The annual COLA announcement always sets off a round of confusion in the federal community involving raises and COLAs, in part because many employees refer to their raises as COLAs. The raise and the COLA do not affect each other. A COLA goes to those who are retired (as well as to benefits paid for surviving spouses and children in certain circumstances) and is linked to the consumer price index for urban wage earners. A raise goes to active employees and is determined through the congressional budget process. For January 2016, a 1 percent across-the-board raise plus a locality component averaging another 0.3 percent is in progress but is not yet finalized. Under federal pay law, the raise is supposed to be linked to the employment cost index, which is a measure of private sector wage growth–not living costs–and that is based on a different measuring period than the CPI figure used for the COLA. That formula has turned into only general guidance, though, and in practice raises are treated as another line item in the federal budget to be decided each year.
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