Monthly annuity benefits for most retired federal employees will rise by 2.8 percent in January, the largest increase since 2012, the government announced Thursday.
The cost-of-living adjustment (COLA) mirrors the increase for Social Security and is based on a 12-month calculation of inflation that ended with the announcement of the figure for September.
There were 2,078,000 federal retirees plus 534,000 survivors drawing benefits from one of the two main federal retirement programs as of September 2016, the latest figures available from the Office of Personnel Management. The Civil Service Retirement System (CSRS) generally applies to those first hired before 1984, after which newly hired employees were put in the Federal Employees Retirement System (FERS).
While FERS now applies to about 95 percent of current workers, two-thirds of retirees are drawing benefits from the CSRS program, where the average monthly annuity is just under $3,600 and the median monthly annuity — where half are above and half below — is slightly above $3,100.
Under FERS the average monthly annuity is just under $1,400 and the median is just under $1,100. The FERS civil service benefit is lesser because unlike CSRS, the FERS system includes Social Security.
COLAs are prorated for those who were retired for less than 12 months at the time of the payout. Otherwise, CSRS retirees receive the full COLA regardless of age. For someone drawing an average CSRS benefit, monthly payments will rise by about $100.
The picture is more complicated regarding FERS. Those retired under that system don’t receive an adjustment to the civil service portion of their benefits until age 62 unless they are disabled or they retired under special provisions for law enforcement officers, firefighters and air traffic controllers. Further, if the inflation count falls between 2 and 3 percent, as it did for the coming adjustment, the payout is 2 percent.
That policy “prevents FERS annuities from keeping up with inflation, which is the whole point of a COLA. It is past time for Congress to ensure FERS retirees receive a full COLA each year,” Richard Thissen, president of the National Active and Retired Federal Employees Association, said in a statement.
Those retired under FERS do receive the full adjustment on their Social Security portion, however.
Thissen also called on Congress to pass a pending House bill to use a different inflation measure, one focusing specifically on spending patterns for retirees, which he said indicates an increase of about 0.2 percentage points more on average.
The White House budget proposal early this year sought to end COLAs on the civil service portion of FERS benefits while shaving a half-percentage point off the adjustments for CSRS retirees. Congress has not acted on those proposals, however.
The COLA is separate from the pay raise for current employees and the two are determined through different processes. The raise is set in an annual spending bill from Congress, now in a House-Senate conference.
The House version of that bill made no mention of a raise, effectively consenting to Trump’s proposal for a pay freeze; the Senate version would provide a 1.9 percent average increase, with slight differences by locality. House Republican leaders say they have tentatively agreed to provide a raise but final action won’t occur until after the elections.
In January of this year, retirees eligible for a COLA received 2 percent, while active employees received raises averaging 1.9 percent and ranging from about 1.7 to about 2.3 percent.