D-Day for pay raise, health premiums, retiree COLA

The size and purchasing power of your 2020 biweekly paycheck or monthly annuity payment will be decided in a couple of months. Inflation (or lack of the same), politics and increasing medical costs will all play a hand in how much more or less you actually have to spend in the coming year.

The good news about the January 2020 cost of living adjustment for federal, military and Social Security retirees is that there almost certainly will be one. The not-so-good news is that because of flat-line inflation the January catch-up for millions of retirees probably won’t be as much as they hoped, and maybe not even enough to cover higher Federal Employees Health Benefits Program health premiums that will kick in in January.

Federal pay raises are usually a political rather than fiscal decision made by Congress and the White House. Changes in the federal health plans premiums are based on bargaining between experts at the Office of Personnel Management and the dozens of health plans from giants like Blue Cross-Blue Shield, Aetna and GEHA to smaller geographically limited health maintenance organizations. In recent years OPM has done a good job of keep premium hikes at a minimum.

COLAs for federal civil service retirees and people who get Social Security are determined by the cost of living as measured by the Bureau of Labor Statistics. The amount of the raise will be based on the rise in the consumer price index (CPI-W) from the third quarter of this year (July, August, September) over the third quarter of the previous year. The July COLA number will be released later this week and the exact amount of the January 2020 COLA won’t be known until early October.

This year people retired under the Civil Service Retirement System got a 2.8% COLA. Retirees under the Federal Employees Retirement System got 2.0%. Individuals who get retired military pay and Social Security also got 2.8%.

Health insurance premiums for federal workers and retirees increased an average of 1.5% this year, which was the lowest average premium increase since 1996.  The federal government will continue to pay the lion’s share of the total premium — about 72% — for white collar workers and retirees no matter how much premiums rise. There will be an open enrollment period, from mid-November to early December when workers and retirees can make changes in health plans, and dental and vision insurance program.

While there is no connection between the retiree COLA and health premiums many retirees depend on them to help pay higher premiums. Retirees got a 2.0% COLA in 2018; 0.3% in 2017 and no COLA in 2016. Federal workers got a 1.4% pay raise in 2019 — Washington, D.C.-area feds got more due to locality pay — 1.4% in 2018, and 1.0% in 2017 and 2016.

The White House did not propose a federal pay raise but the House has approved 3.1. That will probably be the last of the three decided this year.

Nearly Useless Factoid

By Amelia Brust

In cider-producing regions of England, the pagan tradition of “apple wassailing” has continued since about the 500s. Typically in January orchard farmers walk among their apple trees singing, or rather howling, decorating the branches with toast to feed good spirits and shoot rifles to scare off demons. The hope is that the ritual brings a bountiful harvest. Some people also dress as the Green Man, a leaf-covered spirit of the oldest tree in the orchard.

Source: Atlas Obscura

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THRIFT SAVINGS PLAN TICKER

Feb 26, 2021 Close Change YTD*
L Income 22.3956 -0.0246 -0.10%
L 2025 11.2825 -0.033 -0.24%
L 2030 39.3109 -0.149 -0.32%
L 2035 11.7431 -0.0487 -0.35%
L 2040 44.2037 -0.2012 -0.37%
L 2045 12.0579 -0.0584 -0.39%
L 2050 26.2994 -0.1372 -0.41%
L 2055 12.7194 -0.0908 -0.44%
L 2060 12.7194 -0.0907 -0.44%
L 2065 12.7194 -0.0905 -0.44%
G Fund 16.5337 0.0015 0.07%
F Fund 20.7403 0.1701 -0.71%
C Fund 56.8721 -0.2653 -1.01%
S Fund 80.2962 0.2929 2.85%
I Fund 35.7955 -0.5623 -1.09%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.