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The U.S. Office of Personnel Management (OPM) – the federal government’s chief human resources agency – has faced significant challenges in recent years. These range from internal administrative inefficiencies to external threats like cyberattacks, all of which impact OPM’s ability to serve federal employees and retirees. This analysis explores OPM’s key problem areas – including bureaucratic hurdles, cybersecurity vulnerabilities, budget constraints, workforce issues, and policy obstacles – along with opportunities for improvement through reforms, technology, strategic workforce initiatives, and operational changes.
Administrative Inefficiencies
OPM has long struggled with outdated processes and systems that hinder efficient service delivery. A prime example is the federal retirement claims processing system, which still relies heavily on paper files and manual work. This antiquated approach has produced a persistent backlog of retirement applications, leaving many newly retired federal employees waiting months for their pension payments. In fact, a backlog of retirement claims peaked at over 36,000 cases in March 2022, and processing times have continued to worsen – as of early 2023, over two-thirds of claims took more than 60 days to process, with an average of about 142 days (nearly five months) for many cases, according to Senator James Lankford’s call for updating federal retirement services. Such delays place a financial strain on retirees and have prompted numerous complaints to Congress, as FedScoop reports. Lawmakers have noted that OPM’s “outdated system is unacceptable” and have pressed the agency to identify and fix the underlying causes of the backlog. The root problem is clear – decades-old, paper-based processes and a failure to successfully modernize them. A 2019 GAO review found that while OPM had a vision for a modern electronic retirement system, its plan “lacked cost estimates and timelines,” making it hard to drive real progress. As of 2023, the agency still had five of six GAO recommendations on retirement processing improvements outstanding.
This administrative inefficiency isn’t limited to retiree services. Other OPM functions have been hampered by slow, cumbersome processes and legacy technology. For example, federal hiring procedures – governed in part by OPM rules – are often seen as too slow and bureaucratic, making it difficult for agencies to bring new talent on board quickly. In a 2022 forum of federal human capital officers, recruiting and hiring were cited as top challenges in closing skill gaps, with calls for OPM to streamline regulations and reduce administrative burdens in the hiring process, as noted in a GAO report on government-wide skills gaps. Additionally, OPM’s frequent leadership turnover in recent years created internal disruption. The agency had six different Directors or Acting Directors over a four-year span, according to NARFE’s report on OPM challenges, preventing consistent long-term management. This revolving door of leadership made it harder to sustain momentum on modernization initiatives or organizational reforms. In short, inefficient workflows, antiquated systems, and management instability have all undermined OPM’s administrative performance.
Cybersecurity Vulnerabilities
OPM’s information security came under harsh scrutiny after a massive cyber breach in 2015 that exposed extremely sensitive personal data of millions. In that incident – one of the worst federal data breaches in history – intruders stole background investigation records and personnel files for approximately 21.5 million individuals, including Social Security numbers, fingerprints, and personal histories of federal employees and applicants, as Dark Reading reported. The fallout was severe: affected individuals faced potential identity theft, the OPM Director resigned, and confidence in OPM’s cybersecurity was badly shaken. An investigative report later pointed to “failed leadership and consistent cybersecurity ignorance” at OPM as factors that allowed the breach to occur, according to FedScoop’s coverage of the congressional investigation. This breach served as a wake-up call, revealing that OPM’s aging IT systems and security measures were full of vulnerabilities.
In response, OPM and Congress took major steps to improve cybersecurity. The agency established a new background investigations bureau (NBIB) to handle sensitive security clearance data, and ultimately that function was transferred out of OPM to the Department of Defense for tighter protection, as outlined in OPM’s Management Challenges Report for Fiscal Year 2021. OPM also began implementing dozens of cybersecurity recommendations. By 2017, it had completed action on 11 out of 19 urgent security improvements identified by U.S. CERT after the breach, and made progress on the others, according to a GAO report on OPM’s security controls. OPM expanded the use of multi-factor authentication, updated its cybersecurity policies, and started encrypting more data (though auditors found some systems still lacked encryption of sensitive data even after initial fixes). These efforts have reduced risk, but cybersecurity remains a serious challenge. Millions of attempted intrusions target OPM’s systems every month – according to Barracuda Networks Blog, OPM “repels 10 million attempted digital intrusions per month,” including constant automated attacks like port scans and phishing attempts. In such a high-threat environment, OPM must continuously shore up its defenses. The agency’s Inspector General has continued to flag IT security as a top challenge, pushing OPM to fully implement modern, “zero trust” architectures and remediate any weaknesses promptly. While OPM is far better prepared than in 2015, the ever-evolving cyber threats mean vigilance and ongoing investment in security will remain a necessity.
