Franklin Planning News Flash for Federal Employees

OPM Addresses Worries Regarding Plan to Access to FEHB/PSHB Medical Records

OPM moved to calm growing privacy concerns after proposing to access detailed FEHB and PSHB medical claims data—including office visits, treatments, and prescriptions—to improve program oversight. Critics, including NARFE, AFGE, and more than a dozen Democratic lawmakers, warned the plan lacked clarity on why OPM needs such data, how it would be protected, and whether it could expose sensitive information or violate privacy laws.

In response, OPM Director Scott Kupor said the data would be de‑identified before OPM receives it, with names, Social Security numbers, addresses, and other PII removed. Only ZIP code, year of birth, and member ID (which OPM will replace with random identifiers) would remain. Kupor emphasized that the data would be encrypted, stored separately, and used to detect fraud and improper billing in real time—something OPM currently can only do after the fact through IG audits.

Sources:
FEDweek
SouthworthPC

OPM Expands US Tech Force With New Industry Partnerships

The US Office of Personnel Management (OPM) today announced additional leading technology companies have committed to partnering with the US Tech Force (Tech Force), the government-wide initiative to recruit top technologists to modernize the federal government and strengthen America’s technical workforce.
Follow link to read more from the OPM: https://www.opm.gov/news/news-releases/opm-expands-us-tech-force-with-new-industry-partnerships/

Inflation Is Affecting the Financial Security of Federal Employees

Inflation is eroding federal employees’ financial security primarily through shrinking real pay, lagging COLAs, rising FEHB premiums, and pressure on retirement savings. Together, these trends mean take home pay buys less, retirement income grows more slowly than prices, and healthcare consumes a larger share of both active duty and retiree budgets.

Key Ways Inflation Is Impacting Federal Employees:
1. Pay Raises Are Not Keeping Pace With Inflation
• The 2025 federal pay raise averages 2%, consisting of a 1.7% base increase and 0.3% locality adjustment.
• This is a sharp drop from 4.6% in 2023 and 5.2% in 2024, meaning real purchasing power is declining as inflation remains elevated.
• When inflation outpaces pay raises, everyday expenses—housing, food, transportation—consume a larger share of income.

2. COLAs for Retirees Lag Behind Real Inflation
• 2025 COLA for retirees was 3.2%, far below the 8.7% spike seen in 2023.
• FERS COLAs are capped:
o If inflation >3%, FERS COLA = CPI W minus 1 percentage point.
o If inflation is 2–3%, FERS COLA is fixed at 2%.
o This means FERS retirees lose purchasing power during high inflation years.
• For 2026, CSRS retirees receive a 2.8% COLA, while FERS retirees receive only 2.0%, again widening the gap.

3. FEHB Premiums Are Rising Faster Than Inflation
• FEHB premiums increased 11.2% on average in 2025, with enrollees absorbing about 13.5% of the increase.
• Healthcare costs are rising faster than general inflation, meaning:
o Higher premiums
o Higher deductibles and copays
o A growing share of retirement income consumed by healthcare
• For employees nearing retirement, this creates long term budget pressure.

4. Retirement Savings Face Inflation Headwinds
• Inflation influences the Thrift Savings Plan (TSP) in several ways:
o Higher inflation often leads to higher interest rates, which can increase volatility in stock funds.
o Bond funds may lose value when rates rise.
o Real returns must exceed inflation to maintain purchasing power.
• Inflation also increases the amount retirees must withdraw to maintain their lifestyle.

5. Structural Benefit Changes Are Quietly Reducing Long Term Security
• Inflation affects pension calculations, future payouts, and healthcare cost sharing, often in ways employees don’t immediately see.
• These structural shifts compound over time, especially for FERS employees who rely heavily on TSP growth and partial COLAs.
What This Means for Federal Employees
Inflation is creating a multi layered squeeze:
• Active employees: Pay raises aren’t keeping up with rising costs.
• Retirees: COLAs lag behind real inflation, especially under FERS.
• Everyone: FEHB premiums and healthcare costs are rising faster than income.
• Long term planners: TSP returns must outpace inflation to preserve retirement security.

Sources:
Planwell
PSRetirement
Congressional Research Service

OPM's Retirement Backlog has dropped to its lowest level since fall 2025

OPM’s retirement backlog has dropped to its lowest level since fall 2025 because processing is finally outpacing incoming claims — a reversal from the surge that began in late 2025. The improvement is driven by faster throughput, moderating new claims, and continued digital processing gains.

