Federal pay and federal health insurance premiums are going up next year. One a lot more than the other.

But federal retirees will have to absorb higher health premiums (or move into lower-cost plans) next year. Like they did this year.

Barring some event or action that triggers sudden (and catastrophic) inflation, federal military and Social Security retirees will NOT be getting a cost of living adjustment in 2011.

Those retirees, whose benefits are linked to inflation, also did not get a COLA this year.

Not getting a COLA one year is rare. Not getting a COLA two years in a row is unprecedented under the current inflation-catch-up-system.

Two years without a COLA is the bad news.

The good news for retirees is that monthly benefit checks they get are not reduced during times of deflation. That should mean that while prices for many goods and services (as measured by the Bureau of Labor Statistics) are down from their levels in 2009 and 2008, the retirees income has remained stable.

Increases for retirees are based on the increase (if any) in the Consumer Price Index over a 12-month period. According to the Bureau of Labor Statistics, the CPI-W for June was 0.8 percent below the average for the third quarter this time last year. Bottom line: Prices would have to jump big time between now and September to trigger a COLA for retirees.

For an explanation of the CPI numbers, click here.

2011 Pay Raise

Federal workers are in line for a 1.4 percent increase in January. The White House proposed the same amount for both feds and members of the uniformed military.

Pay raises are based on salary changes in the private sector (not cost of living) as well as political and fiscal considerations. While the 1.4 percent proposed for next year is one of the smallest ever, it is 1.4 percent more than retirees (and many private sector workers) will be getting in January.

There have been several votes in Congress seeking to freeze white collar federal pay raises in 2011. While they’ve been defeated, lobbyists representing feds say the razor-thin margins of victory are not very comforting. They are expecting at least one more pay freeze attempt before Congress hits the campaign trail.

Health Premiums

Many retirees point to higher health insurance premiums last year, this year and next year. Some “experts” are predicting a double-digit premium jump next January. The actual premiums for the Federal Employee Health Benefits Program will be announced this fall. After that workers, retirees and dependents will have an open season, mid November through early December, when they can pick their 2011 plan.

To reach me: mcausey@federalnewsradio.com

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