A federal retirement COLA of 1.6 percent will be paid in January, following completion of the count toward that adjustment with release on Thursday (October 10) of the September inflation figure which showed no change in that month.
Those retired under CSRS or CSRS Offset receive a COLA regardless of their age. However, those retired under FERS don’t receive COLAs until age 62 unless they retired on disability or under the special retirement provisions for law enforcement officers, firefighters or air traffic controllers. Survivor beneficiaries under each system receive COLAs regardless of age.
Due to the size of the upcoming COLA, a provision limiting the adjustment for eligible FERS retirees if the count is above 2 percent does not apply.
The same increase will be paid for Social Security benefits. That’s primarily of interest to FERS retirees, for whom Social Security is a basic part of the retirement benefit, but also of interest to CSRS Offset retirees who have Social Security coverage as part of their benefit. Also, some “pure” CSRS retirees qualify for Social Security through from military service or earnings covered under that system before, after—and in some cases from outside earnings during—their CSRS working years. In many cases those benefits are reduced by the “windfall elimination provision” however.
Federal retirement COLAs are prorated for those who retired, or who will retire, in the current calendar year. Social Security COLAs are not prorated.
Cost-of-living-adjustments (COLAs) are effective on December 1 of each year and are applied to the annuity payments made the following month. COLAs for those retired less than one year are prorated according to the date on which they retired. If you retire in January, your first adjustment will be made in January of the following year and will be for 11/12ths of the COLA amount. If you retire in February it will be 10/12ths, and so forth. Future COLAs will be for the full amount.
COLA Based on Consumer Price Index
The COLA is based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI/W) average of the third calendar quarter of one year to the next. If the inflation count finishes negative, benefits are frozen but not reduced. Also, in that situation the starting point for the next COLA count remains the same.
Note: Social Security COLAs follow the same formula except that a full Social Security COLA is paid even to someone who has drawn benefits for less than a year.
Read more on COLAs under FERS and CSRS at ask.FEDweek.com
See also, Raise, COLA Don’t Affect Each Other