Summary: “Fast Processing Slashes OPM Retirement Backlog to Lowest Level Since Fall 2025”

1. Backlog Falls Below 50,000 — First Time Since November 2025
• OPM’s retirement application inventory fell below 50,000 cases in April 2026, the lowest level since November 2025.
• April’s ending inventory: 49,888 cases, a 10.4% drop from March.

2. Processing Outpaced New Claims for the Second Straight Month
• 17,175 cases processed in April vs. 11,940 new claims received, creating a surplus of 5,235 processed cases.
• This continues the trend from March, when OPM processed 22,237 claims vs. 14,759 received.

3. Why the Backlog Is Shrinking
• Higher processing throughput — OPM has processed 100,018 cases in the first seven months of FY 2026, a 70% increase over the same period last year.
• Digital claims now make up a growing share of the workload, accelerating case completion.
• New claims are moderating — April’s intake (11,940) was the lowest since September 2025, suggesting the retirement surge tied to workforce reductions is easing.

4. Context: Backlog Still Historically High
• Despite improvement, April 2026 still represents the second highest April backlog ever recorded (only April 2012 was higher).
• The backlog remains more than triple the level from April 2025.

5. What Drove the Earlier Surge
• A wave of federal workforce reductions led to record-high retirement filings, including 31,240 new claims in February 2026, the highest monthly total ever recorded.

📌 Bottom Line
OPM’s retirement backlog is finally moving in the right direction. Faster processing, digital modernization, and a slowdown in new claims have pushed the inventory below 50,000 for the first time since fall 2025. However, the backlog remains historically elevated, and sustained high throughput will be needed to return to pre surge levels.

Sources:
FedSmith

Disclaimers Are Used Progressively More in Federal Employee Estate Plans

A disclaimer allows a beneficiary to refuse an inheritance, causing the asset to pass directly to the next designated beneficiary as if the original beneficiary had never received it.

Federal employees often have complex estates that include retirement benefits, Thrift Savings Plan (TSP) accounts, life insurance, and other beneficiary-designated assets. As a result, estate planners are increasingly incorporating disclaimers to provide flexibility after death.

Key reasons include:

Flexibility: Beneficiaries can decide after death whether accepting an asset is the best choice based on current circumstances.

Tax planning: Disclaimers can help reduce future estate taxes and facilitate more efficient wealth transfers.

Changing family needs: They can address unexpected situations such as divorce, creditor issues, special-needs concerns, or changes in financial circumstances.

Adapting to outdated plans: Disclaimers provide a way to adjust distributions when laws, assets, or family dynamics have changed since the estate plan was created.

For federal employees, disclaimers are particularly valuable because they help coordinate the transfer of multiple benefits and accounts while preserving flexibility for beneficiaries.

Sources:
Journal of Accountancy
VCLaw.com
Knoxlaw
Legal Information Institute/Cornell University

A Cheat Sheet for Retirement Account Beneficiary RMDs

The SECURE Act completely changed the rules for beneficiary IRA (and workplace retirement plan) required minimum distributions (RMDs). It’s now been more than 6 years since the SECURE Act became law and almost 2 years since the IRS finalized its RMD regulations. Yet there’s still plenty of confusion about how these rules work. To help keep things straight, we present our beneficiary RMD cheat sheet.

Keep in mind that these are the rules for retirement accounts inherited after 2019. Pre-SECURE Act rules applied for accounts inherited before 2020, and those old rules were grandfathered and continue to apply for those accounts. Also note that there are separate rules for successor beneficiaries (beneficiaries of beneficiaries).

Where to Begin

To begin with, we need to answer two questions:

Did the IRA owner die before or after the required beginning date (RBD) for starting RMDs? The RBD is April 1 of the year following the year the IRA owner reaches age 73 (if born between 1951 and 1959) or age 75 (if born after 1959). A Roth IRA owner is always considered to have died before the RBD.
What kind of beneficiary do we have? An eligible designated beneficiary (EDB) is a surviving spouse of the IRA owner; a minor child (under age 21) of the owner; a chronically-ill or disabled person; or someone who is not more than 10 years younger than the account owner. A non-eligible designated beneficiary (NEDB) is an individual beneficiary who’s not an EDB. A non-designated beneficiary (NDB) is a beneficiary who’s not a person, such as an estate, a charity or a non-qualified trust.

