When they retire after a long career with Uncle Sam many Federal Employees Retirement System participants hope for good health, long life and low-inflation. Not necessarily in that order, and for good reason. What’s the point of having a long, healthy retirement if you are too broke to enjoy it?

Folks under the old Civil Service Retirement System, like people who get Social Security benefits, are protected from inflation. If the cost of living goes up two, five or even 10 percentage points, their checks are adjusted accordingly in January of the following year. But the majority of people on the federal pay roll are under FERS.

While it provides a generous 401K plan with a 5 percent match and Social Security coverage, FERS retirees don’t get full cost of living adjustments. When the inflation rate exceeds 2 percent, FERS retirees are put on diet-COLAs. That is one percentage point less than any increase in inflation over 2 percent.

Because of the diet-COLA feature CSRS retirees and people who get Social Security benefits got a 2.8 percent catch-up with inflation raise. But because they are on diet-COLAs, FERS retirees got only 2 percent. That’s better than a sharp stick in the eye. But over time, and periods of high inflation, not much better.

That means that each year retirees fall further behind, getting less in their monthly annuity even as prices, especially for medical care, continue to rise dramatically. The miracle of compounding works both ways. And in periods of high or even moderate inflation, people on fixed or relatively fixed retirement benefits lose out big time. They have to depend more on money from their TSP accounts to make up the difference, and they often have to tap it more often for more money, and sooner than people under CSRS.

So is relief on the way? Maybe, just maybe.

Rep. Gerry Connolly (D-Va.) has introduced a bill that would take FERS retires off their diet COLA plan. It would benefit both current and future retirees. Connolly’s Northern Virginia district is chock full of both active and retired government workers who tend to be smart, savvy and all are old enough to vote. Connolly’s dump-the-diet-COLA plan has been soundly endorsed by the National Active and Retired Federal Employees Association and other groups representing feds.

This is not the first time this has been proposed, only to die in Congress. The difference is that Democrats now control the House. In recent years the GOP-dominated Senate has generally been favorable toward federal workers, from pay raises to other issues. The House has been challenging for feds as Republicans pushed for a variety of changes that would hold down pay, make it easier to fire civil servants and restrict union rights.

This week’s episode of Your Turn featured Jessica Klement and John Hatton from NARFE, who spoke about the impact of the diet COLA on retirees and the chances of a follow-up federal pay raise next year. Listen to the conversation using the player above and tune into next Wednesday’s show at 10 a.m. EST, either on www.federalnewsnetnetwork.com or at 1500 AM in the Washington, D.C. area.

Nearly Useless Factoid

By Amelia Brust

Inuits can sum up the frustration of waiting for someone to arrive that causes us to constantly check the window with one unique word: “Iktsuarpok.”

Source: Mental Floss

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