The annual retiree COLA announcement of 2 percent will be paid in January under CSRS and to those eligible for COLAs under FERS – and this always sets off confusion in the federal community. Part of the reason is that many employees refer to their raises as COLAs, and some retirees refer to their COLAs as raises. They are two different things.
A COLA goes to those who are retired (as well as to benefits paid to eligible surviving spouses and children) and is linked to the consumer price index for urban wage earners. It is automatic unless reduced or blocked by Congress and the White House.
A raise goes to current employees. Under federal pay law, a base raise is supposed to be linked to the employment cost index and locality pay to close local pay gaps is supposed to be paid on top. The ECI is a measure of private sector wage growth–not living costs–and 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 decided by elected officials each year.
In recent years those officials have reached a decision only by default, in effect accepting the White House’s proposal by taking no action on it. For January 2018, a 1.4 percent across-the-board raise plus a locality component averaging another 0.5 percent is in progress but is not yet finalized.