WASHINGTON — The agency that manages the federal government’s civilian workforce is, according to its own watchdog, struggling most with its own workforce. The Office of Personnel Management’s inspector general has named delivering the agency’s mission with fewer people as the leading management challenge for fiscal 2027, after a year in which staffing fell sharply through deferred resignations, reductions in force and the departure of probationary and experienced employees alike.
The finding, summarised by the National Active and Retired Federal Employees Association on 2 November 2026, does not describe a distant risk. It describes work already being squeezed: retirement claims still being processed, health and retirement money still being overseen, and technology systems still being modernised, but by smaller teams carrying responsibilities that were once spread more widely. The Office of Personnel Management, known as OPM, sits at the centre of the federal personnel system. When its capacity shrinks, the effects do not stay inside one building in Washington. They reach federal employees waiting for retirement decisions, retirees trying to reach a representative about a payment, and agencies across government that rely on OPM for hiring, benefits and workforce policy.
According to the inspector general’s account, OPM processed nearly 1,000 separation actions during 2025. That figure, drawn from the Federal Workforce Data website, captures formal separations rather than every vacancy or reassignment, but it gives a concrete scale to a change that employees inside the agency have felt as heavier workloads and thinner cover. Teams, the watchdog found, have been expected to sustain the same mission with fewer resources while they learn to navigate a changed organisation. The challenge is not presented as a single bad quarter. It is presented as the defining condition for the year ahead.
One of the sharpest pressures is in technology. OPM’s Office of the Chief Information Officer is operating, the inspector general said, in an increasingly complex environment. It has lost staff while taking on work previously supported by contractors, including expanded internal security operations. At the same time it must carry forward information-technology modernisation, protect data, manage governance and respond to fast-moving cybersecurity threats. Staff told the watchdog they worried about keeping up with cybersecurity fixes and about artificial intelligence being adopted faster than the governance, security and oversight frameworks needed to manage it can mature.
That combination — fewer people, more in-house responsibility, and newer tools arriving quickly — is where the watchdog sees the clearest danger. If risks in that area are not managed well, the report warns, the agency could face greater cybersecurity exposure, disruption to operations, delays to modernisation and weaker protection of sensitive federal information. Legacy systems without a clear path to modernisation add to the strain. They cannot simply be switched off, because they support benefits and personnel processes that people depend on every day, yet they demand attention that a smaller team may struggle to give.
OPM Workforce Reductions: Retirement Services and Customer Service Under Strain
The strain is most visible to the public in Retirement Services, the part of OPM that handles federal retirement benefits for annuitants and survivors. The inspector general acknowledged improvements in processing retirement applications and in some customer-service features. But it also found that reaching a representative remains difficult for many customers, with long hold times, unanswered calls and a rise in complaints. About 30 percent of retirement-related contacts to the inspector general’s hotline concerned customer service, according to the summary of the report.
For a retiree, that is not an abstract management problem. A missed payment, an unanswered question about a survivor benefit, or a form that cannot be clarified by phone can become a household problem quickly, especially for older people who may not be able to resolve it online. The watchdog’s point is that customer-service limits matter most precisely when an agency is changing: people need guidance while processes, systems and staffing are all in flux. Addressing those limits, the report said, is crucial to improving the experience of annuitants and survivors during ongoing change.
OPM’s leadership, as described in the report, views the downsizing differently in one important respect. Agency leaders see the workforce changes, together with advances in technology, as an opportunity to carry out the mission more efficiently and effectively over time. Modernisation, including targeted uses of automation and artificial intelligence, could in their view improve operational efficiency. The inspector general does not dismiss that possibility outright. Its caution is more specific: the agency is still determining which technologies are effective, sustainable and appropriate for its mission, and until that judgment is settled, careful management of resources and risks remains essential.
That disagreement is not a simple clash between optimism and pessimism. Both sides accept that the workforce is smaller and that technology will have to do more. The question is how quickly that transition can be made safely, and what happens in the meantime to services that cannot wait for a new system to prove itself. A retirement claim, a health-benefit enrolment and a cybersecurity patch all have their own clocks. The watchdog’s warning is that the gap between the old capacity and the new tools is itself a risk, and that closing it thoughtlessly could cost more than it saves.
OPM Inspector General Report: Health Benefits, Improper Payments and Trust Funds
Beyond staffing, the inspector general named three other challenges for fiscal 2027: protecting the financial integrity of the trust funds behind the Federal Employees Health Benefits programme, life insurance and retirement programmes; modernising information technology, including the Federal HR 2.0 initiative; and strengthening government-wide human capital management. Those are not side issues. They are the reason OPM’s staffing problem matters beyond its own payroll. The agency oversees money and benefits for millions of current and former federal workers, and errors or fraud in those systems fall on taxpayers and beneficiaries alike.
On health benefits, the watchdog returned to a long-standing problem: making sure only eligible family members receive benefits. Ineligible people — including non-spousal partners, friends, grandchildren and others improperly enrolled — have in the past received benefits under a self-certification process that did not verify them. Most currently enrolled dependents in the Federal Employees Health Benefits and Postal Service Health Benefits programmes remain unverified, the report said, and OPM lacks the ability and resources to verify them all at once. The decentralised enrolment structure makes it hard to consolidate and check data, and a comprehensive eligibility audit required by law by July 2029 will demand major operational, technological and funding commitments.
