Federal workers who retire in the summer of 1981 would get an annunity increase of 12 to 17 percent if Congress goes along with a Senate version of proposed cost-of-living (COL) changes for U.S. retirees.
But if Congress, as expected buys the House version of the COL cutback, most of that potential 1981 "windfall" would disappear. In addition the tougher House Post-Office Civil Service Committee proposal would, mean that persons retiring this year would get smaller annuities than they had counted on under present law.
Administration officials estimate that as many as 70,000 senior federal workers might retire in August 1981 to take advantage of the COL "windfall" if the Senate bill becomes law.
Office of Personnel Management brass say the tougher House language, which the administration prefers, would eliminate "inequities" in the present retirement calculation system. They figure it would trim $60 a month from the annuity of the midsummer 1981 retiree, and upwards of $400 a month from long-service, high-salaried officials.
Under the House's prorated pension system, federal workers would lose the "look-back (comparative computation) benefit that is now part of their retirement package. The lookback allows persons who are retiring to take advantage of the preceding COL raise, and get the full percentage amount of the upcoming COL raise, even if its goes into effect one day after they retire.
Because of the look-back provision, a record number of federal workers retired this Feb. 29 to take advantage of a 6.9 percent COL raise that went into effect in September 1979. Under the look-back, retirees were eligible to have their annuities calculated to take advantage of the September COL as if they had retired in time to get it. In addition, those Feb. 29 retirees also get the full 6 percent COL adjustment that went into effect the next day, March 1.
The House proposal would eliminate look-back, and prorate the first COL raise, meaning smaller pension benefits for future retirees. The prorated system would mean that retirees would get only that portion of the first COL due them based on when they actually retired. They could not retire the day before the increase came due and get all of it.
The complex situation is the result of orders from the Senate and House budget committees to trim federal-military retirement costs by limiting U.S. retirees each March and September) to a single COL raise each year.
In a compromise, the Senate Governmental Affairs Committee voted to make the one-time COL law effective only this year by skipping the raise due in September 1980, then resuming the two-raise system in 1981.
The House Post Office-Civil Service Committee also balked at making the one-COL permanent. It voted to allow the Septemeber 1980 raise, but skip the March 1981 raise. Under the House committee plan the two raises would resume beginning with the September 1981 increase.
The Senate committee compromise does not address the issue of either look-back, or prorating COL raises. The House Post Office-Civil Service Committee did approve the two changes. The issue will have to go to a Senate-House conference committee on the budget.
If the Senate version prevails (the Carter administration opposes it) the look-back would be unchanged, and there would be no prorating of future COL benefits. That would set retirees up for a raise of about 12 percent next March, and -- with lookback intact -- give those who quit in August an estimated COL adjustment in September 1981 of 17 percent (or more if inflation is higher).
Under the House plan, however, new retirees would lose the benefits of look-back, and be subject to the prorated system, which would not permit them to get the full amount of the next COL raise unless they retired many months before it took effect.