An upcoming cost-of-living raise for federal, postal and military retirees this fall could save the jobs of hundreds of U.S. workers who are on RIF (reduction in force) hit lists.
Retired federal pay, which is linked to the COL as measured by the Consumer Price Index, will be going up at least 3.1 percent this September. That COL adjustment, which will go to 100,000 government retirees in the metropolitan Washington area, will be worth more if living costs for May and June, the two months remaining in the COL countdown period, go up.
Federal officials hope that the prospect of the COL raise will encourage many senior workers, especially those in upper-grade professional jobs, to pull the plug. Because of the inflation rate, retired federal workers have been getting larger percentage increases, and getting them twice as often, as active duty workers. Many government executives at the $50,000 pay range have not had an increase in several years.
Some of them have concluded, correctly, that they would be better off financially (barring a substantial pay raise this year) to retire and start getting COL adjustments, which would boost their pensions regularly faster than if they keep working at "frozen" salaries.
Federal officials who had counted on normal attrition to help them avoid major RIFs in their agencies are now worried, because the number of quits and retirements is running well below normal. That is, fewer people are leaving government at a time when agencies facing RIFs need all the vacant slots they can get.
President Reagan and Congress have tentatively agreed on a maximum 4.8 percent raise this October for white-collar civilians. Retirees got a 4.4 percent increase last March and are due another raise, of at least 3.1 percent, this September. That means pensions are going up faster than pay.
Retirees now get two raises a year, effective each March 1 and Sept. 1. Even if retirees are limited to one COL raise a year (and Congress is moving in that direction) they are ahead of the percentage increases that active duty workers get.That point isn't lost on many current federal workers who see no end to political maneuvers to hold down their annual pay raises, which are supposed to equal industry gains.
Because they are linked to inflation, many long-time retirees now get pensions that are higher than those that will be paid to employes who retire this year. Many persons who retired in the mid-1960s and mid-1970s when salaries were lower) are today drawing pensions higher than those that will be paid to current retirees. Office of Personnel Management has worked up examples showing that persons retiring since 1965 are better off than people who will retire in 1981.
The OPM examples involve civil servant with 30 years of serivce, age 55 or older, who retired from the same grade level, and at the fourth (average) step of that grade. Even though salaries have gone up dramatically during that period the inflation rate has pushed retiree raises higher, faster. This is what it looks like:
The individual retiring at Grade 5 in May 1965 now gets an annuity of $9,156. The same GS5 retiring in May 1973 gets $9,516. The GS5 with the same service time, even at higher salary, will get almost $3,000 less, a starting pension of $6,720.
The May 1965 retiree at Grade 7 now gets an annuity, OPM says, of $11,052. The same person retiring in 1973 gets $11,772 while the same employe, retiring today, would get only $8,316.
A typical GS11 retiring in 1965 today gets, because of COL raises $15,624. The 1973 retiree gets $17,304 while the person retiring today at the same grade, with the same serivce time, will get only $12,312.
A long-service Grade 15 worker retiring this month would get a pension of $24,384. An employe with the same grade and service time retiring in 1973 now gets $33,252. The May 1965 retiree at Grade 15 has an annuity of $28,272, more lthan $4,000 higher than the person of the same grade retiring today.
The data probably will be used by somebody to attack fat cat federal retirees. That would be unfair. Retirees get what they paid for, and what the law promised them. The vilain in the piece is inflation, which has caused the pension flip-flop, and the fact that past presidents have held federal pay raises below the legal catch up with industry, and well below the increase in the cost of living.