Retirement & Financial Planning Report

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Six Democratic senators have joined to introduce a bill (S-4221) to bring cost-of-living adjustments for those retired under the FERS system up to the level paid to CSRS system retirees.

The measure adds a boost to the effort which started last year with introduction of a similar bill (HR-304) in the House. During that time the bill has attracted 32 cosponsors—about a tenth of the House—all but two of them Democrats. However, it has not had even a hearing.

The measures would set the FERS COLA amount at the number indicated by the cost of living index calculation used to set the CSRS COLA (which also is used for Social Security benefits). Under current law, that is the case only if the figure is 2 percent or below; if between 2 and 3 percent, the FERS COLA is capped at 2 percent, and if 3.1 percent or above, the FERS COLA is 1 percentage point less.

That was the case for the January 2022 COLA, which was 5.9 percent under CSRS but 4.9 percent under FERS, and likely will be the case again unless the law is changed, for the January 2023 COLA which is on track to be even larger.

“It is essential that the federal government attract and retain an effective workforce and, once their service is complete, ensure retirees receive the dignified retirement that they deserve,” said main sponsor Sen. Alex Padilla, D-Calif. “Unfortunately, in 1986, Congress created a two-tiered system that now prevents nearly 800,000 retired federal employees from receiving a full cost-of-living adjustment when consumer prices increase more than 2 percent from year to year.”

“I hope my colleagues will join me in support of this bill to ensure that retired federal employees no longer pay the price of a misguided law and that their benefits fully keep pace with the cost of living,” Padilla said in a statement.

The bills however would not address another difference between the two systems: while CSRS pays full COLAs regardless of the retiree’s age, those retired under FERS are not eligible for them until after turning age 62, unless disabled or retired under a mandatory retirement requirement.

Although the FERS system covers more than 95 percent of current federal employees, the majority of current retirees, about 55 percent, retired under the CSRS system.

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