Federal retirement COLAs are prorated for those who retired, or who will retire, in the current calendar year. Image: Andrey_Popov/Shutterstock.com
By: FEDweek StaffA federal retirement COLA will be paid in January of 2.5 percent for those retired under CSRS and 2 percent for those retired under FERS.
The announcement follows completion of the count toward the adjustment with figures through September in the inflation index used to set the COLA.
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.
In addition, in situations such as this one in which the count falls between 2 and 3 percent, the payout to those eligible under FERS is a flat 2 percent.
The figure for 2025 reflects the continued cooling of inflation from recent prior years that had resulted in CSRS/FERS COLAs of 5.9/4.9 being paid in 2022 and 8.7/7.7 paid in 2023. The COLA was 3.2/2.2 in January of this year. Where the count is above 3 percent, 1 percentage point is shaved off the FERS figure.
Social Security benefits also will increase by 2.5 percent. 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 have been on the retirement rolls for less than 12 months. Social Security COLAs are not prorated for recent retirees.
The retiree COLA does not directly impact the potential January 2025 pay raise for active federal employees; while the former is determined automatically by an inflation count, the latter is determined through the congressional budget process. Congress appears to be on track to allow President Biden’s recommendation for a 2 percent raise to be paid by default.
He has said he would split that raise, with 1.7 percentage points paid across the board and the funds for the remainder allocated as locality pay—making total raises range by locality from several tenths of a percentage point above 2 percent to several tenths below.
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See also,
Calculating Service Credit for Sick Leave At Retirement
FERS Supplement vs The 10% Pension Bonus
How Your FERS, Social Security and TSP Payments Get Taxed
