The modest increase drew a mixed reaction from groups representing the federal workforce.
“While next year’s COLA is much smaller than the increase federal retirees and Social Security recipients received at the beginning of this year, it could have been much worse, ” said J. David Cox, president of the American Federation of Government Employees. “Under the deficit-reduction plan proposed by Morgan Stanley director Erskine Bowles and ex-senator Alan Simpson, the annual COLA would be cut by three-tenths of a percentage point.”
That adds up, Cox said in a statement that went on to criticize the earlier proposed cut.
Colleen M. Kelley, president of the National Treasury Employees Union, said the increase is “a vivid reminder of the pressures retired Americans, including retired federal employees . . . continue to face in making ends meet. That is particularly so since a large portion of retiree spending is directed toward health-related needs, a field in which inflation generally far outstrips that of other expenses.”
There are two main federal retirement systems: the Civil Service Retirement System, which generally covers those hired before 1984, and the Federal Employees Retirement System, mainly for those hired in that year and after. While four-fifths of active federal employees are in the FERS program, about the same share of retirees draw benefits from the older CSRS program — 1.5 million out of 1.9 million.
The CSRS program is a stand-alone benefit that does not include Social Security coverage; the yearly benefit is about 2 percent of the average of the employee’s highest three consecutive annual salaries, for each year of service.
The FERS program provides Social Security on the same terms as for other American workers, plus a lesser civil service annuity than the CSRS provides.
There are numerous other differences between the two, including that most FERS retirees are ineligible for the COLAs until age 62. Under both, the COLAs are prorated for those who have been receiving benefits less than a full year.
As of Oct. 1, 2011, the average monthly civil service annuity for a CSRS retiree was $3,002, and the average for a FERS retiree was $1,097. The median monthly benefit amounts — where half are above and half are below — were $2,620 for CSRS and $823 for FERS.
The figures probably are slightly higher today because of COLAs paid at the start of this year, 2.6 percent under the FERS and 3.6 percent under the CSRS. No COLAs were paid in 2010 or 2011 because of an earlier period of deflation.
A COLA also applies to survivor beneficiaries, whose payments on average are somewhat less than half of what the retiree received while living. There are about 546,000 CSRS survivor beneficiaries and about 40,000 under the FERS.