Federal Employee Benefits Bills 2026: What’s Moving in Congress in 2026?

Federal Employee Benefits Bills 2026: For the roughly two million civilians who make up the federal workforce, 2026 has been a year defined by uncertainty. A record-length government shutdown, a historically small pay raise, double-digit health insurance premium hikes, and an administration determined to shrink the size of the civil service have combined to put federal employee compensation and Federal Employee Benefits at the center of political debate.

Against that backdrop, lawmakers on both sides of the aisle have introduced a wave of legislation aimed at reshaping how federal workers are paid, insured, and retired. Some of these Federal Employee Benefits Bills would expand Federal Employee Benefits. Others would trim them. A few are narrowly tailored responses to very specific problems, like the credit damage caused by unpaid furloughs. This article walks through the major Federal Employee Benefits bills currently pending in the 119th Congress, the political forces driving them, and what federal employees and retirees should watch for as the legislative session continues.

Federal Employee Benefits Bills : A Rough Year for Federal Pay and Benefits

Before diving into individual Federal Employee Benefits Bills, it helps to understand the environment they were introduced into. Entering 2026, the General Schedule pay raise was finalized at just one percent across the board, with no additional locality pay adjustment layered on top. That is the smallest increase federal employees have seen in several years, and it came without any of the customary locality-based supplements that usually cushion the impact of inflation in higher cost-of-living areas.

At the same time, premiums for the Federal Employees Health Benefits program rose sharply. The employee and retiree share of FEHB premiums increased by an average of roughly twelve percent for 2026, marking the second consecutive year of double-digit premium growth. For many federal workers, that means a real decline in take-home pay even before accounting for ordinary inflation, since a one percent raise does not come close to covering a jump in health costs that size.

Layered on top of stagnant pay and rising premiums has been substantial workforce turbulence. The administration has continued to push for a smaller federal workforce, with agencies including diplomatic and national security offices seeing further staff reductions. A new “Schedule Policy/Career” designation has been advanced to reclassify a portion of career civil servants in ways that would strip them of the appeal rights they currently hold when facing adverse personnel actions. Unions, led by the American Federation of Government Employees and the National Federation of Federal Employees, have been fighting in court and in Congress to preserve collective bargaining rights that the administration has sought to curtail through executive action. A federal judge has also allowed a lawsuit to proceed alleging that the Department of Government Efficiency’s access to federal data systems violated the Privacy Act, adding another layer of legal conflict to an already contentious year for the civil service.

Perhaps the most consequential event of the year, from a Federal Employee Benefits standpoint, was what did not happen. Earlier in 2025, the sweeping budget reconciliation package informally known as the “One Big Beautiful Bill” moved through Congress carrying a long list of proposed cuts to federal employee and retiree benefits. Proposals on the table at various points included eliminating the FERS Special Retirement Supplement, imposing new surcharges on employees who wanted to retain civil service protections, charging a $350 fee for employees appealing adverse personnel actions to the Merit Systems Protection Board, charging unions for the use of official time and government property, and raising retirement contribution rates for new federal hires. By the time the bill reached final passage, nearly all of these provisions had been stripped out, largely because they ran afoul of the Byrd Rule, which restricts what can be included in a reconciliation bill that only needs a simple Senate majority to pass. The one exception that survived into law was a higher FERS contribution rate for new employees hired after the changes take effect.

The reconciliation bill also did not include any federal civilian pay raise, which is part of why the eventual one percent adjustment landed so low. It is worth noting that many of the proposals removed from the reconciliation package have not disappeared for good. Because they were stripped out for procedural reasons rather than being rejected on the merits, there is a real possibility that some version of these ideas resurfaces as standalone legislation later in the session, since standalone bills are not bound by the Byrd Rule’s restrictions.

Retirement System Bills

The Federal Retirement Fairness Act

One recurring proposal in recent Congresses is the Federal Retirement Fairness Act, which addresses a long-standing complaint from employees who worked as temporary federal employees before converting to permanent status. Under current law, time spent working in temporary positions generally does not count toward an employee’s years of service for federal retirement purposes unless the employee makes a deposit to buy back that service, and even then only certain types of temporary service qualify.

The Federal Retirement Fairness Act would allow employees to make retirement contributions for temporary service performed after 1988, so that this time can count toward their eventual annuity. Supporters argue this simply extends fair treatment to workers who were doing the same jobs as their permanent counterparts, often for years, without receiving credit toward retirement.