Budgetary and Financial Constraints
OPM’s mission has also been constrained by funding challenges and financial management issues. A significant blow to OPM’s finances came as an indirect result of the 2015 cyber breach: in 2019, the responsibility for conducting federal background investigations (previously a major OPM function) was transferred to the Department of Defense. This move was intended to improve security for background checks, but it carried a steep price for OPM’s budget. The background investigations program had contributed about $2.24 billion in revenue to OPM in FY2019, and its loss created an immediate $70 million annual budget shortfall for OPM’s operations, as explained in the Management Challenges Report for Fiscal Year 2021. Although stop-gap measures (such as temporary payments from DoD and a special appropriation from Congress) patched the hole for a year, the structural funding problem persisted. OPM has had to repeatedly ask Congress for additional funds to meet its needs. The agency’s Inspector General warned in 2020 that continuing shortfalls in OPM’s funding were impeding critical projects – for example, needed IT modernization, retirement processing improvements, and better management of benefit programs have all been delayed or scaled back due to lack of funds. Simply put, OPM’s appropriated budget has not kept pace with its responsibilities, especially after losing the revenue-generating background check division.
In addition to tight operating budgets, OPM must oversee large trust funds and benefit programs that pose financial management challenges. OPM administers the Federal Employees Health Benefits Program (FEHBP), Federal Employees’ Group Life Insurance, and the Civil Service Retirement System, among others – programs involving hundreds of billions of dollars. Ensuring the integrity of these funds is a major responsibility. However, OPM has faced persistent issues with improper payments and fraud risk in some programs. For example, in the federal retirement programs, OPM reported over $325 million in improper payments in FY2022 (about 0.37% of total payments), according to the Top Management Challenges for Fiscal Year 2024 report – often due to late reporting of deaths or errors that result in overpayments. In the health benefits program, OPM relies on private insurance carriers to control fraud and overbilling, but oversight gaps have been noted. The OPM Inspector General has pressed the agency to strengthen monitoring of FEHBP carriers and implement more robust fraud detection, noting that better data-sharing and audits could reduce improper payments and save the health program money. OPM has begun developing a centralized enrollment database for health benefits to help verify eligibility and catch errors, but resource limitations slow its progress, as noted in the Agency Response to OIG FY 25 Top Management Challenges Report. Overall, financial constraints – both in OPM’s own administrative funding and in safeguarding large benefit programs – remain a serious obstacle. When budgets are tight, OPM struggles to invest in modernization or hire needed staff, which in turn makes it harder to achieve long-term efficiencies that would save money. It’s a vicious cycle that the agency is striving to break out of through proposed funding reforms and cost-saving initiatives.
Workforce Management Struggles
Managing the federal workforce in the 21st century is a complex task, and OPM has encountered multiple workforce-related challenges. One major issue is the aging of the federal workforce and the wave of retirements hitting government agencies. A huge portion of federal employees are at or near retirement age, which threatens a loss of skilled, experienced workers and institutional knowledge. OPM’s data showed that as of 2020, 31.4% of federal employees would be eligible to retire within five years, according to the Federal Workforce Priorities Report. In fact, more than half of those eligible are expected to retire by 2025. This looming exodus puts pressure on OPM and agencies to recruit new talent and transfer knowledge before it walks out the door. Recent trends confirm the concern: over 114,000 federal workers retired in FY2021, the highest number in nearly a decade, as Federal Times reported. As “baby boomers” leave, agencies risk critical skills gaps if replacements aren’t ready.
