White-collar federal workers are counting on an across-the-board pay raise of 1.9 percent next January. Retired federal workers, military and Social Security beneficiaries won’t know for six months how much their cost-of-living adjustment will be. At the moment, it looks like 1.1 percent, but that could change. Why the difference?
Although federal pay raises and retiree COLAs have been around for decades, many people in and outside of government get them confused, or think they are the same thing. Hardly.
Pay raises for non-postal federal workers are generally proposed by the president, although Congress can, and has in the past, beefed them up a little. The amount proposed is generally based on fiscal (and sometimes political) considerations. President Bill Clinton derailed a bipartisan federal pay bill that would have — beginning the first year of his administration — gradually raised federal pay, without political wrangling, in a series of semi-automatic annual pay hikes.
The idea was to close the pay “gap” with industry, which according to the government, remains at about 23 percent, with feds in the middle and top technical and administrative jobs getting the short end of the stick. President George W. Bush followed the Clinton pattern, ignoring the automatic pay raise formula in the Pay Act signed by his father, and approved by a Democratic-dominated Congress. President Barack Obama took it one step further (or backward) by approving two years (2011 and 2012) without pay raises. Congress OK’d the plan and slapped the freeze on for yet another year (2013) for good measure.
When Congress votes (or allows ) itself a hike, most politicians refer to it as a cost-of-living adjustment (COLA), although it usually has nothing to do with price increases.
Federal and postal retirees get COLAs each year, if the cost of living as measured by the Bureau of Labor Statistics’ CPI-W yardstick shows living costs in the current year’s third quarter (July, August and September) are up over the previous year’s third quarter. But not always the previous year. As David Snell of the National Active and Retired Federal Employees explained it: “The third quarter CPI is measured against the last third quarter CPI where there was an increase. This is not always the prior year’s third quarter. Example, from the third quarter of 2008 to the third quarter of 2009, the CPI dropped and there was no COLA in 2010. For 2011, the third quarter of 2008 was used as the basis for measuring the CPI, since that was the last one to show an increase from 2007.” No wonder people get confused.
Many retirees object, saying the CPI-W doesn’t measure rising costs for many things — like medical care — that retirees need and use.
This year (January 2017) retirees got a tiny 0.3 percent increase. Many who didn’t follow the news (most do) weren’t aware they got an increase because, with higher health premiums coming out of their annuity payments, there wasn’t much to notice.
It will be another six months (until mid-October) when retirees learn if they are getting a COLA and if so, how much it is.
Feds who retired under the old CSRS program (which is most current retirees) get a full COLA if there is one. Feds who retire under the FERS program (which covers most current employees) get so-called diet-COLAs that are 1 percent less than the actual rise in inflation when it goes above 2 percent.
The last big COLA retirees got was a 5.8 percent adjustment in 2009.
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