2020 COLA: Midsummer night’s dream?

This article has been updated to include additional information from the National Active and Retired Federal Employees.

With two critical months to go in the cost of living adjustment countdown, federal, military and Social Security retirees are in line for a January inflation catch-up in the neighborhood of 1.5-1.6%. But don’t spend it yet.

The full and exact amount of the COLA depends on the increase or decrease in the Consumer Price Index-W (CPI-W) for the months of September and August. Millions of American retirees — Social Security, civil service and military — get a catch-up-with-inflation increase each January. In 2018 the COLA was 2.8% for retirees under the Civil Service Retirement System and 2.0% for those retired under the Federal Employees Retirement System which replaced it.

A majority of people still working for Uncle Sam are under FERS, while most people currently retired from the government did so under the CSRS program.

Advertisement
The annual COLA is based on the rise in living costs, as measured by the CPI-W, from the third quarter of the current year (July, August and September) over the third quarter of the previous year. But looking for trends or patterns is tricky because living costs, like the stock market, go up and down. In June for example they decreased by 0.1%. That said there are some projections which say that if the CPI rises in August and September the COLA could be 1.7% — or in that neighborhood.

Nobody can predict the amount of the 2020 COLA but if you are interested in the process here’s the explanation the National Active and Retired Federal Employees gave its members:

“Relevant to the cost of living adjustment to civil service annuities for 2020, the Consumer Price Index for Urban Wage Earners and Clerical Workers increased by 0.20% in July 2019. The new CPI-W figure for July 2019 was 250.236, 1.58% higher than the average CPI-W for the third quarter of 2018, which was 246.352 (1982-84 = 100) and will be used to determine the 2020 COLA.

“Under current law, COLAs for federal retirement annuities, as well as for military retiree annuities and Social Security payments, are determined in reference to the Consumer Price Index for Urban Wage Earners and Clerical Workers, which is calculated by economists and statisticians with the Bureau of Labor Statistics. The CPI-W is the current index used for measuring increases in the prices of consumer goods, including food and beverages, housing, clothing, transportation, medical care, recreation, education, communication, and more.

“The 2019 COLA was 2.8% for Civil Service Retirement System annuities and Social Security benefits, but only 2% for Federal Employees Retirement System retirees. Under FERS, when the CPI-W change is between 2 and 3%, the COLA is only 2%.

“NARFE continues to support strong COLAs based on fair assessments of increases in consumer prices to protect the value of federal annuities from inflation. NARFE specifically supports the Fair COLA for Seniors Act, H.R. 1553, which would switch to the Consumer Price Index for the Elderly, and result in higher COLAs. NARFE also opposes a switch to the Chained CPI, which would result in lower COLAs. Finally, NARFE supports the Equal COLA Act, H.R. 1254, which would provide FERS annuitants with a full COLA, equal to the change in consumer prices, regardless of the percentage, as is provided to CSRS annuitants and Social Security beneficiaries.”

FECA COLAs

“Individuals receiving insurance benefits under the Federal Employees Compensation Act (FECA) received a 1.8% COLA in March 2019. This number was determined by comparing the December 2018 CPI-W (244.786) to the December 2017 CPI-W (240.526).

“FECA COLAs are determined by a different statutorily-set methodology than the COLA for other federal retirees. Benefits awarded under the Federal Employees Compensation Act to individuals suffering work-related injuries or illnesses, are adjusted according to each calendar year’s percentage change in the CPI-W, rather than as measured by the change from the highest previous third quarter average.

“Looking ahead to the 2020 COLA for FECA benefits, the July 2019 CPI-W figure (250.236) is 2.23% higher than the December 2018 CPI-W figure (244.786). The Consumer Price Index for August 2019 is scheduled to be released on Thursday, Sept. 12, 2019 at 8:30 a.m. EDT.”

                       CPI-W Monthly % Change % Toward 2020 COLA
July 2018 246.155 -0.02
Aug. 2018 246.336 0.07
Sep. 2018 246.565 0.09
Oct. 2018 247.038 0.19 0.28
Nov. 2018 245.933 -0.45 -0.17
Dec. 2018 244.786 -0.47 -0.64
Jan. 2019 245.133 0.14 -0.49
Feb. 2019 246.218 0.44 -0.05
Mar. 2019 247.768 0.63 0.57
Apr. 2019 249.332 0.63 1.21
May 2019 249.871 0.22 1.43
June 2019 249.747 -0.05 1.38
July 2019 250.236 0.20 1.58

Nearly Useless Factoid

By Amelia Brust

You do not have to feel overwhelmed or underwhelmed — it is possible to feel simply “whelmed.” The word, according to Merriam Webster, means to cover or engulf completely with usually disastrous effect, or to overcome in thought or feeling but originally meant “to overturn.” Whelmed dates to the 14th century, while the variation “underwhelmed” didn’t gain traction until about the 1950s.

Source: Merriam Webster

Copyright © 2019 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.