Most federal retirees and people who get Social Securityi benefits are in their second year without a cost of living adjustment.

Most federal workers just began the first year of White House-ordered, Congress-approved pay freeze. But tens of thousands of government workers who retired because of disability or illness will be getting a 1.7 percent COLA in their April benefits. How come?

Timing is everything.

Both groups, the regular CSRS and FERS retirees and those retired under FECA (the Federal Employees Compensation Act,) are linked inflation, the cost of living as measured by the Bureau of Labor Statistics. When those costs (reflected in the Consumer Price Index-W) rise, so do annuities. During rare times of low inflation, or actual deflation, benefits don’t go up. The CSRS/FERS/Social Security retirees got a COLA of 5.8 percent in 2009. But they didn’t get a COLA this month or in January, 2010.

The reason is that Congress set up COLAs for regular retirees (and Social Security recipients) based on the increase in living costs (as measured by the CPI-W) from the most recent third quarter (July, August and September) over the previous year third quarter. (It’s normal for your hair to ache at about this point!!!)

But when it set up the FECA program, Congress put it on a calendar year basis. So while the regular COLA is determined by the period ending in September, the COLA for those retired under the FECA program is based on the increase (if any) in the CPI-W for the period ending in December. Both measure 12 months of inflation/deflation. But the timing of the measurement can and does make a difference in when those COLAs are paid, and the amount of the COLA increase.

The bottom line is that FECA retirees will be getting an automatic COLA increase of 1.7 percent. The National Active and Retired Federal Employees association (NARFE) says it will be reflected in their April payments.

The modest increase in inflation makes it likely regular CSRS/FERS and Social Security retirees will get a COLA, but because of the staggered time frames, the COLA for the majority of retirees won’t be effective until December and it won’t (assuming there is one) be reflected until they get their January, 2012 payments.

To reach me: mcausey@federalnewsradio.com

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