Reg Jones Expert's View

Here’s another entry in the false facts series. This one is about the common misunderstanding among retiring employees about when and in what amount annual cost-of-living adjustment will be added to their annuities.

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The first misunderstanding is that FERS retirees receive the same COLAs as CSRS retirees. Wrong. When the increase is 3 percent or more, you’ll receive 1 percent less than CSRS retirees. When it’s between 2 and 3 percent, you’ll receive 2 percent. Only when it’s 2 percent or less will you receive the same amount.

The second misunderstanding is that all FERS retirees are entitled to receive a COLA when they retire, as are CSRS retirees. Wrong again. Unless you are a special category employee, such as a law enforcement officers, firefighters or air traffic controllers, you won’t begin receiving it until you are age 62. This means that the amount of annuity you receive when you first retire will stay just where it was on the day you retired until you reach 62.

The third misunderstanding is that COLAs for CSRS employees (and eligible FERS employees) are payable in full as soon as they retire. Wrong once more. COLAs are payable proportional to the number of months you are on the annuity roll. For example, if you retired and were on the annuity roll in December 2012, you’d receive a full COLA in your January 2014 annuity payment. With each succeeding month you aren’t on the annuity roll, that COLA will be reduced by 1/12th.