Pay Raises and Retiree COLAs Explained

As lawmakers and administration officials are considering various proposals that could influence salary and benefits for federal workers and retirees, it is essential to look over the process undertaken by federal agencies in determining potential salary increases for employees and adjustments in the cost of living for the retired recipients.

Jeff Pon, director at the Office of Personnel Management, recommended the proposal to eliminate or reduce cost of living adjustments for his was not familiar with any other retirement systems that pay COLAs (Cost-Of-Living-Adjustment) as they differ depending on where the retire resides. OPM spokesperson issued a statement on Friday clarifying Pon suggestion saying he referred to the fact that annuity is determined by an employee’s total salary in three years including the locality salary.

The spokesperson continued to say that the director was emphasizing that locality pay was already considered into the recipient retirement funds and there is no need for future increases depending on where a retiree choose to reside. He added that the director encouraged federal service annuities to follow the private sector trend on offering retirement compensation package that excludes COLAs.

Every year, federal workers salaries deliberation commence with the release of the president’s budget for the next financial year, which is generally released in February. The document contains White House’s proposal for raise across the board or lack of it for military members and civilian federal workers.

President Trumps, this year gave a proposal on a pay freeze for civilian employees in 2019. Congress holds power to overrule the president regarding salary increments across the board although in the last few years it typically has postponed to the White House.

The president is expected to reaffirm his compensation proposal by the end of August for the coming calendar year through issuing a different salary plan that is declaring the existence of “economic emergencies” avoiding an automatic formula-based salary increase that is much larger than would be activated under the 1990 Federal Workers Salary Comparability Act.

President Trump plan increased salaries by 1.9 percent last year, where 0.5 percent average increase was in the locality pay and 1.4 percent in base salary. Were it not for the president’s intervention, the average locality pay would have been at 26.16 percent, which would cost the federal government $26 billion.

The President’s Pay Agent must forward a report in December finalizing the White House’s planned salary increase. The reports will also formally implement the previously approved changes and add-ons to the locality salary area program.

According to the OPM’s website, the process of determining COLAs is simple as for both Federal Employees Retirement and Civil Service Retirement Systems are established on the annual third quarter variation in the Consumer Price Index in the Labor Department for clerical workers and urban wage earners.

Retirees COLAs are not determined on where they live, unlike current employees across-the-board salary increases. The Federal Salary Council is in charge of the proposals on the changes to which a certain region federal workers receive extra compensation based on location. The board comprises of employees group, union representatives, and federal officials. The recommendations are then forwarded to the president’s Pay Agent, and upon approval, they are sent to OPM for implementation through the standards rulemaking procedure.

Last year the salary council was not reconstituted so there were no new locality proposals. OPM lacked a permanent director thus the President’s Pay Agent was hamstrung and postponed the locality pays proposed by the council in 2016. OPM looks forward to conducting a rulemaking procedure for the already approved areas.