Payroll Reminders for Year End 2025 and New Year 2026

DATE: Wednesday, November 26, 2025

The IBC would like to share several payroll reminders and upcoming changes that may affect employee Earnings and Leave Statements in the final pay periods of 2025 and beginning pay periods of 2026.

Section Categories:

Important: Please review all categories carefully, as certain items may require agencies or employees to take action.

• Calendar Details and Information: Leave Year, Number of Pay Periods, Taxable Earnings Year, and 2026 Payroll Schedule Calendar.
• Deductions (Benefits and Donations): CFC, Dental and Vision Benefits, FEHB, FEGLI, FSA, TSP, and TSP Catch-Up Contributions.
• EFT Pay Dates Reminder: EFT pay date information by Pay Processing Group.
• Payroll Changes & Pay Limitations: Aggregate Pay Limitation, Annual Premium Pay Limitation, Earnings and Leave Statement, and Adjustments of Certain Rates of Pay.
• Tax Deductions & Implications: Form W-4 Claiming Exempt Withholding, Occupational Privilege Tax, State and Local Taxes, Social Security and Medicare Taxes, Transportation (Commuting) Benefits, and Voluntary Tax Allotments.
• Tax Forms: Forms W-2 and 1095-C.

Calendar Details and Information

Leave Year

• 2025 Leave Year: Ends Pay Period 2026-02, January 10, 2026.
  • Employees in the six-hour leave category will receive their extra four hours in Pay Period 2026-01, which is the last full pay period of the calendar year.
• 2026 Leave Year: Includes Pay Period 2026-03 through Pay Period 2027-02, January 11, 2026, through January 9, 2027.
  • Employees in the six-hour leave category will receive their extra four hours in Pay Period 2027-01, which is the last full pay period of the calendar year.

Number of Pay Periods

• 2025 Calendar Year:
  • There are 26 pay periods in 2025.
  • The final official pay date is December 23, 2025.
• 2026 Calendar Year:
  • There are 26 pay periods in 2026.
  • The final official pay date is December 22, 2026.

Taxable Earnings Year

• 2025 Taxable Earnings Year: The 2025 taxable earnings year is Pay Period 2025-01 through Pay Period 2025-26, December 15, 2024, through December 13, 2025.
• 2026 Taxable Earnings Year: The 2026 taxable earnings year is Pay Period 2026-01 through Pay Period 2026-26, December 14, 2025, through December 12, 2026.

Payroll Schedule Calendar

The 2026 Payroll Schedule is available at this link: Payroll Schedule Calendars.

Deductions (Benefits and Donations)

Combined Federal Campaign (CFC)

• OPM is contracted with the Give Back Foundation for federal employees to make CFC pledges through one giving system.
• To sign up, select charities, and setup new donor contributions for 2026, visit cfcgiving.opm.gov no later than December 31, 2025.
• Per 5 C.F.R. § 950.701, the 2026 CFC deductions will take place in Pay Period 2026-04 through Pay Period 2027-03 (January 25, 2026, through January 23, 2027).

Dental and Vision Benefits

• Unless an employee makes a new dental or vision election during Open Season, their 2025 coverage will automatically continue in 2026. Please note that premium rates may change from one plan year to the next.
• To view the new rates or to make changes during Open Season, employees can visit BENEFEDS.

Federal Employees Health Benefits (FEHB)

• Unless an employee makes a new FEHB election during Open Season, their 2025 coverage will automatically continue in 2026. Please note that premium rates may change from one plan year to the next.
• Coverage under a newly elected health plan is effective the first day of the pay period beginning on or after January 1, 2026, Pay Period 2026-03.
  • Enrollees will remain covered and receive the benefits of their 2025 plan until coverage under the new plan begins.
• Employees in terminating or reduced coverage plans should make a new election during Open Season. For additional information, refer to our 2025 Federal Employees Health Benefits Open Season and Terminating Plans message sent on November 10, 2025.

Federal Employees' Group Life Insurance (FEGLI)

• There are no changes to FEGLI rates for 2026. FEGLI rates and information can be viewed here: FEGLI Premium Overview.

Flexible Spending Account (FSA)

• Unless reauthorized by the employee, pre-tax deductions for the FSA Program automatically stop after Pay Period 2025-26.
• For pre-tax FSA deductions to occur in 2026, new elections must be made during Open Season (November 10 – December 8, 2025).
• For additional information and to make Open Season changes, employees can visit FSAFEDS.