However, attracting and retaining new talent – especially younger workers with in-demand skills – has proven difficult under current government hiring and pay structures. Federal agencies often struggle to recruit experts in areas like cybersecurity, IT, science, and acquisition, because private sector opportunities are more lucrative or easier to navigate. In GAO’s High-Risk List, strategic human capital management (i.e. the government’s ability to address skill gaps) has been flagged as a high-risk area since 2001, according to Management Concepts’ analysis of federal workforce skills gaps. Skill gaps can significantly hurt agency performance – GAO found that skills shortfalls were a contributing factor in nearly half of all government-wide high-risk issues. OPM is expected to lead the charge in closing these gaps, but it too has struggles. An independent assessment in 2022 found that OPM itself had skills gaps in key capability areas (such as IT expertise and data analysis), potentially undermining its ability to assist other agencies, as detailed in a GAO report on OPM’s workforce capacity. OPM concurred with these findings – essentially acknowledging it needs to bolster its own workforce’s skills to better serve as the government’s HR leader.
Another workforce challenge has been keeping federal employees engaged and adapting workplace policies to modern expectations. Newer generations in the workforce place high value on work-life balance, flexibility, and telework options. The COVID-19 pandemic accelerated acceptance of telework across government, and OPM has since promoted flexible work arrangements as a tool for retention and recruitment. Still, agencies face competition from private employers who can often offer more flexible or higher-paying positions. Federal pay scales and hiring rules are rigid, making it hard to quickly hire high-tech talent or reward top performers. OPM has provided some hiring flexibilities (like expanded direct-hire authority for certain critical occupations, as listed in CIO.gov’s OPM resources) and is exploring special salary rates for roles like cybersecurity to improve competitiveness. But these measures must be balanced with merit system principles and budget limits. In summary, OPM’s workforce management struggles include an aging workforce ready to retire, difficulties attracting new talent with critical skills, internal skill gaps within OPM’s staff, and the need to modernize workplace policies to meet contemporary workforce expectations. Addressing these issues is essential to ensure the federal government has the human capital needed to meet mission demands.
Policy-Related Obstacles
Underlying many of the above challenges is a framework of laws and policies that has not fully kept up with changing times. OPM operates under the Civil Service Reform Act and other statutes that date back decades, which hardwire certain processes and limits. These outdated civil service laws and regulations can act as obstacles when OPM tries to innovate. For instance, the government’s classification and pay system (the General Schedule) was designed in 1949; its rigid structure makes it hard for agencies to set competitive salaries for high-demand skills without special legislation or OPM-approved exceptions. Similarly, federal hiring procedures are bound by merit system rules meant to ensure fairness – an important safeguard against patronage, but one that also entails lengthy job postings, rating criteria, and appeal rights that can slow things down. OPM’s traditional role has been enforcing compliance with these rules, and as a result the agency has often been seen as more of a regulatory enforcer than a strategic partner. A 2021 independent report by the National Academy of Public Administration noted that OPM’s culture was overly “compliance-oriented” and needed to shift to a more customer-focused, strategic mindset, as NARFE reported. In other words, strict adherence to complex rules sometimes gets in the way of creative solutions to modern HR problems.
Political and organizational turbulence in recent years also created policy-related hurdles for OPM. In 2019, the previous administration proposed an ambitious (and controversial) plan to dismantle OPM, transferring its policy functions to the White House (Office of Management and Budget) and merging its program offices into the General Services Administration, as the National Academy of Public Administration noted. This proposal grew out of frustrations with OPM’s performance, but many experts and lawmakers raised alarms that simply carving up OPM would not solve core problems. Congress put the reorganization on hold and commissioned a study instead. The resulting study emphatically found that the breakup plan “would have been ineffective in addressing OPM’s challenges,” according to NARFE. In fact, it concluded the move could do harm by reducing focus on federal human capital strategy. During this period, however, OPM’s leadership had to devote significant time to responding to the reorganization effort, creating distraction and uncertainty. (For example, building management responsibilities were briefly tugged back and forth between OPM and GSA amid the planned merger.) Although the merger was ultimately scrapped, the episode highlighted that unstable policy direction from the top can itself be a challenge. It took an act of Congress to safeguard OPM’s existence and refocus attention on genuine reforms.
