New COLA to Take Effect in January

In January of next year, a majority of retired federal employees will have their monthly annuities adjusted for inflation of 1.6%. Though the adjustment is on track with other previous years, it seems to be under the increase that was given in January of this year.

The COLA (cost of living adjustment) will also take effect on retirement benefits for the military and Social Security.

As of now, there are two major federal retirement programs, which are the Federal Employees Retirement System (FERS) for employees hired in 1984 and on and the Civil Service Retirement System (CSRS) for workers employed in 1983 or before. Between these programs, there are some rules that are different. The CSRS applies the adjustment for inflation to retired workers of any age. However, those that are covered under the FERS program, the adjustments are not applied unless you are at the minimum age of 62. (Exceptions can be made for those that are in positions that have a mandatory early retirement like law enforcement or for former workers that retired on disability.)

There is only a small percentage of current federal workers that are still under the CSRS program, but 62% of retired employees are receiving CSRS benefits at this time.

Though both the FERS and CSRS programs are calculated based on time served and salary, the more giving of the two seems to be CSRS. As of this time last year, the average monthly annuity of a CSRS recipient was $3,781, which is more than half of what retirees under FERS receive at $1,506.

In January of this year, those that are under the CSRS system received an inflation adjustment of 2.8%. Those that are in the FERS program had an adjustment of 2%.

The cost of living adjustment will also take effect on survivor beneficiaries in both retirement benefit systems. The monthly benefits were $596 on average for FERS and $1,646 for CSRS last year.

The new COLA will increase the average monthly S.S. benefit to $1,503.

Although CSRS recipients receive higher benefits under the program, the FERS program has Social Security along with contributions made by the employer toward TSP accounts to compensate for the difference. Though there are some retirees under CSRS eligible for S.S. benefits due to other work, but these benefits are liable to an offset that lowers their benefit by a significant amount.

There will also be another change in January to the Federal Employees Health Benefits Program (FEHBP), which will see an increase in monthly premiums by an average of 5.6%. A majority of former and current works are under this program.

Those under the FEHBP system may have the opportunity to change plans if necessary during its yearly open season starting on November 11th and closing on December 9th.

This inflation adjustment will only affect those that are retired. Currently, federal employees are still waiting for what their raises will be for 2020. This is decided during the processing of the federal budget.

New COLA

Leave a Reply