Reg Jones Expert's View

The official announcement about cost-of-living adjustments will soon be out. So it’s time to give you a refresher course on who will get what.

If you are a Social Security beneficiary, you’ll automatically receive the full amount of any COLA in your January annuity payment. That’s regardless of how long you’ve been receiving benefits, even if you don’t start until December of this year.

If you are a federal retiree, the amount you’ll receive depends of several things, among them, the retirement system you are in. While CSRS retirees receive a COLA regardless of their age, most FERS retirees can only receive a COLA after they reach age 62. The exceptions to that rule are law enforcement officers, firefighters and air traffic controllers, military reserve technicians who lost their military status due to medical reasons, disability retirees, and survivors.

Further, as a FERS retiree, the COLA you’ll receive will sometimes be less than the amount your CSRS counterparts get. When a COLA is less than 2 percent (as it’s looking like the upcoming one will be), CSRS and FERS retirees receive the same amount. However, if it’s between 2 and 3 percent, FERS retirees will receive only 2 percent. And when it’s 3 percent or higher, FERS retirees receive the COLA minus 1 percentage point. ‘Taint equal treatment, but it’s the law.

Regardless of whether you are covered by CSRS or FERS, there’s one more wrinkle to deal with. For both retirement systems, any payable COLAs are prorated based on the number of months you have been on the annuity roll, if less than 12.

For example, if you retired during November 2013 (or up to December 3, if you were covered by CSRS), you were on the annuity roll in December 2013 and are eligible for the full COLA in January 2015 that will be payable for your retirement system (under FERS, assuming you are eligible at all under the rules above).

If you retired during December 2013 (or up to January 3, 2014 if you were covered by CSRS), you were on the annuity roll in January and will be eligible for only 11/12 of the COLA. For each month following, the COLA is reduced by an additional 1/12th.

COLAs have been on a rocky road since they became automatic in 1962. In recent years, they have ranged between zero in 2010 and 2011 to a high of 3.6 percent (CSRS) and 2.6 percent (FERS) in 2012. For both systems it’s been 1.7 percent in 2013 and 1.5 percent in 2014. What will 2015 bring? We’ll know on October 22.