savings Plan fund performance through June 19, 2026:

Volatility context: 52-week trading ranges have been wide across the equity-heavy funds spanning roughly 29% to 37% peak-to-trough across the C, S, and I Funds. The C Fund alone posted a single-month decline of -4.98% in March 2026, a reminder that double-digit YTD gains can mask sharp interim drawdowns.

WHY SEQUENCE-OF-RETURN RISK MATTERS RIGHT NOW

Strong year-to-date numbers are encouraging, but employees at or near retirement should focus less on the headline return and more on sequence-of-return risk: the danger that a sharp drawdown, like the -4.98% March 2026 print in the C Fund arrives in the first few years of withdrawals, permanently reducing the portfolio's ability to recover.

A wide 52-week range (29%-37%) is exactly the kind of volatility that makes withdrawal-order and glide-path planning essential in the years immediately before and after retirement.

05 • LEGISLATIVE & COLA WATCH

Supplement Preserved; 2027 COLA Adjusts

FERS Annuity Supplement Holds

The FERS Annuity Supplement survives for now. The Senate stripped House-passed proposals that would have eliminated the supplement, leaving the benefit intact pending further conference negotiations.

2027 COLA Outlook: The “Diet COLA” Math

Early projections place the 2027 Cost-of-Living Adjustment in a range of 3.6% to 3.9%. FERS retirees, however, do not receive the full CPI-based COLA. Under the standard statutory formula, FERS COLAs are capped at the full CPI figure minus 1.0 percentage point whenever CPI exceeds 2%, commonly nicknamed the “diet COLA.”

In short: FERS retirees should plan around a likely 2.6%-2.9% annuity adjustment for 2027, not the full 3.6%–3.9% CPI headline figure.

FEHB Premiums Outpacing COLA

The gap between income growth and health-cost growth remains the core budgeting challenge for federal retirees: FEHB premiums are averaging a 12.3% hike, running well ahead of any realistic FERS COLA adjustment for the year. Retirees should budget for real, after-COLA purchasing power to shrink once FEHB premium increases are factored in.

SOURCES CONSULTED

• FedSmith - www.fedsmith.com • FedWeek — www.fedweek.com • Federal News Network — www.federalnewsnetwork.com • Government Executive — www.govexec.com • Thrift Savings Plan (TSP.gov) — official fund performance data • U.S. Office of Personnel Management (OPM.gov) — www.opm.gov • Social Security Administration (SSA.gov) — www.ssa.gov • U.S. Bureau of Labor Statistics (BLS.gov) - www.bls.gov

This publication is provided for general educational and informational purposes only and does not constitute individualized financial, legal, tax, or retirement planning advice. Figures cited, including OPM processing times, TSP fund performance, and COLA projections, reflect publicly reported data available as of the publication date and are subject to change without notice. Federal Benefits Advisors (FBA) is not affiliated with, and this document is not endorsed or reviewed by, the U.S. Office of Personnel Management, the Thrift Savings Plan, or any federal agency. Please consult a qualified, credentialed federal benefits professional before making any retirement or financial planning decision. Past performance is not indicative of future results.

PREPARED BY JOE AND THOM GLEASON