Did you know that many federal clients will take home less in January 2027 than they did in December 2026? The 2027 federal pay freeze keeps General Schedule base and locality pay at 2026 rates. At the same time, OPM reports the average FEHB enrollee premium share is rising 10.9%. With flat gross pay and a larger health premium, net pay goes down.
This is a useful open season conversation for advisors. Federal clients often notice the freeze headlines, but they do not always connect them to the premium increase on the next line of their earnings statement.
What the 2027 Federal Pay Freeze Covers
On August 26, 2026, the President sent Congress an alternative plan for pay adjustments, printed as House Document 119-189. The letter states that "for 2027, base pay and locality pay for civilian Federal employees will not change from the 2026 rates." It applies to employees covered by the General Schedule and certain other pay systems.
The letter also explains what would have happened without it. Under current law, locality pay would have increased by an average of 20.6% in January 2027, at a cost of $26 billion in the first year. On top of that, the base General Schedule would have received a 3.1% across-the-board increase.
January 2027 pay adjustments under the alternative pay plan
0%
GS base and locality pay
3.8%
Law enforcement personnel
5% to 7%
Armed Forces, by grade
Who still gets a raise
The plan treats three groups differently:
- Law enforcement personnel. The President directed OPM to use its statutory authority to increase 2027 compensation by 3.8%. OPM's 2027 special rates page for law enforcement describes this as a separate process from the alternative pay plan.
- Armed Forces. Basic pay rises 7.0% for grades E1 to E5, 6.0% for E6 to O3 and 5.0% for O4 and above, effective January 1, 2027.
- Other uniformed services. Members who do not serve in the Armed Forces receive 3.6%, also effective January 1, 2027.
Is the freeze final?
Not technically. The final rates are set by executive order, which has usually been signed in December. Congress can override the plan by enacting a different figure. The FAIR Act, which would provide a 4.1% raise, has been introduced again, but Congress has not passed any version of it. Current funding runs through December 11, 2026, and some lawmakers have said they want a raise included in year-end spending legislation. Until something is enacted, plan around the freeze.
The Premium Side of the Paycheck
The other half of the story comes from OPM's plan year 2027 open season highlights:
| Program | Average change for 2027 |
|---|---|
| FEHB total premium | +9.3% |
| FEHB enrollee share | +10.9% |
| FEHB government contribution | +8.6% |
| PSHB total premium | +6.7% |
| PSHB enrollee share | +8.2% |
| FEDVIP dental | +1.0% |
| FEDVIP vision | +1.6% |
These are averages. The actual change for any client depends on the plan and enrollment type, so use OPM's rate charts for real numbers. OPM's plan year 2027 highlights explain that the government pays the lesser of 72% of the program-wide weighted average premium or 75% of the selected plan's total premium. When premiums rise faster than the government contribution, the enrollee share grows faster than the total premium.
Why the gap matters
When pay rises, a premium increase is partly absorbed. When pay is frozen, every dollar of premium increase comes straight out of take-home pay. For a client who keeps the same plan, the January 2027 earnings statement will likely show the same gross pay and a larger health benefits deduction.
How to Use This in Client Meetings
Review the client's plan during open season
Open season runs November 9 through December 14, 2026. This is the one regular chance for most federal clients to change FEHB or PSHB plans. Encourage clients to look up their plan's 2027 rate and compare it with other options. A plan with a lower premium is not automatically better, but a client who never looks will simply pay the increase.
Revisit the budget
A flat paycheck with a larger deduction means less cash each pay period. Clients who are already tight should adjust their budget now rather than in February.
Check contribution elections
TSP contributions are set as a percentage of pay or a dollar amount. A pay freeze does not change a percentage election. Clients who were planning to raise their contribution percentage with a raise may need to decide whether to raise it anyway, especially those who are not yet contributing enough to receive the full agency match.
Look at FSAFEDS
FSAFEDS requires re-enrollment each year. A health care FSA lets employees pay eligible out-of-pocket medical costs with pre-tax dollars, which can soften the effect of higher costs. Clients must re-enroll during open season to have an account in 2027.