Thrift Savings Plan (TSP)

• The maximum elective deferral limit for 2026 TSP contributions is $24,500. For deduction changes to be effective in Pay Period 2026-01, the employee can enter "12/14/2025" in the "Future Effective Date" field in Employee Express (EEX).
  • EEX allows "Future Effective Date" changes to be scheduled up to 90 days in advance.
• The combined total of tax-deferred traditional and Roth after-tax contributions cannot exceed the elective deferral limit in any year.
• Unless changed or canceled by the employee, 2025 biweekly contribution amounts or percentages automatically carryover into 2026.
• Employees who reach the IRS maximum contribution limit before the end of the year will be ineligible to make further contributions and, if applicable, may lose any government matching contributions for the rest of the year.
• In the year you turn 50+, you are eligible to contribute an additional $8,000.
• In the years you turn 60-63, you are eligible to contribute an additional $3,250.
• See the TSP website for more information: TSP Contribution Limits.

TSP Catch-Up Contributions

• Beginning in 2026, eligible catch-up contributions must be Roth contributions if your wages from TSP-eligible positions exceed $145,000. The IRS wage threshold is adjusted for inflation and announced by the IRS each year.
  • If this provision applies to you and your contribution election includes savings to your traditional TSP balance, your contributions will change automatically to all Roth TSP contributions once you meet the annual elective deferral limit (or annual additions limit if making traditional contributions from tax-exempt pay in combat zone).
• In general, the wages that determine whether this rule applies to you are equal to Medicare wages listed in box 5 of your W-2.
• For future planning, this means if your wages for 2025 are greater than the wage threshold and you are eligible to make catch-up contributions, any catch-up contributions you make for 2026 will go to your Roth balance. Since Roth contributions go into the TSP after tax withholding, you will pay taxes on that amount at your income tax rate.
• If you hold multiple TSP-eligible positions during a given year, the sum of those wages will be subject to this rule. Wages from outside employment with a different employer or under a different retirement plan are separate.

EFT Pay Dates Reminder

The Electronic Funds Transfer (EFT) pay date is determined by the Pay Processing Group that your agency is assigned to in FPPS. The EFT pay date should be when funds are deposited into employees’ bank accounts. Some financial institutions may advance funds to accounts prior to the official EFT pay date. Please advise your employees that IBC is unable to address any deposits that are made on a date prior to the established EFT pay date.

Below is a table that reflects the EFT pay date by Pay Processing Group. Please note that the “official pay date” for all agencies is the second Tuesday following the end of the pay period. If you are unsure which Pay Processing Group your agency is in, you can view the Pay Processing Group Report.

Payroll Changes & Pay Limitations

Aggregate Pay Limitation

• For 2026, the statutory limit on pay applies to most employees exempt from the Fair Labor Standards Act (FLSA) per 5 U.S.C. 5307.
• Although basic pay is never cut back, some allowances, differentials, bonuses, or awards may be cut back and deferred to the following year.
• Retention, recruitment, or relocation incentives authorized under 5 U.S.C. 5753 and 5754, may cause employees to exceed the aggregate limitations on pay and may be reduced or suspended.
• The aggregate pay limitation is generally Level 1 of the Executive Schedule.

OPM's Fact Sheet: Aggregate Limitation on Pay

Annual Premium Pay Limitations

• For 2026, the annual premium pay limits defined in 5 U.S.C 5547(b) apply.
• For employees exempt from the FLSA: If regular pay is projected for the year—plus Title 5 overtime, night differential, standby pay, availability pay, administratively uncontrollable overtime, Sunday premium, or holiday worked—to reach the limits, no additional premium payments will be paid.
• Compensatory time may not be substituted for overtime that is not payable.
• The annual pay limitation is greater than the annual rate of GS-15, step 10 for each locality or Level V of the Executive Schedule.

OPM's Fact Sheet: Maximum GS Pay Limitations

Earnings and Leave Statement

• Employees should carefully review their Earnings and Leave Statement for any changes that would impact their pay.
• If employees have any questions, please have them contact the Customer Support Center at 1-866-FOR-1-CSC (1-866-367-1272), or Payroll_Helpdesk@ios.doi.gov.

Adjustments of Certain Rates of Pay

If there are any authorized increases to the rates of basic pay or salaries of the statutory pay systems for 2026, they will be effective in the first full pay period of the year, Pay Period 2026-03. The processing pay period will depend upon receipt of the tables and time for testing. A separate User Group communication will be sent regarding pay raise processing.

