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Retirees to get 1.5 percent inflation increase to benefits

Federal retirees, Social Security recipients, military retirees and beneficiaries of several other government programs will receive an increase of 1.5 percent in their benefits in January.

The cost of living adjustment, or COLA, is based on a figure announced this morning by the Labor Department reflecting inflation over the 12 months ending in September.

Joseph A. Beaudoin, president of the National Active and Retired Federal Employees Association, called the COLA “welcome news for countless Americans who rely on the increase to keep up with the rising price of food, housing, transportation and medical care.”

(Kim Hong-Ji/Reuters) (Kim Hong-Ji/Reuters)

As of October 2012, there were 1,933,062 federal retirees, about three-fourths of them drawing benefits from the Civil Service Retirement System, which generally applies to those hired into the government before 1984.

The average monthly CSRS benefit was $3,181 for retirees. For those receiving benefits under the newer Federal Employees Retirement System, the average retiree annuity was $1,175. The figures don’t take into account the 1.7 percent inflation adjustment paid in January of this year.

That means the COLA translates into a monthly increase of about $50 on average under CSRS and $20 under FERS; however, with some exceptions, FERS doesn’t pay COLAs to retirees under age 62.

In addition, there were 576,467 survivor beneficiaries with an average benefit of $1,446 per month under CSRS and $484 under FERS as of last October, the most recent accounting of federal retirement figures.

While civil service retirement benefits on average are lower under FERS, those under that system also pay into Social Security and receive benefits from that program. Social Security is not part of the CSRS system, and while CSRS retirees may be eligible for Social Security through other employment, those benefits may be relatively low and typically are subject to an offset that further reduces their value.

The COLA for retirees is determined separately from the raise for active employees. A 1 percent raise for employees is in the works, although not yet finalized. That raise, which would be the first increase in salary rates since 2010, would take effect in early January, varying somewhat by agency pay cycles; it would not go to members of Congress, however.

Beaudoin said the inflation measure the government uses to set the COLA understates cost increases experienced by retirees, who spend a larger percentage of their incomes on health care than does the general population. The average enrollee premium for the health plan that covers federal employees and retirees will rise by 4.4 percent in 2014.

He urged that Congress reject proposals to switch to the “chained” consumer price index measure designed to take into account changes in buying patterns and that would produce slightly lower annual COLA figures. Instead, an inflation measure that better reflects spending by older persons should be used, he said in a statement.

COLAs on civil service benefits, although not on Social Security payments, are prorated for those on the retirement rolls less than a full year.

The annual COLA announcement was delayed two weeks because of the partial government shutdown this month.



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Steve Vogel · October 30, 2013

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