Retiree Pension Raises Vary by System

By Stephen Barr
Thursday, October 18, 2007

It's COLA season, and if you're a federal retiree, how much your pension increases depends on which retirement system you're in.

Unlike Social Security recipients, who learned yesterday that they would get a cost-of-living adjustment of 2.3 percent for 2008, the government's employees are covered by a number of retirement programs, each with its own salary-based formulas to determine benefits.

One of the biggest is the old Civil Service Retirement System, covering more than 1.56 million retirees. The system, which covers people hired by the government before 1984, was known as the "golden handcuffs" because retirement benefits rose dramatically after 30 years of service. These retirees will receive a 2.3 percent COLA next year, which will increase the average monthly CSRS pension by $59, to $2,646.

People who retired under the newer Federal Employees Retirement System and are 62 or older will receive a 2 percent COLA. The average monthly FERS payment, which goes to about 278,000 retirees, will rise by $18 in 2008, to $962.

The FERS pension is smaller than that provided under CSRS because FERS retirees also receive Social Security. Congress rewrote federal retirement rules in 1984 to help increase payroll taxes for the Social Security system.

The 2008 COLAs are the lowest in four years and are bound to prompt many federal retirees to register their concerns at the National Active and Retired Federal Employees Association. The Alexandria group has about 350,000 members and specializes in retiree issues.

"A lot of retirees are going to send us letters and e-mails complaining it is so low because all of the things they are buying, like bread and groceries, have gone up more than that," said Margaret L. Baptiste, NARFE's president. "Then they are going to worry that their 2.3 is going to be eaten up by the increased costs of their Medicare and their health benefits."

The federal adjustment is triggered by the Social Security COLA, which was announced yesterday.

In addition to the CSRS retirees, regular military retirees and many Foreign Service officers will receive a 2.3 percent increase in their pensions.

The Pentagon said yesterday that it had not estimated average retirement payments for 2008. This year, the average military pension was $1,705 a month. Nationwide, there are about 1.96 million military retirees.

At the State Department, officials said the average Foreign Service pension will be about $4,648 per month next year. There are about 12,000 retired Foreign Service officers.

Many federal retirees had hoped for a higher COLA next year. But the 2008 COLA is the lowest since 2004, when it was 2.1 percent for CSRS retirees and 2 percent for FERS retirees. The 2007 COLAs were 3.3 percent and 2.3 percent for those retirees, respectively.

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