Tax Deductions & Implications

Form W-4 Claiming Exempt Withholding

• To continue an employee's exemption from federal income tax withholding in 2026, the IRS requires individuals to complete a new Form W-4, Employee's Withholding Allowance Certificate, no later than February 17, 2026.
  • If entering the federal tax-exempt status through Employee Express, please allow time for processing by entering that transaction no later than February 6, 2026.
  • If a new Form W-4 has not been entered into Employee Express or the Federal Personnel and Payroll System between January 1 and February 6, 2026, the employee's federal withholding status will be changed to the highest possible withholding. If the action is entered after February 6, 2026, it may not update in time to avoid tax withholding for Pay Period 2026-04.
    • At this time, the IRS has not updated the Form W-4 with the 2026 information. Please check this link periodically: Form W-4 Employee's Withholding Certificate.
• The IBC will update the Federal Income Tax Withholding Formulas for 2026 in the coming weeks. Once updated, the formulas can be viewed on IBC Customer Central at this link: Federal, State, and Territorial Income Tax Withholding Formulas.
  • Before utilizing the formulas, employees contributing pre-tax deductions should first subtract those deductions from their biweekly gross pay.

Occupational Privilege Tax

• Certain localities require an Occupational Privilege Tax to be deducted from employees in their jurisdiction.
• When working within a specific district, the Occupational Privilege Tax is levied.
• While some localities withhold the tax in the first full pay period of the year, the actual deductions will depend on the locality's withholding requirements.

State and Local Taxes

• To ensure taxes are being withheld from the correct state and/or locality, we encourage every employee to review their Earnings and Leave Statement.
  • If an employee notices taxes are being withheld for the incorrect state or locality, or if they are still being withheld for a city the employee no longer lives or works in, they should contact their payroll liaison, personnel office, or the Customer Support Center.
• For additional information, refer to our user group communication: Updated State, City and County Income Tax Withholding Related to Official Duty Station.
  • The IBC's ability to correct prior-year tax errors is limited—errors from 2025 that are not identified until 2026 may require the employee to file a tax return to recover taxes withheld by the wrong tax entity.
  • Wages for non-taxing states are not reported on the Form W-2, Wage and Tax Statement.

Social Security (OASDI) and Medicare Taxes

• The Social Security Administration increased the 2026 maximum earnings to $184,500—there is no wage base limit for Medicare tax.
• For 2026, the Social Security and Medicare tax rates remain the same for all wages at 6.2% (OASDI) and 1.45% (Medicare).
• Individuals with earned income of more than $200,000 pay an additional 0.9% in Medicare taxes. Note: The Medicare tax rate shown above does not include the additional 0.9%.
• Additional details are available here: 2026 Social Security Changes.

Transportation (Commuting) Benefits

• The IRS has not announced the 2026 rates because they are contingent on legislation that has not been finalized.
• Once rates are available, they can be viewed in the Publication 15-B, Employer's Tax Guide to Fringe Benefits (see the Fringe Benefit Exclusion Rules section).

Voluntary Tax Allotments

• Since voluntary tax allotments are remitted to the locality on the employee's behalf, the amount of "estimated" tax deductions withheld through a voluntary tax allotment will be reflected on the Form W-2 in Box 14 as
  Item 8 – Estimated Local Tax.
  • These amounts are estimated.
  • Reconciliation occurs when the employee files an applicable tax return with the locality. 

Tax Forms

Form W-2

• The Form W-2, Wage and Tax Statement will be available electronically in Employee Express on January 12, 2026.
  • Currently, 57% of the active employees serviced by IBC's Human Resources Directorate have opted out of hard copy mailing for their Form W-2.
  • To prevent the risk of identity theft from lost or stolen forms in the mail, please encourage employees to opt out of receiving hard-copy W-2s by December 24, 2025.
• For all employees who do not elect to turn off their hard-copy mailing, a printed Form W-2 will be mailed to the employee's address of record no later than January 31, 2026.
  • Employees who are expecting a mailed Form W-2 should verify the address listed on their latest Earnings and Leave Statement in Employee Express.
  • Any address changes must be processed in Employee Express, or by the Servicing Personnel Office, no later than December 12, 2025.

Form 1095-C

• The Form 1095-C, Employer-Provided Health Insurance Offer and Coverage will be available electronically in Employee Express on January 12, 2026.
  • Currently, 44% of the active employees serviced by IBC's Human Resources Directorate have opted out of hard copy mailing for their Form 1095-C.
  • To prevent the risk of identity theft from lost or stolen forms in the mail, please encourage employees to opt out of receiving hard-copy 1095-Cs by December 24, 2025.
• For all employees who do not elect to turn off their hard-copy mailing, a printed Form 1095-C will be mailed to the employee's address of record no later than February 28, 2026.
  • Employees who are expecting a mailed Form 1095-C should verify the address listed on their latest Earnings and Leave Statement in Employee Express.
  • Any address changes must be processed in Employee Express, or by the Servicing Personnel Office, no later than December 12, 2025.
  • For any questions about the Form 1095-C, visit: About Form 1095-C, Employer-Provided Health Insurance Offer and Coverage.

Questions:

• Please contact the Customer Support Center at Payroll_Helpdesk@ios.doi.gov or 1-866-FOR-1-CSC (1-866-367-1272).