Another policy obstacle has been the lack of consistent, strong leadership prioritization of human capital issues government-wide. The NAPA panel in 2021 argued that the OPM Director should be “the principal adviser to the President on human capital” and needs a seat at the highest policy table. In the past, workforce issues have sometimes been treated as back-office concerns, with OPM not always included in major policy discussions. This can lead to human capital implications being overlooked in government reforms or legislation. The panel also pointed out that frequent transitions at the top of OPM (as mentioned, six directors in four years) impeded the agency’s ability to push long-term policy changes. Sustained leadership and clear support from the Administration and Congress are needed to overcome inertia in civil service policy. Without that, OPM’s efforts to update regulations or propose new laws (for example, to streamline hiring or adjust benefits) may stall. In summary, OPM faces a thicket of policy-related challenges – from rigid statutes that mandate old-fashioned processes, to political interventions and leadership instability that divert focus. Modernizing the civil service framework and giving OPM the mandate to lead are critical to resolving these obstacles.
Opportunities for Improvement
Despite the difficulties, there are many opportunities and initiatives underway to strengthen OPM and enable it to better meet its mission. These fall into several key areas: legislative reforms, technological advancements, workforce strategies, and operational efficiencies. Taken together, such improvements can help OPM overcome its challenges and transform into a more effective, modern leader of federal human capital management.
Legislative Reforms and Support
Targeted legislative action could address several structural problems facing OPM. One urgent need is to stabilize OPM’s funding. Lawmakers are considering proposals to adjust OPM’s fee structure and provide more direct appropriations so the agency is not running at a deficit after the loss of the background investigations program. For example, OPM has proposed legislation to allow use of a small portion of the Federal Employees Health Benefits fund to finance needed IT systems for enrollment and eligibility management, as outlined in the Agency Response to OIG FY 25 Top Management Challenges Report. This kind of reform would give OPM a more reliable funding stream to maintain critical infrastructure without having to beg for special funds each year. More broadly, Congress could revisit the way OPM is funded and authorize dedicated resources for multi-year modernization projects (like the retirement system overhaul) that are difficult to accomplish on annual, shoestring budgets.
In addition to funding, updating civil service laws could empower OPM to be more agile. There is bipartisan interest in modernizing federal hiring and pay authorities. Potential legislative reforms include simplifying the federal hiring process (for instance, by expanding direct-hire authority for hard-to-fill positions, or allowing resumes in place of complex application questionnaires), reforming the General Schedule pay system to permit higher pay bands for technical experts, and enhancing OPM’s ability to pilot new personnel programs. Recently, agency leaders have asked OPM for more flexibility to address their own skill gaps – a signal that statutes and rules might be loosened to let agencies try innovative HR solutions. Congress has a role in granting such flexibilities while still safeguarding merit principles. Another opportunity is for lawmakers to affirm OPM’s role and leadership in government. After the failed merger attempt, the consensus is that OPM should remain the central HR agency, but with a clearer mandate. Codifying the OPM Director’s consultative role (so that workforce impacts are considered in policy decisions) is one idea. Ensuring longer-term continuity in leadership – for example, by encouraging longer appointment tenures or even exploring a fixed term for the OPM Director – could also be beneficial, though that might involve statutory change or at least Senate support for stability. In summary, thoughtful legislative reforms can bolster OPM’s resources and update the policy framework it operates in. With Congress’s support, OPM can get the tools it needs (funding, authority, and political backing) to implement the improvements outlined below.
Technological Advancements and Modernization
Upgrading OPM’s technology is perhaps the most pivotal improvement area, as it underpins solutions to many other problems. The agency is actively pursuing IT modernization on multiple fronts. A top priority is the Retirement Services Modernization effort – moving from paper-based retirement processing to a fully digital, electronic system. In its FY2023 budget, OPM requested funding to pilot a new digital retirement application platform that would allow federal employees to file for retirement online and have their data processed electronically, as Federal Times reported. This pilot is a concrete step toward eliminating the mailed forms, manual data entry, and scanning that slow down the current process. If successful and expanded, a modern e-retirement system should significantly cut processing times and reduce the backlog by automating many steps. OPM is also investing in imaging and data capture technology to convert the mountains of existing paper records into accessible digital data, so that computation of benefits can be faster and more accurate.
