Thanks to a gasoline-powered surge in prices last month, one in every six Americans will be getting a cost of living adjustment of at least 4.5 percent in January, 2009. The COLA,which is due retired feds, military retirees and people who get Social Security,could go even higher if the inflation-measuring Consumer Price Index rises between now and the end of September.

Most private pensions are frozen when an individual leaves the company. With civil service benefits, military retired pay and Social Security benefits go up each year to keep pace with the rate of inflation. The actual adjustment is based on the rise in the CPI from the current third quarter (July, August, September) over the third quarter of the previous year.

Congress set up the catch-up-with-inflation benefit as an escalator that can only go up. That is, when the CPI increases it builds the value of the next COLA. But if prices were to drop dramatically, which happens in times of major deflation, the current benefits enjoyed by those on the COLA express cannot be cut. Members of Congress and their staffs, by the way, get COLAs on their retirement benefits.

Congress and the White House won’t tamper with the retiree COLA. It would be political suicide and the November elections are coming up.

Federal/Military Pay Raise

While Congress and the White House don’t dare dilute the retirees COLA, what they can do with federal pay raises is another matter.

In his budget, President Bush proposed a 2.9 percent raise for white collar federal workers, and a 3.4 percent increase for members of the uniformed military. Friends of feds in Congress are pushing for the same percentage increase for both groups, calling it “pay raise parity”,

The bottom line is that while retiree COLAs are good to go (with only the amount in question), the federal pay raise is still a question mark. Congress usually wins out when it proposes a higher pay raise (it outflanked President Clinton each year). But that is not a sure thing. There will be a pay raise, but the amount is up to the politicians. For retirees there will be a COLA with the final amount based on the price of fuel, food and other key items.

For the full story (and maybe more than you want to know about how COLAs are made) click here.

Nearly Useless Factoid

Probably the least known member of Frank Sinatra’s “Rat Pack” was Norman Fell, who went on to play Mr. Roper in Three’s Company.

To reach me: mcausey@federalnewsradio.com

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