For years, getting a 4 or a 5 on your performance rating was pretty normal in the federal government. Starting with the rating year that just ended, it won’t be.
On September 21, 2026, OPM Director Scott Kupor sent agencies a memo capping top performance ratings. No more than 40% of an agency’s covered employees can be rated Level 4 or Level 5, combined. Agencies have to round down, and OPM was clear that 40% is “a ceiling, not a target.”
In my work as a financial planner for federal employees, clients have already started asking me what this means for them. Here’s how I’d think about it.
How big of a change is this?
When GAO looked at 2013 rating data, more than 60% of non-executive federal employees were rated in the top two levels. If anything close to that is still true today, roughly one in three people who are used to getting a 4 or 5 won’t get one this year.
That doesn’t mean they did worse work. It means there are fewer seats at the top. And a Level 3 isn’t a bad rating. It’s “Fully Successful.” But for a lot of people who have never seen a 3, it’s going to feel like a demotion.
Who it covers
The cap applies to the FY2026 rating cycle that closed September 30. It covers GS employees, career SES and Senior Professionals. It does not cover Wage Grade employees, Inspector General offices, very small agencies, or political appointees.
There is one escape hatch. Agencies that beat the goals in their strategic plans can ask OPM for a waiver of up to 50%.
What it means for your bonus
Here’s OPM’s award guidance for GS employees, using a $100,000 salary as the example:
- Level 5: at least 7%, or at least $7,000.
- Level 4: at least 4%, or at least $4,000.
- Level 3: at most 3%, or $3,000 at most. It can also be $0.
- At least 60% of each bonus pool has to go to Level 4s and 5s, and no single award can exceed $25,000.
Put those together and the picture is fewer top ratings, but bigger checks for the people who get them.
What it means for your job
This is the part I think matters most. Under the new reduction-in-force rule that took effect September 2, 2026, performance comes first when agencies decide who stays. Your three most recent ratings of record from the last four years drive your retention standing. Veterans’ preference still counts, and tenure and service date still matter, but they come after your ratings.
So the 40% cap decides more than the size of your bonus. In a RIF, it can help decide who keeps their job.
What it means for your retirement
Three things I want every fed to know here:
- Bonuses don’t raise your pension. A performance award is a lump sum, not basic pay. It doesn’t count toward your High-3.
- Your step increases are still safe at Level 3. A within-grade increase requires an acceptable level of competence, and Fully Successful meets that. A Quality Step Increase requires a Level 5, and there will be fewer of those.
- Don’t build your retirement plan around a bonus. If you’re a few years from retiring and were counting on a big award to pad your savings, plan without it.
What happens next
Agencies send OPM their rating numbers and any waiver requests by October 30. OPM rules on waivers by November 20. Final ratings will show up over the next few months, depending on your agency. Federal unions sued over the new performance rules in August, and that case is still pending.
What I’d do right now
- Put numbers in your self-assessment. Calibration panels compare people side by side, and “processed 340 cases” beats “worked hard.”
- Keep your own records. Get every rating of record in writing and keep at least four years of them, since that’s the window the RIF rule looks at.
- Know where you stand. If a RIF is possible at your agency and you’re close to retirement eligibility, understand your options before you need them.
Final thoughts
The rating system has changed more in the last few months than in the last decade. You can’t control where your agency draws the 40% line. What you can control is how well you document your work, how much your plan depends on a bonus, and how prepared you are if your job is ever on the line.
If you’re a federal employee within 5 years of retirement and want a plan built around your FERS benefits, book a free call to see if we’re a fit.
Dallen Haws, CFP®, is the founder of Haws Federal Advisors, which helps federal employees plan their retirement. This article is educational only and is not tax, investment or legal advice. HawsFederalAdvisors.com