Excluding Locality Pay From Annuity Calculations

A separate and more contentious retirement bill would change how annuities are calculated for new employees under the Federal Employees Retirement System by excluding locality-based comparability payments from the average pay figure used to compute retirement and disability annuities. Because locality pay can represent a significant share of total compensation in high-cost metro areas, removing it from the annuity calculation would meaningfully reduce the eventual retirement benefit for new hires in those regions, even though their retirement contributions would presumably stay the same. This bill reflects one strand of thinking in Congress that views current Federal Employee Benefits as overly generous relative to the private sector, and it is emblematic of the kind of benefit-trimming proposal that did not make it into the reconciliation package but could resurface as a standalone bill.

VSIP Reform: The Federal Workforce Early Separation Incentives Act

Perhaps the most active retirement-adjacent bill this year is the Federal Workforce Early Separation Incentives Act, sponsored by Representative Nick Langworthy. This legislation would raise the cap on Voluntary Separation Incentive Payments, commonly known as buyouts, which agencies can offer employees who agree to leave federal service voluntarily. Under current law, VSIP payments are capped at $25,000 or the amount an employee would receive under the standard severance pay formula, whichever is less. That cap has not been adjusted in years, and with the cost of living having risen substantially since it was set, supporters argue it has become far too small to meaningfully entice employees to leave voluntarily.

The bill would instead tie the maximum VSIP payment to a percentage of an employee’s salary, allowing agencies to offer as much as six months of pay with approval from the agency head. Because the payment would scale with salary, it would also automatically adjust over time as pay levels rise, addressing the inflation problem baked into the current flat-dollar cap.

This bill has moved further than most of the others discussed here. It passed out of the House Oversight and Government Reform Committee by a unanimous, bipartisan vote of 43 to 0, a notable show of consensus in an otherwise polarized Congress. Committee Chairman James Comer argued that expanding VSIP authority gives agencies a less disruptive alternative to reduction-in-force actions, which are often described by lawmakers and federal managers alike as costly, slow, and demoralizing compared with voluntary buyouts.

The Congressional Budget Office has scored the bill and projected some of its downstream effects on federal retirement costs. CBO estimated that larger VSIPs would encourage several hundred additional employees each year to retire roughly a year and a half earlier than they otherwise would have. Because those employees would have fewer years of service at retirement, their annuities would typically be smaller than if they had stayed longer, but the government would also continue paying its share of retiree health insurance premiums for a longer stretch of each retiree’s life. Taken together with the increased cost of the VSIP payments themselves, CBO projected the bill would increase direct federal spending by several hundred million dollars over the coming decade, with the VSIP payments accounting for the largest share of new costs, spread across agencies’ discretionary budgets rather than the mandatory spending side of the ledger.

Given the strength of its committee vote and the practical appeal of giving agencies more flexibility during a period of active downsizing, this bill is arguably the closest thing to a bipartisan consensus item among the current crop of federal workforce legislation.

Disability Insurance and Health Coverage

The Federal Employee Short-Term Disability Insurance Act

One of the more novel Federal Employee Benefits proposals this year comes from Delegate Eleanor Holmes Norton, who represents the District of Columbia. The Federal Employee Short-Term Disability Insurance Act would create an entirely new, optional insurance program for federal employees, functioning somewhat like the short-term disability plans that many private-sector employers already offer but that have never existed as a formal federal benefit.

Under the bill, employees who choose to enroll would be able to receive Federal Employee Benefits for injuries or disabilities that leave them unable to perform the essential functions of their job, for time needed to care for a family member, or for leave connected to the birth, adoption, or fostering of a child. Employees who opt in would pay the full cost of their own premiums, meaning the program would not add new costs to the government’s share of Federal Employee Benefits, and coverage could last for up to a year. The bill would direct the Office of Personnel Management to contract with licensed insurance carriers to offer these plans, establish minimum benefit standards, and require periodic reporting to ensure the plans remain competitive over time. It would also require the Labor Department to report back to Congress a year after enactment on how the program is being implemented and how many employees have taken advantage of it.

Because the structure is voluntary and self-funded by participating employees, this bill has drawn less controversy than some retirement-related proposals, since it does not require new federal spending commitments in the way that expanding an existing paid benefit would. Its central appeal is filling a genuine gap: federal employees currently have access to long-term disability retirement through their retirement system, but nothing analogous to the short-term disability coverage many corporate employees rely on for shorter medical absences, caregiving needs, or parental leave situations that fall outside the scope of existing paid leave programs.

Expanding PACT Act Coverage to Civilian Workers

A second health-related bill making its way through Congress addresses a gap in coverage for toxic exposure illnesses. When Congress passed the PACT Act in 2022, it created a presumption of service-connection for veterans who developed certain illnesses after exposure to burn pits and other toxic substances during their military service, making it far easier for affected veterans to access disability benefits without having to individually prove that their illness was caused by their service.