Rules That Apply When a Traditional IRA Owner Dies BEFORE the RBD OR a Roth IRA Owner Dies at Any Time

EDB (other than a minor child): An EDB other than a minor child can either (1) take annual RMDs over the EDB’s life expectancy, or (2) use the 10-year payment rule. If the 10-year rule is elected, the inherited account must be emptied by December 31 of the 10th year following the year of death, but annual RMDs aren’t required during the 10-year period. A surviving spouse EDB can also do a rollover to the surviving spouse’s own IRA (usually not recommended until age 59½).

EDB (minor child): A minor child EDB can either (1) take annual RMDs until the year the child turns age 30 and then empty the inherited account by the end of the following year, or (2) have the 10-year payment rule apply. If the 10-year rule is elected, the inherited account must be emptied by December 31 of the 10th year following the year of death, but no annual RMDs are required.

NEDB: The 10-year rule applies, but annual RMDs aren’t required.

NDB: The 5-year rule applies. The entire account must be emptied by December 31 of the 5th year following the year of death, but no annual RMDs are required during the 5-year period.

Rules That Apply When a Traditional IRA Owner Dies ON OR AFTER the RBD

EDB (other than a minor child): An EDB other than a minor child can take annual RMDs over the EDB’s life expectancy. But if the EDB is older than the deceased IRA owner, the EDB can use the deceased person’s longer life expectancy in calculating RMDs. A surviving spouse EDB can also do a rollover to the surviving spouse’s own IRA (usually not recommended until age 59½).

EDB (minor child): A minor child EDB can take annual RMDs until the year the child turns age 30 and must empty the inherited account by the end of the following year.

NEDB: The 10-year rule applies, and annual RMDs are required during the 10-year period (based on the beneficiary’s single life expectancy starting in the year after the year of death).

NDB: Annual RMDs must continue over the deceased IRA owner’s remaining single life expectancy assuming the owner had lived (the “ghost rule”).

Copyright © 2026, Ed Slott and Company, LLC Reprinted from The Slott Report, 5/11/26, with permission. A Cheat Sheet for Retirement Account Beneficiary RMDs - Ed Slott and Company, LLC Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

FEHB: Federal Employees See Changes in Health Benefits

Federal employees are not facing structural cuts to FEHB, but they are seeing major cost increases and shifting benefits, according to the most recent reporting. The biggest “change” is financial: 2025 FEHB premiums are rising at the fastest pace in more than a decade, and OPM has expanded certain benefits (like fertility and maternity care), while plan availability and pricing vary widely across carriers.

⭐ Summary: Could Federal Employees See Major Changes in FEHB?
1. The Most Significant Change: Sharp Premium Increases
• FEHB enrollees will pay 13.5% more on average toward premiums in 2025 — the largest increase in at least 10 years.
• This follows increases of 7.7% in 2024 and 8.7% in 2023, showing a multi year upward trend.
• OPM attributes the rise to:
o Higher provider and supplier prices
o Increased use of prescription drugs
o Higher behavioral health spending
o General market wide cost pressures

2. Not All Plans Are Increasing Equally
• Among 144 FEHB plans for 2024–2025:
o 28 plans will decrease premiums
o 5 plans stay the same
o 69 plans increase below the 13.5% average
o 42 plans increase above the average (some dramatically)

• Example extremes:
o Presbyterian Health Plan Standard: –23% (New Mexico)
o Health Alliance HMO Standard: +66% (several states)

3. Expanded Benefits (Positive Changes)
OPM announced expanded fertility and maternity benefits for 2025, which may improve coverage for families but can also contribute to premium growth.

4. Government Contribution Levels
• The government continues to cover about 75% of premiums, capped at 72% of the weighted average.
• For 2025, the biweekly maximum government contribution is:
o $298.08 Self Only
o $650.00 Self Plus One
o $714.23 Self & Family

5. Plan Availability and Market Shifts
• FEHB will offer 64 plans and 130 plan options across 42 carriers in 2025.
• The new Postal Service Health Benefits (PSHB) program has slightly lower premium increases (11.1%) and different plan availability.

Sources:
Federal News Network
Ermer and Suter PLLC

Federal Retirees Face Unexpected Medicare Part B Surcharges

What Is IRMAA?
The Income-Related Monthly Adjustment Amount (IRMAA) is an income-based surcharge automatically added to Medicare Part B and Part D premiums when a retiree's Modified Adjusted Gross Income (MAGI) exceeds certain thresholds. It is not a penalty — it is formula-driven and recalculated every year. You do not apply for it; Medicare applies it automatically if your income qualifies.

