COLA (Cost of Living Adjustments) Explained
The Cost of Living Adjustments (COLA) become effective annually (every 1st of December), and they are applied to your January annuity payments. For anyone who is retired for less than a year receive prorated COLAs based on their original retirement date. The FERS and FERS Special Cost of Living Adjustments are provided after you reach 62 years of age, with the exception of survivor benefits, disability, and other special retirement cases.
Also, if you have CSRS component, it is subject to CSRS COLA. Those who have been retirees for less than a year are allocated based on their date of retirement. For example, if you retired in January 2018, your first Cost of living adjustment will be made in January 2019. It will be for 11/12ths of the adjustment amount. If you retire in February, the amount will be 10/12ths, and the sequence continues. The future adjustments will be for the full amount.
Cost of living adjustment as per the Consumer Price Index
The adjustment is made depending on the change in the Consumer Price Index for Urban Wage Earners and an average of the third calendar quarter of one year to the next for the Clerical Workers. In the case of a negative count in inflation, the benefits are not reduced, but instead, they are frozen. Also, in such a case, COLA’s starting point remains constant.
You should know that Social Security COLAs follow the exact formula that an entire social security cola is paid even to individuals who have drawn benefits for not more than a year.
CSRS/CSRS Offset
All annuities in the CSRS category are increased annually except for the supplemental annuities bought under the Voluntary Contributions Program.
Recent COLA Amounts
2019 – FERS: 2.0 / CSRS: 2.8
2018 – FERS:2.0/CSRS:2.0
2017 – FERS: 0.3 / CSRS: 0.3
2015 – FERS: 1.7 / CSRS: 1.7
In 2016, no COLA was paid because the inflation count for the relevant measurement period was negative.
FERS COLAs
FERS retirees are allocated COLAs except those under the age of 62. The COLAS are not applicable to the CSRS-based Voluntary Contributions annuities or the FERS Special Retirement Supplement.
They are payable to:
– Regular retirees of at least 62years of age
– Law enforcement officers, air traffic controllers, and firefighters
– Disability retirees, which is payable after one year
– Military services employees of at least 50 years of age with at least 25 years of service and if they lost their position in the military due to medical issues
– Special CIA workers
COLAs on the FERS regular retirement benefits depends on the changes in the Consumer Price Index for Urban Earners and CPI/W average of the third quarter of the calendar of one year to the next. If the Clerical Workers increases by or more than 3% in the particular year, the increase in COLA will be the CPI/W less one percent. Take a scenario where the CPI/W rises by 3.2 percent; the COLA will be 2.2%. If the CPI/W is in between 2 and 3%, the COLA will be 2%. If the PI/W rises by 2% or less, then COLA will be equivalent to CPI/W.
COLAs on the Social Security Portion of FERS Benefits
COLAs on the Social Security portion of FERS is payable every January.
