Retiree COLA trumps employee pay raise

Here’s food for thought: What if today, right now, turns out to be the good old days for active-duty federal workers and retired civil servants? What if the pay raise workers get in January (usually averaging 1.9 percent) and the cost-of-living adjustment due to retirees (2 percent) turn out to be as big as they will ever get? Close, but not the same cigar.

Federal workers were denied the January pay raise for three years...

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Here’s food for thought: What if today, right now, turns out to be the good old days for active-duty federal workers and retired civil servants? What if the pay raise workers get in January (usually averaging 1.9 percent) and the cost-of-living adjustment due to retirees (2 percent) turn out to be as big as they will ever get? Close, but not the same cigar.

Federal workers were denied the January pay raise for three years by the Obama administration and Congress. Retirees didn’t get COLAs in 2010 or 2011. The inflation catchup they got this year, in January, was a barely noticeable 0.3 percent. Not even close enough to make up for higher health insurance premiums or for the big jump in long-term care insurance premiums, which averaged $111 per month.

The pay raise proposed by President Donald Trump will vary among the different locality pay zones. Workers in San Francisco-San Jose, Los Angeles, Philadelphia, New York City and Washington-Baltimore are likely to get something in the range of 1.9 percent. Those in the so-called RUS (for Rest of U.S.) pay zone could get as little as 1.4 percent. The average is expected to be about 1.5. A growing number of feds in the upper steps of their pay grade will get less, or nothing, unless the cap on pay is lifted.

Retirees will all get the same COLA. This time. But that could change.

If the inflation increase as measured by the Bureau of Labor Statistics exceeded 2 percent, retirees under the FERS system would get diet COLAs that are less than the full amount of inflation. As an example, if the actual increase was 2.2 percent or even 3 percent, the FERS retirees would get a flat 2 percent. If the inflation rate is 3 percent or more, they would receive 1 percentage point less (told you this was complicated).

Congress could approve changes this year that would increase the amount of salary that FERS workers kick into their civil service benefit by 1 percent each year for the next six years. That would reduce take-home pay. There is also a plan (not yet in the form of legislation) that would eliminate COLAs entirely for FERS retirees. And yet another that would do away with the defined benefit (the civil service pension) portion of the retirement plan for people under FERS. Instead, their retirement income would be based on their (possibly enhanced) Thrift Savings Plan contributions and earnings and Social Security. It is possible that none of the changes will be made this year. But it could happen.

Hence: Enjoy yourself. These may be the good old days.

Nearly Useless Factoid

By Michael O’Connell

Paul McCartney produced the 1968 version of “Those were the Days” sung by Mary Hopkins. The song reached number two on Billboard’s Hot 100, just behind The Beatles’ hit, “Hey Jude.”

Source: Wikipedia

Read more of Mike Causey’s Federal Report

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