Issue Briefs

Following are portions of a recent Congressional Research Service report on how cost of living adjustments are calculated for federal retirement benefits and a history of those increases since the first automatic inflation adjustments for those benefits began in 1965.


Cost-of-living adjustments (COLAs) for the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) are based on the rate of inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). COLAs for both CSRS and FERS are determined by the average monthly CPI-W during the third quarter (July to September) of the current calendar year and the third quarter of the base year, which is the last previous year in which a COLA was applied. The “effective date” for COLAs is December, but they first appear in the benefits issued during the following January.

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All CSRS retirees and survivors receive COLAs. Under FERS, however, nondisabled retirees under the age of 62 do not receive COLAs. Survivors and disabled retirees are eligible for COLAs under FERS regardless of age. CSRS pays a COLA that is equal to the percentage change in the CPI-W during the measurement period, but COLAs under FERS are limited if the rate of inflation is greater than 2.0%. If the rate of inflation during the measurement period is between 2.0% and 3.0%, the COLA under FERS is 2.0%. If inflation is greater than 3.0%, then the COLA for FERS benefits is equal to the CPI-W minus one percentage point.

Congress passed the first law requiring automatic COLAs for federal civil service retirement benefits in 1962, and it has adjusted either the formula by which they are calculated or the date on which they take effect more than ten times since then.

If consumer prices as measured by the CPI-W do not increase from the third quarter of the base year to the third quarter of the current calendar year, there is no COLA for annuities paid under CSRS or FERS. For example, from the third quarter of 2014 to the third quarter of 2015, the CPI-W fell by 0.4%. Therefore, no COLA was paid under either CSRS or FERS beginning January 2016.

From the third quarter of 2018 (the current base year) to the third quarter of 2019, the CPI-W increased by 1.6%. Therefore, paid out beginning January 2020, the CSRS COLA and the FERS COLA are both 1.6%.

COLA Formulas and Amounts
‘Only federal employees hired before 1984 participate in the Civil Service Retirement System (CSRS). The CSRS is closed to new entrants and will expire with the death of the last CSRS annuitant sometime around the year 2075. Civilian federal employees who were hired in 1984 or later participate in the Federal Employees Retirement System (FERS), as do employees who voluntarily switched from CSRS to FERS during “open seasons” that were held in 1987 and 1998. The FERS program began operating on January 1, 1987.

Cost-of-living adjustments (COLAs) for CSRS annuities are based on the average monthly percentage change in the CPI-W in the third quarter (July to September) of the current calendar year compared with the third quarter of the base year, which is the year in which the last COLA was applied. The base year for determining the COLA effective in December 2019 (paid out in 2020) is 2018. Adjustments are effective on the first day of the month preceding the month in which they are first paid.

COLAs for benefits paid under FERS also are based on the percentage change in the CPI-W from third quarter to third quarter, but payment of COLAs under FERS is limited according to the eligibility category of the beneficiary and the rate of inflation. COLAs are not paid to nondisabled FERS retirees as long as they are under the age of 62. COLAs are paid to survivors of FERS retirees and disabled FERS retirees of any age after the first year of disability.

All COLAs paid under FERS are limited if the rate of inflation exceeds 2.0%, according to the following formula:

Increase in CPI-W               Increase (COLA) in FERS Benefits
Under 2.0%                          Same as CPI-W increase
2.0% to 3.0%                        2.0%
More than 3.0%                   Increase in CPI-W minus 1 percentage point

From the third quarter of 2018 (the current base year) to the third quarter of 2019, the CPI-W increased by 1.6%. Therefore, paid out beginning January 2020, the CSRS COLA and the FERS COLA are both 1.6%.

COLAs in Civil Service Retirement Benefits

First value is the CSRS benefit increase, second value is the FERS benefit increase, followed by the CPI Change During COLA Measurement Period:

Effective Date | CSRS | FERS | CPI
December 1965 6.1% — 4.6%
January 1967 3.9 — 3.9
May 1968 3.9 — 3.9
March 1969 3.9 — 3.9
November 1969 5.0 — 4.0
August 1970 5.6 — 4.6
June 1971 4.5 — 3.5
July 1972 4.8 — 3.8
July 1973 6.1 — 5.1
January 1974 5.5 — 4.5
July 1974 6.3 — 5.3
January 1975 7.3 — 6.3
August 1975 5.1 — 4.1
March 1976 5.4 — 4.4
March 1977 4.8 — 4.8
September 1977 4.3 — 4.3
March 1978 2.4 — 2.4
September 1978 4.9 — 4.9
March 1979 3.9 — 3.9
September 1979 6.9 — 6.9
March 1980 6.0 — 6.0
September 1980 7.7 — 7.7
March 1981 4.4 — 4.4
March 1982 8.7 — 8.7
April 1983 3.9 — 3.9
December 1984 3.5 — 3.5
December 1985 0.0 — 3.1
December 1986 1.3 — 1.3
December 1987 4.2 — 4.2
December 1988 4.0 3.0 4.0
December 1989 4.7 3.7 4.7
December 1990 5.4 4.4 5.4
December 1991 3.7 2.7 3.7
December 1992 3.0 2.0 3.0
March 1994 2.6 2.0 2.6
March 1995 2.8 2.0 2.8
March 1996 2.6 2.0 2.6
December 1996 2.9 2.0 2.9
December 1997 2.1 2.0 2.1
December 1998 1.3 1.3 1.3
December 1999 2.4 2.0 2.4
December 2000 3.5 2.5 3.5
December 2001 2.6 2.0 2.6
December 2002 1.4 1.4 1.4
December 2003 2.1 2.0 2.1
December 2004 2.7 2.0 2.7
December 2005 4.1 3.1 4.1
December 2006 3.3 2.3 3.3
December 2007 2.3 2.0 2.3
December 2008 5.8 4.8 5.8
December 2009 0.0 0.0 -2.1
December 2010 0.0 0.0 -0.6
December 2011 3.6 2.6 3.6
December 2012 1.7 1.7 1.7
December 2013 1.5 1.5 1.5
December 2014 1.7 1.7 1.7
December 2015 0.0 0.0 -0.4
December 2016 0.3 0.3 0.3
December 2017 2.0 2.0 2.0
December 2018 2.8 2.0 2.8
December 2019 1.6 1.6 1.6

Source: The Congressional Research Service.

Notes: Includes pensions for Members of Congress. P.L. 87-793 (enacted in 1962) was the first law that provided for automatic adjustments in civil service retirement and disability benefits based on certain changes in the Consumer Price Index; however, December 1965 was the first month in which an automatic adjustment was effective.

*Benefit increases are actually paid the following month.

Read more on Federal Cost of Living Adjustments at ask.FEDweek.com