Fedweek

With the prospects for the January 2019 federal retiree COLA and for the federal employee raise looking very different, questions are arising from some federal employees regarding how the outcome of one could affect the other.

Congress currently is considering—and may not resolve for many months—whether active employees will receive an average 1.9 percent raise in January or whether salaries will be frozen. Meanwhile, the count toward the retiree COLA continues to build. It stands at 2.6 percent and if trends continue could be significantly higher by the time the final count is announced in October. The boost will be paid in January without further action by Congress needed.

The determination of the COLA for retirees and of the pay raise for active employees are separate issues and have no direct relationship to each other. Part of the confusion arises because some active employees refer to their raises as COLAs, while some retirees refer to their COLAs as raises.

COLAs for retirees are set automatically according to the change in the average consumer price index from one third calendar quarter to the next. The only exception is that some COLAs have been delayed or denied for budgetary reasons—although not for many years.

More on Federal Cost of Living Adjustments at ask.FEDweek.com

In contrast, raises for active employees are determined in the annual federal budget process. A 1990 pay law created a formula for setting raises that included an element linked to the employment cost index, a measure of changes in labor markets, not of inflation. However, that formula never has been followed as initially designed. As a practical matter the raise is one of many spending issues on the budgetary table each year.