However, that presumption of exposure does not extend to civilian federal employees who worked in similar toxic environments, including law enforcement officers and national security personnel who may have been exposed to comparable hazards in the course of their civilian federal duties. These workers currently must establish an individual, direct link between their illness and a specific exposure, a burden that lawmakers backing the bill describe as often impossible to meet, particularly when illnesses surface years after the exposure occurred and records may be incomplete or unavailable.

The bipartisan bill addressing this gap, introduced by a group that includes Representatives Nellie Pou, Brian Fitzpatrick, and Celeste Maloy along with Senator Kirsten Gillibrand, would extend the same presumption of exposure available to veterans under the PACT Act to the civilian federal employees who worked alongside them in comparable conditions. Its bipartisan sponsorship, spanning both parties in the House along with Senate involvement, suggests this proposal has a somewhat easier path than some of the more partisan retirement and pay bills, since it is framed around correcting what sponsors describe as an unintended and unfair disparity rather than around broader philosophical debates over the size or generosity of the federal workforce.

Financial Protections During Shutdowns

The Federal Worker Credit Protection Act of 2026

No discussion of Federal Employee Benefits legislation in 2026 would be complete without addressing the aftermath of the record-length Department of Homeland Security shutdown, which stretched 76 days before ending in late April, the longest shutdown of its kind in American history. Tens of thousands of employees across DHS component agencies, including the Transportation Security Administration, FEMA, Border Patrol, and the Coast Guard, went without pay for months. Backpay is guaranteed under existing law once a shutdown ends, but backpay does nothing to reverse damage already done to an employee’s credit history if bills went unpaid or payments were late during the lapse in funding.

In direct response, a group of Senate Democrats led by Mark Kelly, along with Ruben Gallego, Angela Alsobrooks, Tim Kaine, Chris Van Hollen, and Mark Warner, introduced the Federal Worker Credit Protection Act of 2026. The bill would prohibit consumer reporting agencies such as the major credit bureaus from reporting adverse information on a federal worker’s credit file during a government shutdown and for thirty days after the shutdown ends, giving affected employees a grace period to catch up on missed payments before any damage is recorded. It would also require the Office of Management and Budget to formally notify credit reporting agencies when federal agencies enter and exit shutdown status, and it would allow federal workers to correct adverse information that has already been reported to their credit file as a result of a shutdown.

Notably, the bill as introduced would apply retroactively to February 1, 2026, meaning that if enacted, it could potentially allow DHS employees affected by the 76-day shutdown to have negative marks tied to that period removed from their credit history after the fact. Advocates, including AFGE President Everett Kelley and NFFE President Randy Erwin, have framed the bill as a matter of basic fairness, arguing that federal workers should not bear long-term financial consequences for funding lapses caused by political disputes entirely outside their control. Some federal employees affected by the DHS shutdown have described dramatic credit score drops, in some cases exceeding 200 points, after falling behind on rent and other obligations during the extended pay lapse.

It is worth noting that similar credit protection proposals have been introduced in prior Congresses without advancing, including a 2019-era bill called the Protecting Innocent Consumers Affected by a Shutdown Act and an even earlier proposal that would have encouraged financial institutions to work with affected federal employees on loan modifications during a shutdown. Given that history, the current bill’s ultimate fate remains uncertain, though the scale and duration of the 2026 DHS shutdown may generate more political pressure to act than prior, shorter funding lapses did.

Pay and Hiring-Related Legislation

The FAIR Act and the Federal Pay Debate

Federal pay legislation remains a perennial fight in Congress, and 2026 is no exception. For years, the Federal Adjustment of Income Rates Act, known as the FAIR Act, has been introduced repeatedly by lawmakers seeking to guarantee federal employees a specific, statutorily defined pay raise each year rather than leaving the decision to the administration’s discretion. Before his death earlier this year, Representative Gerry Connolly had introduced the FAIR Act for the tenth time, this version calling for a 4.3 percent pay raise for 2026, a figure dramatically higher than the one percent increase that ultimately took effect.

The FAIR Act’s repeated introduction and repeated failure to pass illustrates the persistent gap between what employee advocates argue is necessary to keep federal pay competitive with the private sector and what Congress has actually been willing to enact in recent years.

Cybersecurity Hiring Modernization

Not all federal workforce legislation is about pay or retirement. Several bills advanced by the House Oversight and Government Reform Committee this year focus on hiring practices, an issue closely tied to the government’s ability to compete for talent in specialized fields. The Cybersecurity Hiring Modernization Act, for instance, would bar federal agencies from imposing formal education requirements on cybersecurity positions unless such requirements are separately mandated by law. The idea, consistent with the broader skills-based hiring movement that has gained traction in both the public and private sectors, is that requiring a four-year degree for technical roles unnecessarily narrows the hiring pool and screens out qualified candidates who gained equivalent skills through certifications, military training, or hands-on experience rather than a traditional academic path.