The Two-Year Lookback — The Core Surprise
Medicare does not use your current income. It uses your MAGI from two years prior, based on IRS tax data.

Example: Your 2026 Medicare premiums are based on income reported on your 2024 tax return — even if you've already retired and your income has dropped significantly.

This is the primary reason federal retirees are caught off guard: they retire, their income drops, but their Medicare bill reflects their higher pre-retirement earnings.

2026 IRMAA Brackets — Part B Premiums
The 2026 standard Part B premium is $202.90/month. IRMAA surcharges begin at $109,000 (single) / $218,000 (married filing jointly) and escalate across five tiers:
Individual MAGI Joint MAGI Monthly Part B Premium
Part D surcharges add an additional $14.50–$91.00/month on top of plan premiums.

The "Cliff Effect" — A Costly Detail
IRMAA does not work like a traditional tax bracket. Exceeding a threshold by even $1 triggers the full surcharge for the next tier — not just the overage.

Example: A single retiree with $137,001 MAGI pays the exact same surcharge as someone earning $170,000. That $1 difference can cost thousands per year.

Why Federal Retirees Are Especially Exposed
Several events common to federal retirement can spike MAGI and trigger IRMAA — often years after the decision was made:
Large TSP withdrawals (including Roth conversions)
• Required Minimum Distributions (RMDs), including taking two in one year due to a delayed first distribution
• CSRS/FERS pension income combined with Social Security
• Selling a home or investment property
• Pension cost-of-living adjustments (COLAs)

How to Appeal — Form SSA-44
If a qualifying life-changing event has reduced your income (retirement, death of a spouse, divorce, loss of income), you can request a reduction using Form SSA-44 filed with the Social Security Administration. A successful appeal can eliminate surcharges worth $1,148 to $6,936 per person per year.
Qualifying life-changing events include:
• Retirement or reduction in work hours
• Death of a spouse
• Marriage or divorce
• Loss of pension income

How to file: Online at SSA.gov, by phone at 1-800-772-1213, or by faxing/mailing the completed SSA-44 form to your local Social Security office.

Planning Strategies to Reduce IRMAA Exposure:

Spread Roth conversions over multiple years Avoids spiking MAGI in a single year

Time large TSP withdrawals carefully, keeps income within a lower IRMAA tier

Coordinate RMDs with other income sources, prevents double-RMD years from crossing a cliff

File SSA-44 after retirement, uses current (lower) income instead of two-year-old data

Review MAGI two years before Medicare enrollment, allows time to make adjustments before premiums are set

Sources:
SSA.gov
My Federal Retirement
Daily FED
Medicare Tools
Federal Pension Advisors

Combining Retirement Accounts and Roth Conversions: Today’s Slott Report Mailbag

Question:
I have a new client who has an old SEP IRA as well as a traditional IRA with funds that were rolled over from his 401(k) plan. Can we combine these two accounts?

Answer:
Yes. These accounts can be combined. A SEP IRA is really just the same as a traditional IRA once the contributions are made. There is no reason to keep these accounts separate.

Question:
I am working with a couple on possible Roth conversions and retirement distribution planning. The husband inherited an IRA from his mother. If the husband passes and the wife inherits this inherited IRA, what are the options available to the surviving spouse on this inherited IRA? Can she do a Roth conversion?
Thanks,
Rick

Answer:
Hi Rick,
A Roth conversion would not be possible in this situation. The IRA was originally inherited by the husband from his mother. The husband is a non-spouse beneficiary, and non-spouse beneficiaries cannot convert inherited IRAs. If the wife inherits this IRA as a successor beneficiary, she would be a non-spouse beneficiary as well because she was not married to the original IRA owner (her husband’s mother). That means conversion is not allowed.

Copyright © 2026, Ed Slott and Company, LLC Reprinted from The Slott Report, 5/28/26 with permission. Combining Retirement Accounts and Roth Conversions: Today's Slott Report Mailbag - Ed Slott and Company, LLC. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

May AssetMark Mark to Markets

Economic growth remains supported by consumers, AI investment, and strong corporate profits, but risks are building. Energy prices, credit stress, Fed uncertainty, and rising debt reinforce the case for long-term discipline.

We encourage you to review the full presentation for detailed insights and data.

Follow link to read more.https://static.fmgsuite.com/media/documents/c696d67d-f8e6-420b-a1e2-3230a0194f05.pdf