More than 80,000 government and military retirees living in the Washington area will get a cost-of-living raise of at least 2 per cent beginning with the monthly annuity check they receive in early April.
According to Civil Service Commission data, the average retired federal worker today gets a monthly annuity of $630 a month. The typical survivor of a U.S. retiree receives $230. CSC estimates that for employees retiring now, the monthly pension entitlement should be about $700 before taxes.
Federal pension figures in the Washington area are higher because a larger percentage of the retirees held top levels jobs, entitling them to larger pensions. The Washington area also has had one of the highest increases in living costs of any metropolitan area in the nation.
The automatic retiree raise, which will reflect the COL (cost of living) rise from June through December 1977, could be higher if the Consumer Price Index for December exceeds the November level. Federal and military pensions are linked to the CPI. The December data, which would trigger off even larger retiree raise, will be available on Jan. 20.
Federal and military retirees got a 4.8 per cent COL raise last September. It first showed up in October checks. They also got a COL raise in March, 1977, of 4.8 per cent. That went into April, 1977, checks.
Unlike the case in Social Security benefits, which generally are much lower than Civil Service annuity payments, retired government workers [WORD ILLEGIBLE] taxes on their earned annuities. Social Security benefits are exempt from federal taxes.
Until a few years ago, federal and military retirees got a coat-plus raise, based on the CPI. Under the system, which Congress scrapped two years ago, retirees got an increase every time the CPI jumped 3 per cent over the level that triggered the previous increase and held at the level for three consecutive months.
Because of the delay in getting the extra money to retirees, Congress added a "sweetener" in 1969 that tacked on an additional 1 per cent above the actual cost of living with each raise. That increase, with compounding, resulted in significantly larger pension increases during the 1970s because of the high inflation rate. In 1974, for example, retirees got a 5.5 per cent increase in January and another 6.4 per cent in July.
Congress dropped the coat-plus system after the General Accounting Office reported that it resulted in significant "overpayments", over and above the actual increase in living costs.
In place of the old system, Congress approved legislation that grants federal and military retirees a cost-of-living raise effective each March 1 and each Sept. 1. The money gets to retirees a month later.