Raise, COLA: No Formal Link, but Looking about the Same

President Trump’s message to Congress last week stating his intent to set a 1.9 percent federal employee raise on average in January if Congress remains silent regarding a raise through the year has spurred some federal retirees to ask what impact that has on their January COLA. The short answer is “none.”

An annual raise for current employees is supposed to be set during the congressional budget process, although in recent years Congress has taken advantage of the federal pay law’s language providing for a raise by default in the absence of a number specified in law. Trump’s message, like similar ones of his predecessors, repeats his original proposal of earlier this year and is essentially a defensive move: it prevents what would be a much larger default raise, above 26 percent, that the law otherwise would require. That number is based on the latest official estimate of the “pay gap” produced by the Federal Salary Council, using Labor Department figures on comparing federal vs. non-federal pay.

Trump further recommended dividing the raise into across-the-board and locality components, which likely would result in raises varying by locality from about 1.7 to about 2.1 percent.

COLAs for federal retirees (and survivor beneficiaries) are set automatically, based on the same inflation measure used to determine the adjustment to Social Security and several other benefit programs. Through ten months of that count, the figure stands at 1.5 percent. There have been projections that the number will jump in the last two months, in part due to an increase in fuel prices resulting from a slowdown in production by refineries in the areas hit by Hurricane Harvey. The final number is to be announced in late October and the COLA will be paid automatically except in the highly unlikely event that Congress and the White House intervene to override it.

Thus, the 2018 employee raise number and the retiree COLA number could end up being about the same, a common occurrence. But there is no formal linkage between the two, and in some years one has been significantly higher than the other.