Staying Ahead of the Curve

OPM’s Latest Performance Management Overhaul

Winding two-lane road curves through autumn forest, a visual metaphor for OPM's federal performance management overhaul and forced rating distribution change.

It is everyone’s favorite time of year - performance appraisal season! If you are a federal employee, you should be receiving your 2026 performance rating within the next month or so, and there are important changes that you need to keep an eye on.

The government has been fixated on performance management and rooting out poor performers over the last year and a half. According to the Office of Personnel Management (OPM), federal performance ratings are inflated, and therefore, not useful (and even harmful) when making personnel decisions. For example, OPM reports that 66.3% of federal employees received a rating above fully successful in fiscal year 2024, and 61.3% of federal employees received a rating above fully successful in fiscal year 2025. (OPM Federal Workforce Data) They argue that these figures are much too high because supervisors are afraid of conflict and hard conversations.

The latest tool in OPM’s arsenal to combat rating inflation is forced rating distribution. On July 7, 2026, OPM issued a final rule that revised their regulations to allow for “forced” or “standardized” distribution models for performance ratings. (OPM’s July 2026 Final Rule) Prior to July, employees were only rated against their performance elements, but with the new rule in effect, supervisors can consider an employee’s performance relative to their co-workers. This new rule went into effect on August 6, 2026 - just in time for the end of the 2026 performance season.

How will you stack up against your peers? Keep reading to learn how this new rule will be implemented and how it fits in with the rest of our recent performance changes.

U.S. Capitol in Washington, D.C. with green trees in the foreground, representing government oversight of federal employee performance management and OPM’s performance regulations.

Overview of Federal Performance Management Systems

Performance management systems are intended to set individual and organizational goals, communicate goals to employees, assess performance, and reward the top (and bottom) performers accordingly. These basic principles apply to all performance management systems, including those in the federal government.

OPM has oversight of federal performance management, but each federal agency is responsible for designing their own performance management system, which should meet the goals stated above. This is why you might see some federal agencies use a three-level rating system (levels 1, 3, and 5 only) while others use a five-level rating system (levels 1, 2, 3, 4, and 5).

For decades, agencies have been prohibited by regulation from using a “forced” or “standardized” distribution model for performance ratings. This meant that agencies could not require supervisors to use a bell curve or a fixed percentage quota when issuing performance ratings. Each employee was rated against their individual performance elements and there were no comparative ratings - employees weren’t competing with each other for the top spots.

Close-up of a government office building facade with rows of tall narrow windows between stone columns, illustrating the recent rule changes by OPM that impact the performance ratings of federal employees.

System Overhaul

The game changed drastically this summer. In July 2026, OPM issued final regulations that included a host of changes to the federal performance management process, including the embrace of a forced distribution model. The most significant changes include the following:

Forced Distribution: First, OPM revised 5 CFR 430.208(d) to state that the government can establish methods for assigning ratings that involve “comparing, categorizing, and ranking employees or groups on the basis of their performance.” It is important to note that the regulations themselves do not mandate a specific distribution model, but they open the door for OPM to issue such guidance - and they did exactly that.

On September 21, 2026, OPM issued a memo that capped the number of employees who may receive a Level 4 or Level 5 rating to 40% for fiscal year 2026. (OPM’s September 2026 Memo) Last fiscal year, OPM encouraged agencies to limit the two top rating levels to 30% of the workforce. Regulations had not been amended at that time, so the 30% was a recommendation and not a mandate. Now, for fiscal year 2026, the cap is mandatory. OPM noted that they increased the cap from 30% to 40% because agencies made substantial progress in normalizing performance ratings during the last fiscal year. However, OPM reserves the right to adjust this cap for future fiscal years. They also pointed out that no caps were applied to ratings below a level 4. For example, there is no limit on the number of employees that can be rated a level 3 (fully successful) or a level 1 (unacceptable). OPM also noted that the caps would be applied at the agency-level. They will look to see if an agency as a whole is compliant - not individual supervisors or work units.

Restricted Rating Patterns: Next, OPM revised their regulations to eliminate level 2 as a possible rating level in federal performance management systems and prohibited the use of a pass/fail rating for all employees except for seasonal employees, teachers, GS-1 to 4, and federal wage system (FWS) employees. Performance management systems submitted to OPM for approval must comply with these limits.

Biennial Certifications: OPM has also upped the frequency of certification. Federal agencies are now required to obtain biennial (vice annual) certification of their performance management systems, which gives OPM more oversight of the agency’s performance management practices.

No Higher-Level Review of Level 1 Ratings: OPM also eliminated the requirement that level 1 ratings be reviewed by a higher-level supervisor. OPM pointed out that agencies can still choose to do a higher-level review of these ratings, but it is no longer mandated.

