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Federal retirees and Social Security recipients are about to get the largest increase in their cost-of-living adjustment (COLA) in over four decades.

The COLA will increase 8.7% for 2023, the Social Security Administration announced on Oct. 13. But not all federal retirees will see that amount added to their checks. Those in the Federal Employee Retirement System (FERS) will receive a 7.7% COLA starting in January.

The large COLA announcement for 2023 is no surprise, given high rates of inflation and climbing consumer prices this year, said Ken Thomas, national president of the National Active and Retired Federal Employees (NARFE) Association, in an Oct. 13 statement.

“However, rising health care costs and the unfair treatment of specific federal annuitants could reduce the value of this adjustment,” Thomas said. “Seniors spend more on health care than any other segment of the population.”

In 2023, federal employees and retirees in the Federal Employee Health Benefits Program (FEHBP) will pay 8.7% more, on average, toward their health care premiums.

COLAs intend to keep federal retirees and Social Security recipients on pace with inflation. They’re measured by the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.

Depending on the system under which a federal employee retires, though, the exact COLA amount will vary. Those on the Civil Service Retirement System (CSRS) receive the full COLA , while FERS retirees usually receive less. Exactly how much less depends on the size of the COLA itself:

If the CSRS COLA increases less than 2%, FERS retirees will receive the full COLA.

If the CSRS COLA increases between 2% and 3%, FERS retirees will receive a 2% COLA.

And if the CSRS COLA increases more than 3%, FERS retirees will receive 1% less than the full COLA.

Still, next year’s COLA is the highest increase since 1982, making the relatively large COLA of 5.9% in 2022 look minimal in comparison. Before that, the last sizeable COLA for civil service retirees was 5.8% in 2009.

The chart below shows the COLAs for CSRS and FERS retirees going back to 2009. You can see COLA data going further back on SSA’s website.

Many federal advocacy groups disapprove of the reduced, or “diet” COLA, for FERS retirees.

“This inequitable policy, enacted in the 1980s with the creation of FERS, fails to fully protect the earned value of FERS annuities, which decrease in value year after year — exactly what COLAs are intended to prevent,” Thomas said.

In an effort to remove the disparity between COLAs for FERS and CSRS retirees, Sen. Alex Padilla (D-Calif.) introduced the Equal COLA Act in May. Rep. Gerry Connolly (D-Va.) also introduced a companion bill in the House last year. The legislation would give FERS retirees the full COLA amount. Connolly has introduced similar legislation over the last several years, but the bill has never cleared Congress.

Other lawmakers have proposed changing the COLA system altogether. The Fair COLA for Seniors Act, which Rep. John Garamendi (D-Calif.) introduced, would make future COLAs based on the Consumer Price Index-E (CPI-E), rather the CPI-W. Both indices track consumer costs, but the CPI-E places greater weight on health care costs, which in theory would lead to a higher COLA for retirees.

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