2026 Brings Pay, Retirement, and Tax Updates for Federal Employees

It’s 2026 and the new year ushered in a series of changes affecting federal employee pay, retirement, health care, and other workplace benefits.

The 2026 pay raise for general schedule (GS) employees will take effect during the first full pay period of 2026, which is January 11-24 for most employees. Before Christmas, President Trump signed an executive order implementing a one percent raise for most civilian employees, the smallest increase since 2021. There was no increase in locality pay.

Some federal law enforcement officers are in line for a 3.8 percent pay bump as are members of the U.S. military.  

Also taking effect the first pay period of the year are Federal Employee Health Benefits (FEHB) and Federal Employees Dental and Vision Insurance Program (FEDVIP) plan elections and premiums for the 2026 plan year. 

Tax Changes

There are also adjustments in certain tax savings programs.

For example, the maximum amount that can be carried forward from 2026 to 2027 in Health Care Flexible Spending Accounts is rising to $680 from $660 the prior year. 

For dependent care accounts, there is a 10-week grace period for using unspent money carried from one year to the next.

The maximum tax-free amount allowed under the public transit subsidy program is rising from $325 to $340, as is the tax-free benefit for parking at a transit lot. 

And the Internal Revenue Service (IRS) says the mileage rate for certain tax deductibility purposes will rise from 70 cents per mile to 72.5 cents for 2026. The General Services Administration (GSA) typically mirrors that figure when setting the mileage reimbursement rate for federal employees using personal vehicles for official purposes.

Retirement Changes

For retirement, the annual contribution limit for the federal government’s Thrift Savings Plan is increased to $24,500, up from $23,500 for 2025. The limit to annual contributions to an IRA is increased to $7,500 from $7,000. 

Meanwhile, the interest rate charged to federal employees who need to pay to get retirement credit for certain past service will drop in 2026, falling to 4.25 percent from 4.375 percent. This rate applies when employees make payments to cover time when retirement contributions weren’t taken out of their pay, when contributions were refunded after leaving federal service, or when buying back military service time for retirement credit.