Although the terms raise and COLA (for cost-of-living adjustments) often are used interchangeably in the federal vocabulary, they are two very different types of increases.
COLAs are paid to retirees each January, based on the change in the average of a consumer price index from the third calendar quarter of the year that had just ended from the third calendar quarter of the preceding year. COLAs are thus a measure of inflation and are paid virtually automatically. Those retired under the CSRS annuity system get the full COLA regardless of age while the COLA policy for those under the FERS system is more restrictive: in most cases the COLA is not paid until age 62. Also, if the COLA amount is above 3 percent, FERS retirees get the CPI figure minus 1 percentage point, and if the COLA falls between 2 and 3 percent, they get 2 percent. Further, COLAs are pro-rated for those who retired during the calendar year before the COLA is paid, depending on how many months they were retired in that year.
Raises, on the other hand, are determined during the annual congressional budget cycle, which starts with a recommendation from the White House. The raise formula is much more complicated, with variations in amounts by locality and numerous special rules and exceptions applying. However, basically, each January