No Negotiated Grievances of Performance Ratings: Last, but certainly not least, the regulations prohibit employees from utilizing the negotiated grievance procedure to contest their performance ratings. OPM argues that the rating alone is not an adverse personnel action - it is simply something that could be used as the basis of a subsequent action which may be appealable or grievable.

Large iceberg floats in calm dark water with mountains behind it, illustrating that the most recent changes to federal performance management by OPM are just one small piece of a much larger trend.

Tip of the Iceberg

The July 2026 changes are significant, but they are just the most recent in a long line of performance management updates since 2025.

For example, OPM issued a June 2025 memorandum, which was revised in July 2025, that standardized the government-wide performance cycle to track the fiscal year, provided guidance on clear and measurable performance standards, and directed supervisory training. (OPM’s July 2025 memo)

In April 2026, OPM excluded federal employees occupying Schedule C and Schedule G positions (political appointees) from annual performance appraisal requirements. OPM reasoned that formal performance ratings are not necessary because Schedule C and G employees are effectively at will employees and they are already excluded from awards and bonuses. Read more about the Schedule C and G exclusion here.

In July 2026, OPM and the Merit Systems Protection Board (MSPB) issued a joint proposed rule that would limit performance improvement plans (PIPs) to no more than 30 days and would require agencies to implement performance-based adverse actions (removals and demotions) no later than 30 days from the date the employee receives the proposed action. (OPM and MSPB’s July 2026 Proposed Rule) The final rule has not been issued for this change, but we should expect it in the coming months as the comment period, which was reopened, closed on September 29, 2026.

In August 2026, OPM issued a final rule that prioritizes performance over seniority during a Reduction in Force (RIF). (OPM’s August 2026 Final Rule on RIF Retention) On the same day, OPM also took authority over appeals for employees who are furloughed for more than 30 days, separated, or demoted by a RIF action. (OPM’s August 2026 Final Rule on RIF Appeals) Before this rule was issued, employees had the right to appeal those RIF actions to the MSPB.

This laundry list of changes fits neatly into OPM’s narrative of accountability. They seem to be looking for more rigorous ratings, faster processes to oust poor performers, and less opportunity for employees to contest management decisions.

Gold trophy cup with two handles stands on a black base, representing high-performance ratings for only 40% of the federal workforce during the 2026 performance appraisal cycle.

What Can I Expect This Rating Cycle?

For the fiscal year 2026 cycle, you should expect to see your agency enforce a 40% cap on level 4 and level 5 ratings. This means that no more than 40% of covered employees at your agency can receive a level 4 or level 5 rating, and 60% (or more) employees should expect to receive a level 3 (fully successful) or below.

However, keep in mind that this cap does not have to be enforced at the work unit level. The 40% is a cap on the entire agency. There could be a situation where certain work units are above the 40% line while others are below, but the overall agency numbers balance out. However, we cannot be certain how this cap will actually be handled at the agency level. Regardless, I would expect to see supervisors exercise more caution when assigning higher performance ratings. Also, remember that there are no caps on the number of employees that can be rated a level 3 or level 1, so you should not see your rating reduced from a level 3 to a level 1 in order to comply with an OPM directive.

If you are a bargaining unit member, you can also expect to lose your right to file a performance-rating grievance under a negotiated grievance procedure in the near future. OPM concedes that negotiated grievances may continue if a collective bargaining agreement that includes grievances on ratings was effective before the date of this new rule. However, once the agreement expires, negotiated grievances on performance ratings will be prohibited.

Wooden gavel with gold band sits beside an open law book on a blue background, representing a federal employee's options to contest a performance rating through a grievance, EEO complaint, or OSC complaint.

Can I No Longer Contest My Performance Rating?

Not necessarily. Agencies may still use the administrative grievance process to review performance ratings. OPM’s final rule notes that agencies retain the discretion to use the administrative grievance process to review ratings, but it does not mandate its use. However, OPM expects agencies to maintain effective oversight of performance management practices, and using an administrative grievance process would be one way to do so.

Other avenues may also be available to federal employees. First, if an employee believes their rating was the result of discrimination based on race, color, religion, sex, national origin, age (40 or older), disability, or genetic information or in retaliation for prior EEO activity, then they may contact their EEO office within 45 calendar days of receiving the rating to pursue an EEO complaint. You can find more information about the EEO process here. Second, if an employee believes their rating was issued in retaliation for protected activity such as whistleblowing, they can file a complaint with the Office of Special Counsel. You can find more information about the Office of Special Counsel here.

In summary, federal employees should expect a stricter performance rating process with fewer avenues of redress. As always, your best line of defense is education. Know the rules. Know your options. Ask for help when you need it.