The COLA, or Cost of Living Adjustment, is something that the Consumer Price Index for Urban Wage Earners and Clerical Workers (or more succinctly, the CPI-W) calculates every year. This is applied to a variety of federal benefits and annuities, including Social Security, and is provided to these services by the Bureau of Labor Statistics for implementation.
As of July of this year, that index went up by .2 percent, meaning that the CPI-W calculation was 1.58 percent more than the average of the CPI-W from the year before. The reason you have to look back two years when figuring out the COLA is that it is likely that inflation will stay steady, and help you anticipate any upcoming adjustments.
The average prices in the third quarter of the prior year, along with the third quarter of the current year, is how Social Security figures out what their COLA should be. They tend to not factor in quarter four of the year because of the time it takes to calculate all the averages will last past the January 1st deadline when COLAs go into effect.
FERS tops off their COLA at 2 percent, regardless of inflation rate determined by the CPI-W, but the CSRS will often adjust theirs higher, and for 2019 that number was 2.8 percent.
To get a picture of Cost of Living Adjustments historically, the past ten years look as thus: 2009 was 5.8 percent, both 2010 and 2011 saw a 0 percent increase, 2012 was at 3.6 percent, 2013 was at 1.7 percent, 2014 was at 1.5 percent, 2015 was at 1.7 percent again, 2016 saw no adjustment, while 2018 and 2019 saw a 2 percent and 2.8 percent increase respectively.
Come the middle of October, COLA rates should be announced for the upcoming year.