A federal employee earning $100,000 who skips one 2% raise and never catches up forgoes about $64,000 in paychecks over the next 25 years. The annuity then shrinks by roughly $950 a year. That's the real cost of a pay freeze. It's why a one-year pause in 2027 matters more than a single skipped January bump suggests, and why unions are warning about recruitment and retention.
The proposal would hold most federal civilian pay at 2026 levels in 2027. Federal law enforcement officers and military service members would be exempt. It's a proposal, not a done deal, and Congress still has a say. But raises compound, so the stakes run well past one year.
By the Numbers
- $64,000: cumulative pay lost over 25 years by a $100,000 employee who misses one 2% raise and never makes it up, assuming 2% raises every year after (my calculation)
- ~$950 a year: the resulting hit to a FERS annuity at 30 years of service (my calculation)
- $1,000 a year: what each 1% of foregone raise costs per $100,000 of salary, before compounding
- 0%: across-the-board civilian increase under the plan, per GovExec's reporting
- 2 groups exempt: federal law enforcement officers and military service members
- Not specified in reporting: how locality pay and within-grade increases would be treated
How it works
Civilian raises come from the Federal Employees Pay Comparability Act of 1990 (FEPCA), codified mainly at 5 U.S.C. 5303 and 5304. On paper, the formula is simple. The across-the-board raise is tied to the Employment Cost Index (ECI) for private-sector wages, minus half a percentage point. Locality pay, a separate layer, is supposed to close the gap between federal and local private-sector pay in each area.
Nobody follows that formula to the letter. Under 5 U.S.C. 5303(b), the president can send Congress an "alternative pay plan" by August 31 of the preceding year, citing a national emergency or serious economic conditions. Presidents of both parties have used that authority routinely. If Congress doesn't enact something different, the alternative plan takes effect in the first pay period of January.
That's the path a freeze would take. Congress can override it through legislation, typically an appropriations bill or a standalone measure, but it has to act.
Headlines tend to lump three separate mechanisms together:
The across-the-board raise. This is the adjustment applied to the base GS schedule. A freeze means zero.
Locality pay. A percentage on top of base pay that varies by area. The reporting doesn't say how it would be handled, so treat anything you read on that point as unconfirmed until the plan is published.
Within-grade increases (WGIs), or steps. These come from 5 U.S.C. 5335 and depend on time in grade and performance, not the annual adjustment. Waiting periods are one year for steps 1 to 3, two years for steps 4 to 6, and three years for steps 7 to 9. A typical step is worth roughly 3% of base pay. Nothing in the reporting says WGIs are frozen, and a pay freeze doesn't automatically stop them.
Military pay runs on a different rail. Under 37 U.S.C. 1009, the annual basic pay raise is indexed to the ECI by default, and Congress usually locks in the number through the NDAA. Federal law enforcement pay depends on the pay system covering the specific job. Many officers are on the GS schedule or special rates, so a carve-out has to be written explicitly. It can't be assumed.
A worked example
Take a hypothetical GS-12 whose base plus locality pay is $100,000. Call him Marcus. He's five years into his career and plans to retire at 30 years of service. For simplicity, assume he'd get a 2% raise in a normal year.
Year one. With the freeze, he earns $100,000 instead of $102,000. That's $2,000 gone, or about $167 a month before taxes.
Year two onward. The gap doesn't close on its own. If he gets 2% raises each following year, his pay stays 2% below the no-freeze path. The shortfall grows from $2,000 to about $3,200 by year 25.
Cumulative paycheck loss. Over 25 years, the gap sums to roughly $64,000. (Formula: $2,000 × [(1.02²⁵ − 1) ÷ 0.02].)
Retirement. FERS pays 1% of High-3 average salary for each year of service, or 1.1% for those who retire at 62 or later with at least 20 years. Marcus's High-3 would run about $3,150 lower than it otherwise would. Multiply by 30 years and 1%, and his annuity drops by roughly $950 a year.
What could change the result. A catch-up raise later would shrink these numbers. So would a step increase, a promotion, or a different raise schedule. Inflation matters too. If prices rise 3% in 2027, Marcus loses about $3,000 in purchasing power on top of the nominal loss.
The freeze itself is a modest dent. The compounding is where the money goes.
Who is affected — and by how much
GS employees, no step increase due. They take the full hit. A 0% base adjustment against a typical 2% year costs $1,000 per $50,000 of salary, scaling up from there. A GS-7 earning $55,000 would be out about $1,100 in year one. A GS-14 at $140,000 would be out about $2,800.
GS employees with a step due in 2027. A step is roughly 3% of base, so some people would still see a raise. It softens the blow but doesn't replace the annual adjustment. Employees at step 10 have no steps left and get the full hit.
Wage grade employees. Prevailing-rate pay follows separate wage surveys under 5 U.S.C. 5343, and local wage schedules get their own adjustments. The reporting doesn't spell out how those schedules would be treated, so the effect on wage grade workers is unclear.
Federal law enforcement officers. Exempt. They keep access to an adjustment while civilian colleagues at the same agency may not. At an agency like DHS or Justice, the gap between a special agent and an analyst working the same case is exactly what unions point to when they talk about winners and losers.
Military service members. Also exempt. Under the statutory formula, a raise is the default. A Staff Sergeant with 10 years of service would keep pace with the ECI-linked schedule while a civilian colleague at the same installation wouldn't.
Roles competing with private industry. Critics' workforce concern hits hardest in IT, cybersecurity, engineering, accounting, health care, and similar jobs. Private employers in those fields typically adjust pay every year. A frozen federal salary falls further behind the market for each year it stays frozen.
New hires. They'll start on a schedule with no 2027 adjustment, which narrows the gap between what agencies can offer and what the private sector pays.
How to estimate your own
Pull your current base and locality pay from your latest SF-50 or LES. Multiply by your assumed raise percentage to get the one-year hit, then run the compounding with a standard growth rate. Add your next step increase date to see whether any of the loss gets partially offset.
The federal pay raise calculator lets you plug in your grade, step, and locality and compare scenarios side by side.
FAQ
Is the 2027 pay freeze final? No. It's a proposal. If it follows the alternative pay plan route in 5 U.S.C. 5303, it takes effect in January unless Congress passes something different. That's why the legislative calendar matters.
Would my step increase still happen? Reporting doesn't say, and the law treats WGIs separately from the annual adjustment. Under 5 U.S.C. 5335, they're tied to your time in step and performance rating. Check your waiting period and watch for official guidance from OPM.
Does a freeze affect my retirement? Yes, indirectly. FERS and CSRS annuities are based on average salary over the highest-paid three consecutive years (High-3). A lower salary path means a lower High-3 and a smaller annuity. For employees close to retirement, the effect is smaller. For those with 20 or more years to go, it compounds.
Why are law enforcement and the military exempt? The reporting says they're excluded but doesn't explain the reasoning in detail. The exemption is in the proposal, and critics say it creates winners and losers across the federal workforce.
Can Congress change it? Yes. Congress can pass legislation setting a different raise. Past pay fights have often been settled in appropriations bills or the NDAA, though outcomes aren't predictable until a bill is signed.
Bottom line
One frozen year doesn't look dramatic in a paycheck. A 2% miss on $100,000 is $2,000. But unless a future raise makes it up, that miss follows you through the rest of your career and into your annuity. For the example employee here, that adds up to about $64,000 in lost pay and roughly $950 a year in retirement income.
Watch whether the plan reaches Congress intact, how locality pay and step increases are handled, and whether lawmakers move to override. The exemptions for law enforcement and the military also set a precedent for how the next fight over federal pay will be framed.