Congressional Democrats may team up with the Reagan administration this session to cut cost-of-living adjustments (COLAs) for federal and military retirees.
Congress this year will design a new retirement program for federal and postal employes who have been hired since January 1983. Those employes are now under both Social Security and the regular civil service retirement program.
In the process of setting up a new system, this budget-conscious Congress will take a look at a variety of proposals to trim federal spending on payroll and benefits.
Congress may balk at White House plans to cut federal pay and make employes work an extra 10 years (until age 65) to get full pension benefits.
But Congress will zero in on the current COLA formula. It is seen as one of the most costly (and most cutable) of all civil service benefit programs. Changes could involve giving COLAs that cover only a portion of the actual rise in living costs and/or giving full COLAs only to the first $10,000 of an annuity.
U.S. retirees are supposed to get annual raises to keep pace with living costs. In the past several years Congress and the White House delayed one COLA raise and reduced benefits for retirees under age 62.
"The system of giving retirees unreduced, on-time COLAs has been dead for a couple of years," said a congressional Democrat, "but most people don't realize it. Last week's Congressional Research Service report [on the federal retirement system] shows that the government pension plan costs more than plans in private industry, but in many cases pays out smaller benefits."
The reason for the higher cost and lower benefits, he said, "is the COLA system."
"It is a tricky issue, and it is political dynamite," he said, "but you can bet money that it is one of the things this Congress must tackle and will tackle." He said that if Congress could reduce the COLA formula somehow, it would cut costs and enable the government to give bigger initial retirement benefits. "You won't find many people willing to talk about it on the record," he said, "but we are going to have to deal with it this year."