Beyond retirements, OPM is focusing on modern IT solutions for its other services. The agency recognizes the need for a modern human capital IT platform government-wide. NAPA’s 2021 report recommended developing a robust data and analytics platform to support federal HR operations. In response, OPM has been working on enhancing its HR IT systems and data analytics capabilities. For instance, upgrades to USAJOBS (the federal hiring portal) are ongoing to improve the applicant experience and integrate modern features. OPM’s cloud-based HR systems, like the USA Staffing system used by agency hiring managers, are being refined to be more user-friendly and data-rich. The aim is to enable data-driven human capital management – for example, using analytics to spot government-wide staffing trends or identify emerging skill gaps so they can be addressed proactively. Importantly, cybersecurity advancements are a core part of OPM’s tech modernization. The agency has implemented phishing-resistant multi-factor authentication and stronger encryption protocols in line with federal zero-trust security mandates, as noted in the Agency Response to OIG FY 25 Top Management Challenges Report and GAO’s evaluation of OPM security controls. Plans are underway to modernize or replace legacy systems that are hardest to secure. By investing in secure, modern IT infrastructure, OPM not only reduces cyber risks but also gains efficiency and flexibility in delivering services.
However, making these technological leaps requires sustained funding and expertise. This is why legislative support (as noted above) is crucial – one-time IT funding can jump-start projects that yield long-term savings. It’s also why OPM is partnering with other agencies and industry to bring in modern solutions. There are opportunities to use shared services (for example, leveraging another agency’s successful IT platform for certain HR functions) rather than OPM building everything from scratch. In sum, technological advancements – from digitizing records to modernizing software and strengthening cyber defenses – offer OPM a path to drastically improve performance. If executed well, technology upgrades will reduce backlogs, cut errors, enhance customer service for federal employees, and free up OPM staff from clerical tasks to focus on higher-value work.
Recruitment and Retention Strategies
To tackle workforce challenges, OPM is exploring and implementing a range of strategies to recruit new talent and retain skilled employees, both within the agency and across the federal government. One key area is expanding hiring pathways to bring in talent more easily. OPM has promoted programs like the Pathways internships and fellowships for students and recent graduates to pipeline young talent into federal careers. It has also increased the use of Direct Hire Authority for high-demand occupations – this allows agencies to expedite hiring for roles like STEM professionals or cybersecurity experts without the normal competitive rating process, as detailed in CIO.gov’s OPM resources. Additionally, OPM launched a new USAJOBS “internships and early career” site to make it easier for applicants to find entry-level opportunities. These efforts recognize that attracting younger workers is vital to replacing the retiring cohort.
Improving pay and incentives is another strategy under consideration. While broad civil service pay reform takes time, OPM can approve special salary rates for certain occupations. In late 2022, OPM proposed a government-wide special salary rate to substantially raise pay for federal IT and cyber security employees, aiming to narrow the pay gap with the private sector (though this initiative requires OMB approval and funding). OPM has also encouraged agencies to use incentives like student loan repayment benefits, recruitment bonuses, and retention allowances to compete for top talent in critical fields. Moreover, the administration’s focus on diversity, equity, inclusion, and accessibility (DEIA) in the federal workforce, which OPM helps lead, is intended to broaden recruitment outreach and ensure the government is tapping talent from all communities. A more inclusive federal workplace can appeal to a wider pool of candidates and improve retention by fostering employee engagement.
