Retiree Pension Raises Vary by System
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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.

Although the COLA is lower than in past years, Baptiste said she is "always grateful" for the annual adjustments, which help prevent federal pensions from being eroded by inflation.

Baptiste, who joined NARFE in 1978 when her husband retired from the government, said she "spent a lot of my life as a stay-at-home mom" and appreciates that Congress has provided a COLA for her survivor's annuity and for her Social Security.

While retirement systems for government employees provide COLAs, the benefit has faded in the private sector. Only 7 percent of employees in the private sector are covered by pension plans that provide automatic COLAs, the Congressional Research Service said in a recent report.

Labor Department data show that only 20 percent of private-sector workers participated in a pension plan last year and that 43 percent of private-sector workers contributed to a 401(k) plan.

While federal employees have access to a pension and the 401(k)-type Thrift Savings Plan, only 15 percent of private-sector workers had both types of plans available to them in 2006, the research service said.

Looking to the Future

A breakfast discussion on "Federal Workforce Transformation: Priorities for the Future" will be held Oct. 23 at the Riggs Library on the Georgetown University campus.

Alexis M. Herman, former secretary of labor, will moderate a panel discussion, starting at 7:30 a.m. Panel members will include Michael L. Dominguez of the Defense Department and Kevin E. Mahoney of the Office of Personnel Management.

The session is sponsored by Georgetown's Public Policy Institute and Accenture's Institute for Public Service Value. To attend, register by Friday at http://www.gppidialogue.com.

Stephen Barr's e-mail address isbarrs@washpost.com.