Pay Raise & COLAs

With a little less than 6 months left in the federal retiree COLA (cost of living adjustment) countdown, the ex-feds are due an inflation-catch up raise of at least 1.8 percent. That amount will go up if living costs (for the months of March through September 2008) rise.

The increase in inflation for the month of March will be released around the middle of this month. Inflation is measured by the Consumer Price Index which takes into account increases/decreases in the price of a variety of goods in a market basket that contains items most people need and use. Like food.

But many folks think the CPI is out of whack. Either it doesn’t take into account things they need and use, or it understates the cost of those items. Some conspiracy-minded folks believe the government, under Republicans and Democrats, fiddles the number of keep costs down.

This year most federal retirees (those retired under the old CSRS plan) got a 2.3 percent COLA. Those who retired under the newer FERS program got a 2 percent adjustment. The so-called diet-COLA for FERS folks is not effective until the retiree has hit age 62.

People who retired under both FERS and CSRS (and yes, there are some) got the full raise on the CSRS portion of their benefit and the so-called diet COLA on the FERS share of their check.

Many people confuse the federal pay raise (for active folks) and the COLA (which is for retirees). But they are very different. The pay raise is subject to actions by the White House and Congress. The COLA is subject only to living costs.

It will be several months before white collar feds know, for sure, what their basic January raise will be. And it could be sometime after that before they find out the total amount of the 2009 raise, after locality pay is factored in.

While workers more or less understand the pay raise procedures, few retirees understand, or believe, the way their COLAs are calculated. Here’s the official word the National Active and Retired Federal Employees Association (NARFE) sent out to its members:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 0.5 percent in January 2008 according to the Bureau of Labor and Statistics (www.bls.gov/cpi or 202/691-6994). Released on February 20, the CPI-W for January is 206.7. For purposes of calculating the next COLA (cost-of-living adjustment) the index is currently 1.5 percent above the 2007 third quarter average base index of 203.6.

Still confused? Convinced that somebody is diluting your COLA? Check this out.

Nearly Useless Factoid

Swedish workers topped the European vacation rankings, entitled to an average of 33 paid vacations days in 2006 – close to 7 weeks, not counting public holidays. On top of all that, one wonders what an “average” Swedish vacation is.

To reach me: mcausey@federalnewsradio.com

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