The Retirement Planning Angle
A freeze also has a quieter effect on retirement projections. The FERS basic annuity is based on the high-3 average salary, meaning the highest average basic pay over three consecutive years. A client who expected a raise in 2027 and planned to retire in the next few years will have a slightly lower high-3 than projected if pay stays flat.
The freeze affects pay tables, not individual advancement. Clients can still receive within-grade step increases or promotions if they qualify, and those raise basic pay.
Advisors should update projections that assumed a 2027 raise. Clients near retirement deserve an honest recalculation rather than last year's assumptions.
A note on law enforcement clients
Law enforcement clients are a separate case. Their 3.8% increase comes through OPM special rate authority, and OPM's page explains how it applies. Check which positions are covered before assuming a client qualifies.
Questions Clients Will Ask
"Will I still get my step increase?"
Yes, if the client qualifies. The freeze applies to the pay tables, not to within-grade increases. A client due for a step in 2027 still moves to the next step, at 2026 rates. Promotions work the same way.
"Does this affect my FEGLI?"
Basic FEGLI coverage is tied to annual basic pay, so a client whose pay stays flat will see basic coverage stay flat as well. If the client's pay does rise through a step or promotion, coverage can rise with it.
"Should I switch to a cheaper health plan?"
Maybe, but premium is only one factor. Clients should compare deductibles, networks, drug coverage and expected care before deciding. OPM's plan comparison tool and each plan's 2027 brochure are the right starting points. A cheaper plan that does not cover a client's doctors or prescriptions can cost more over the year.
"What if Congress passes a raise later?"
Then the numbers change. Advisors should tell clients that the freeze is the current plan, explain that legislation could still change it, and revisit the budget if it does.
Talking Points for Advisors
- "The 2027 federal pay freeze keeps GS base and locality pay at 2026 rates unless Congress acts."
- "FEHB enrollee premiums are rising 10.9% on average, so your take-home pay will likely drop if you keep the same plan."
- "Open season ends December 14. Let's look at your plan's 2027 rate together."
- "If you are retiring in the next few years, we should update your annuity estimate."
Building Federal Expertise
Questions like this are why federal clients value advisors who understand their system. A generic planner sees a salary freeze. A federal benefits specialist sees the premium formula, the high-3 effect and the open season deadline. For more on 2027 premiums, read our post on FEHB premiums and open season. For the bills that could still change pay, see federal employee legislation to track in 2027.
FedEd Academy™ covers federal pay, FEHB and FERS in depth in its live program, and advisors who want a credential can explore the RFBS℠ designation.
A freeze is not just a headline. It is a flat paycheck meeting a larger premium. Advisors who show clients the net effect, and help them act before December 14, earn trust that lasts beyond open season.
Frequently asked questions
Is there a 2027 federal pay freeze?
Under the alternative pay plan the President transmitted to Congress in August 2026, base pay and locality pay for civilian employees under the General Schedule and certain other pay systems will not change from 2026 rates. The rates become final when the President signs the annual pay executive order, usually in December, and Congress could still set a different figure.
Who gets a raise in 2027 under the plan?
The plan directs OPM to use its statutory authority to increase 2027 pay for law enforcement personnel by 3.8%. Members of the Armed Forces receive 7.0% for grades E1 to E5, 6.0% for E6 to O3 and 5.0% for O4 and above. Other uniformed service members receive 3.6%.
How much are FEHB premiums rising for 2027?
OPM reports that the average FEHB premium is rising 9.3% and the average enrollee share is rising 10.9%. For PSHB, the average enrollee share is rising 8.2%. Actual changes vary by plan and enrollment type.
Can a federal employee still get a pay increase during a freeze?
A freeze applies to the pay tables. Employees can still receive higher pay through a within-grade step increase or a promotion if they qualify.
What would the pay formula have produced without the plan?
The President's letter says locality pay would have increased by an average of 20.6%, costing $26 billion in the first year, plus a 3.1% across-the-board increase to base General Schedule pay.