For retaining existing employees, especially those with critical skills, OPM is championing flexible work arrangements and professional development. The widespread adoption of telework and hybrid work schedules during the pandemic has now become a long-term feature; OPM has issued guidance supporting telework where it makes sense, which can help retain employees who value that flexibility. OPM is also looking at expanding reskilling and upskilling programs – for example, offering training for employees to transition into emerging mission-critical roles (like cybersecurity or data science) so that skill gaps can be filled internally. Mentorship programs and better career development pathways in government can keep employees engaged and less likely to leave. Additionally, to address OPM’s own internal skill gaps, the agency has begun targeted hiring and training. GAO noted that OPM agreed with recommendations to craft an action plan for closing its internal skills gaps (such as hiring data scientists or modern IT project managers). By strengthening its internal workforce, OPM will be better positioned to assist other agencies with their workforce needs. In summary, recruitment and retention strategies at OPM range from policy changes (hiring authorities, special pay) to workplace improvements (flexibility, training) – all aimed at building a federal workforce for the future. These human-centered initiatives complement the tech and policy reforms, recognizing that having the right people is critical to OPM’s success.
Operational and Management Efficiencies
Finally, OPM can greatly improve its effectiveness through internal operational reforms and efficiency measures. Some of these are already underway. For instance, OPM has been scrutinizing its business processes to eliminate bottlenecks and waste. In the retirement services division, aside from technology fixes, management has been tweaking workflows – cross-training staff, redistributing workload during peak retirement seasons, and coordinating with federal agencies to reduce errors on incoming retirement applications (agency errors have been found to significantly contribute to processing delays, according to FedScoop’s analysis). The goal is to process applications “right the first time” so that cases don’t bounce back for corrections. OPM has also turned to tactics like surge overtime and temporary detail assignments during spikes in workload, although as noted, overtime alone is not a sustainable solution if underlying inefficiencies remain. The agency is now implementing better tracking of productivity to ensure resources like overtime are actually tied to improved outcomes.
Another area of operational improvement is customer service and communication. OPM is making efforts to be more responsive to the federal community. For example, it has enhanced call center operations and online self-service tools for retirees to check status of claims, which can reduce frustration during waits. The agency has also increased transparency by publishing monthly progress on retirement backlogs and processing times on its website, holding itself accountable to the public. Internally, OPM is working to break down silos between departments. The challenges OPM faces (IT, finance, HR policy, etc.) are interrelated, so a more integrated management approach is being fostered. The Director has stressed one OPM team ethos, encouraging coordination between, say, the Chief Information Officer’s team and program offices to jointly tackle projects like the digital retirement system. This kind of coordination is essentially an operational efficiency – it can prevent scenarios where IT solutions fail because program offices weren’t fully involved (a problem that bedeviled past modernization attempts).
OPM is also looking outward to improve operations by sharing services and learning from others. In some cases, it might be more efficient for OPM to partner with another agency or a centralized service provider for common administrative tasks. The federal government has moved many back-office functions to shared service centers – OPM could potentially offload certain transactions (for example, payroll processing for its own employees or certain financial management tasks) to focus on its core strategic functions. Moreover, implementing best practices from private sector HR operations or state governments can inspire improvements. The 2021 NAPA report outlined numerous recommendations for OPM to redefine its mission and processes for greater impact. This included shifting staff roles toward consulting and innovation, rather than pure compliance checking. OPM’s leadership has embraced many of these ideas, updating the agency’s strategic plan to emphasize modernization, customer service, and data-driven decision-making. Early signs of progress include OPM’s revamped website that is more user-friendly and the creation of a new unit focused on human capital data analytics. While deep-seated change takes time, these operational efficiency gains – from process reengineering to cultural shifts – are steadily positioning OPM to deliver better results. The more OPM can streamline its internal operations, the more capacity it will have to meet government-wide HR needs effectively.
Conclusion
The Office of Personnel Management’s journey through recent challenges has been difficult, but not without hope. By acknowledging and addressing its administrative inefficiencies, shoring up cybersecurity, overcoming financial constraints, managing workforce transitions, and navigating policy hurdles, OPM is charting a course toward renewal. The agency’s leadership, with support from Congress and the Administration, is pursuing a broad improvement agenda – modernizing technology, updating policies, empowering its workforce, and fine-tuning operations – all with the aim of transforming OPM into the strategic, customer-focused HR partner the federal government needs. Progress will require persistence and resources, but the payoff could be substantial: faster and more reliable services for federal employees and retirees, a more agile and skilled federal workforce, and ultimately a more effective government for the public.