As of Oct. 1, 2015, there were about 2,054,000 federal retirees plus about another 545,000 survivor beneficiaries, according to the Office of Personnel Management. There are about 44,500 retirees or survivor beneficiaries in the District, about 163,200 in Maryland and about 144,500 in Virginia. California has the most, 215,500.
Seventy percent of federal retirees draw their benefits from the Civil Service Retirement System (CSRS), which generally applies to those first hired before 1984; by contrast, more than 90 percent of current federal employees are under the Federal Employees Retirement System (FERS), which generally applies to those first hired in 1984 or after.
The average monthly annuity of a CSRS retiree as of October 2015 was $3,529, while the average for those retired under FERS was $1,355. Average monthly benefits for survivor beneficiaries of deceased retirees were $1,560 and $544, respectively.
There was no cost-of-living increase under either federal retirement program or under Social Security in January of this year, because the inflation count for the measuring period toward that adjustment ended in negative territory. In that situation — which has happened two other times in recent years — benefits are not cut.
The two federal retirement programs differ in that FERS employees pay into Social Security as well as into the federal retirement fund and become eligible for a benefit from that program. Social Security is not part of the CSRS system, although some under CSRS become eligible for a Social Security benefit through other work or through a spouse’s employment; in those cases, offsets commonly reduce or even eliminate that benefit. The average monthly Social Security benefit nationwide is $1,355.
FERS employees also get employer contributions, of up to 5 percent of salary, toward the Thrift Savings Plan, the 401(k)-style retirement saving program for federal workers, while CSRS employees don’t. But while all CSRS retirees receive a full COLA regardless of age, those retired under FERS don’t receive COLAs until age 62 unless they fall under certain exceptions. Also, a FERS COLA is reduced if the inflation count exceeds 2 percent, a provision that hasn’t applied since the 2012 boost.
A COLA applies only to retirees, not to active employees, most of whom are in line for a raise averaging 1.6 percent in January. Increases for the two groups are set through different processes, and the amounts don’t necessarily track each other.
Federal retirees commonly use increases in their health insurance costs as a comparator to the COLA. In the Federal Employees Health Benefits Program (FEHBP) — for which most federal retirees are eligible — the enrollee share of premiums will increase by 6.2 percent on average in January. That translates into about $11 a month more on average for self-only coverage, about $22 more for self-plus-one coverage and about $28 more for family coverage.
However, enrollees have the choice of many plans in an upcoming open season — 31 in the Washington area — and some insurers are holding premiums about steady or even decreasing them slightly.
Also, effective Nov. 1, premium increases averaging 83 percent will hit almost all of those who enrolled before August 2015 in the Federal Long Term Care Insurance Program, which also is open to active employees and retirees. A decision period recently ended in which they could accept that increase or reduce their benefits to lessen the impact; most also qualified for a provision in which they could stop paying premiums and remain eligible for a benefit, although much reduced.
National Active and Retired Federal Employees Association President Richard G. Thissen said the developments show that the COLA increase should be determined by a separate inflation measure that specifically tracks spending patterns of retirees. “Given the large increase in health care and insurance costs, it is crystal clear that the current formula does not accurately reflect how seniors spend their limited annuities,” he said in a statement.
Many federal retirees also are enrolled in Medicare, which acts as the first payer for those who also have FEHBP coverage. About half of those retired under the CSRS, along with certain other Medicare enrollees, could face much higher premiums for their Part B (physicians and related services) coverage in 2017 than others will pay. That’s due to a “hold harmless” provision protecting most enrollees from Medicare hikes that exceed the increase in their Social Security benefits — effectively passing the entire Medicare premium cost increase to those not protected.
Next year’s Medicare premium rates are to be announced in November. Last year, Congress provided partial relief for the 2016 plan year for those affected, and a coalition including federal employee and retiree groups recently wrote to Congress seeking an extension.
“Congress must act now to prevent a massive increase in Medicare Part B premiums for this group of retirees,” American Federation of Government Employees President J. David Cox Sr. said in a statement. “Although most seniors would be protected, this group will have to pay more solely because of the uniqueness of their pension system.”