FEDweek

Keep in Mind COLA Prorating

The prospect of the upcoming COLA for retirees once again exceeding the pay raise for active employees apparently has spurred some employees eligible for retirement to think about retiring around the end of this year.

However, they should be aware that COLAs are prorated for those who were on the annuity rolls for less than a year, according to how many months a person is on the retirement roll. Thus, to get a full cost-of-living adjustment in January 2013 someone would need to have been on the roll no later than December 2011.

The COLA payout will be reduced by a twelfth for each month since then that a person was not on the roll.

Under FERS, a person is on the retirement roll in the month after the month of retirement, regardless of what date in a month he or she retired. Under CSRS, a person is on the retirement roll during the month of retirement if he or she retires within the first three days of the month; otherwise, that person is on the roll the next month. Thus, even by retiring soon, someone who is now still working would get only a small portion of the upcoming COLA at most.