The report also dealt with improper payments, where the numbers are stark. Improper payments from OPM’s retirement programmes were approximately 363 million dollars in fiscal 2025, including about 265 million dollars in overpayments and 98 million dollars in underpayments. A leading cause, the watchdog said, is continued payment to deceased annuitants or survivor annuitants, which can happen when programme controls are weak. Reducing paper retirement documents and modernising legacy systems should help over time, the report suggested, but in the meantime tools such as the Treasury Department’s Do Not Pay portal remain important for catching payments that should have stopped.
Fraud detection is another weak point. In the past fiscal year, the inspector general opened complaints based on just 15 referrals from the Retirement Services programme office, with a combined loss of about 1.09 million dollars — a low number of referrals compared with the scale of improper payments. The watchdog and the agency are working to clarify referral criteria, with a memorandum of understanding nearing finalisation. The report also pointed to newer approaches, including using artificial intelligence to spot patterns such as non-use of health-care services and to analyse large datasets for suspicious trends among very elderly beneficiaries, as ways to identify payments that should be discontinued or investigated.
In the health-benefits programme itself, the watchdog said OPM has a strong opportunity to reduce improper payments by using its access to data and requiring cooperation from the carriers that administer the plans. Fraud in the wider health-care system, including in home health, hospice and durable medical equipment, creates exposure for a programme whose members are ageing. High spending on certain expensive drugs, such as GLP-1 medicines and immunotherapy treatments, means that fraud involving those treatments can quickly reach millions of dollars. The report described an ongoing contest in which fraudsters are increasingly using artificial intelligence to improve their schemes, even as the government expands its own use of the same technology to detect them.
GAO Warning on OPM Skills Gaps Adds to the Watchdog Picture
A separate watchdog assessment reinforces the inspector general’s warning from a different angle. The Government Accountability Office, in a report released on 20 July 2026, found that OPM’s headcount fell by 1,052 employees — about 35 percent — between 31 December 2024 and 31 March 2026, as the agency carried out workforce reductions directed by the Trump administration. The Government Accountability Office said those actions had reduced institutional knowledge and operational capacity at the agency.
The detail in that report is sobering. Fifty-nine percent of employees who left during the period did so through the deferred resignation programme, while another 10 percent left through reductions in force. Employees aged 60 and older were particularly affected, with that group falling by 49 percent, and 41 percent of employees under 30 also left. Fifty-seven percent of separating employees had at least 11 years of federal service, including 18 percent with more than 31 years — in the watchdog’s words, a significant loss of institutional knowledge. The agency also eliminated 10 offices between fiscal years 2024 and 2026 while shifting responsibilities among the organisations that remained.
The Government Accountability Office also warned that the cuts risk worsening skills gaps that predated them. OPM has yet to implement a February 2023 recommendation to develop an action plan to address those gaps, the report said, with agency officials saying they had instead prioritised workforce changes aligned with the agency’s fiscal 2026–2030 strategic plan. The fiscal 2027 budget proposal, the watchdog noted, calls for expanded use of artificial intelligence and information-technology modernisation to help offset the reductions — for example, exploring artificial intelligence to improve financial reporting and the internal customer experience in the chief financial officer’s office.
There is an important limit to that second assessment, and it should be stated plainly. The Government Accountability Office said it could not fully assess the impact of OPM’s reorganisation because the agency declined to provide requested documentation, respond to written questions, or meet with investigators beyond commenting on a draft report. As a result, the watchdog said it was unable to provide complete information on what changes OPM made, their rationale, their expected costs and benefits, or their effect on the agency’s ability to fulfil its mission. That gap does not prove that the reorganisation failed, but it does mean the public record is incomplete at exactly the point where accountability matters most.
Taken together, the two watchdog reports tell a consistent story with two different emphases. The inspector general, looking forward to fiscal 2027, says the central task is to deliver a large, sensitive mission with a smaller workforce and technology that is still being tested. The Government Accountability Office, looking back at the reductions themselves, says the loss of experienced staff and the absence of a skills-gap plan make that task harder, and that the agency’s own reluctance to share information has left key questions unanswered. Neither report claims that OPM has stopped functioning. Both suggest that its margin for error has narrowed, and that the people most likely to feel it first are retirees waiting on the phone and employees waiting on a claim.
What happens next will depend less on a single announcement than on whether the agency can show, in measurable terms, that service is holding up while it changes. Shorter hold times, fewer unanswered calls, steadier retirement processing and cleaner payment data would be evidence that automation and reorganisation are working. A widening backlog, rising complaints or new payment errors would point the other way. For now, the watchdog’s ranking is the clearest public signal available: in fiscal 2027, OPM’s own shrinking workforce is not a background condition for its other problems. It is, in the inspector general’s judgment, the problem that shapes all the others.
Sources
USN reviewed reporting from multiple outlets for this story. Read more from NJ Today: https://njtoday.news/2026/11/02/opm-watchdog-says-agencys-shrinking-workforce-is-its-top-challenge/, FEDweek: https://www.fedweek.com/issue-briefs/workforce-cuts-improper-payments-in-health-and-retirement-benefits-top-management-challenges-for-opm/ and MeriTalk: https://www.meritalk.com/articles/gao-warns-opm-workforce-cuts-could-worsen-longstanding-skills-gaps/.