Performance-Based Pay Pilots

Another bill working its way through Congress, the Federal Employee Performance and Accountability Act, would establish a five-year pilot program tying pay increases for certain federal employees directly to individual job performance rather than the standard annual and locality-based pay adjustments available under current law. Agencies participating in the pilot would be required to select between one and ten percent of employees at or above the GS-11 level, drawn from positions with clearly measurable performance criteria, and could increase a high-performing employee’s pay by as much as ten percent in a year.

Employees who merely met their performance targets, rather than significantly exceeding them, would not receive an increase under the pilot, and participants would forgo the standard annual and locality pay raises during their time in the program. Agencies would need to build out formal performance evaluation systems and report cost savings and productivity data to the Office of Management and Budget annually. Agencies would also be permitted to opt out entirely if participation is judged to pose a risk to national security or public safety.

Supporters frame this as a way to reward high performers and inject more accountability into a pay system that critics argue treats nearly all employees the same regardless of how well they actually perform. Critics, including many federal employee unions, generally view performance-based pay pilots with skepticism, arguing that subjective performance ratings can be inconsistently applied across agencies and supervisors, and that tying pay to metrics can create perverse incentives or unfairly disadvantage employees in roles where performance is inherently harder to quantify.

A Broader, More Ambitious Proposal: The Federal Jobs Guarantee Development Act

Standing somewhat apart from the narrower Federal Employee Benefits and pay bills is the Federal Jobs Guarantee Development Act, a considerably more ambitious piece of legislation that would establish a pilot job guarantee program administered through local and tribal government partners, with federal agencies also participating directly by employing qualified individuals for up to three years. While the bill is not exclusively about existing federal Federal Employee Benefits, it is relevant to this discussion because of how it defines the benefits that guaranteed jobs must include. Workers in the program would be entitled to health insurance coverage comparable to what federal employees receive under the Federal Employees Health Benefits Program, along with paid family leave and paid sick leave modeled on separate paid leave legislation from a prior Congress. The bill illustrates how the FEHB program has become something of a benchmark or reference point even in legislation that is not primarily about the existing federal workforce, underscoring how central that health benefits structure is to broader debates about employment security and access to health coverage in the United States.

What Comes Next?

Taken together, these bills paint a picture of a Congress pulled in several directions at once when it comes to federal employee benefits. Some lawmakers are pushing to expand protections and Federal Employee Benefits, whether through new disability insurance options, expanded toxic exposure coverage, or credit protections during shutdowns. Others are pushing in the opposite direction, looking to trim retirement benefits for new hires or tie pay more tightly to individual performance metrics. Still others are focused on operational flexibility for agencies, whether through larger buyout authority or loosened hiring requirements for hard-to-fill technical positions.

The fate of any individual bill will depend heavily on which chamber it originates in, whether it has bipartisan sponsorship, and whether it can be attached to a must-pass vehicle like an appropriations bill, since standalone legislation on federal workforce issues has historically had a difficult time getting floor time on its own. The VSIP reform bill’s lopsided, bipartisan committee vote suggests it has a real chance of further movement, as does the PACT Act expansion bill given its bipartisan, bicameral sponsorship. Bills viewed as either expanding costs, like the short-term disability insurance program, or cutting benefits, like the locality pay exclusion from annuity calculations, are likely to face more resistance and slower timelines.

Federal employees and retirees who want to track these bills closely can follow their status directly on Congress.gov by bill number, watch for committee markup schedules on the House Oversight and Government Reform Committee’s website, and pay attention to statements from major federal employee unions like AFGE and NFFE, which tend to weigh in quickly on legislation that affects their members. Given how much can change between a bill’s introduction and any eventual floor vote, and given how much of the original reconciliation package’s benefit cuts were removed only at the last stage of negotiation, it would be a mistake to assume any of these proposals, in either direction, are guaranteed to become law in their current form. The safest assumption for now is that federal Federal Employee Benefits will remain a live and contested issue in Congress for the remainder of this session, with outcomes that could meaningfully affect take-home pay, retirement security, and health coverage for millions of current and former federal workers.

Federal Employee Benefits Bills – Conclusion

The Federal Employee Benefits Bills 2026 reflects a Congress balancing competing pressures: managing the near-term consequences of shutdowns and workforce reductions, addressing long-standing gaps in coverage like short-term disability insurance and toxic exposure benefits for civilian workers, and continuing an older, unresolved debate about whether federal compensation and retirement Federal Employee Benefits are too generous, not generous enough, or roughly in line with what the work actually demands. None of the bills discussed here has yet been signed into law, and several face genuine uncertainty about whether they will advance beyond committee. But collectively, they represent the clearest picture available right now of where federal Federal Employee Benefits policy could be headed, and federal workers would do well to keep an eye on all of them as the session continues.

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