Who Gets a COLA and Who Doesn't?

By on October 19, 2004 in Current Events, Retirement with 0 Comments

Do you qualify for a cost of living increase (COLA)?

If you are a former federal employee who retired under the Civil Service Retirement System (CSRS), you will get an increase of 2.7% in your annuity next year, beginning in January 2005.

Federal retirees who are in the FERS system and receive Social Security payments will also see an increase of 2.7% in their Social Security payments.

The reason is the increase in the Consumer Price Index (CPI) is up by 2.7%. The amount is determined by the Department of Labor and it measures the amount of inflation in the American economy.

So what does this have to do with active federal employees? It does not directly impact you. The amount of your raise will be determined at a later date. It is likely to be 3.5% but it is possible it could be less.

The reason is that active duty employees do not get a Cost of Living Adjustment (COLA) as retirees do. In recent years, federal employees have received more than retirees because of this distinction.

President Bush has proposed a 1.5 percent increase for federal employees (not retirees). Congress is likely to raise this amount to 3.5 percent but, as happened last year, if and when it is approved, you may not see the money until later in the year.

The result is the active duty federal employees generally get a bigger increase than retirees. It isn’t always that way and active duty feds certainly don’t always get an increase in their checks in January because of the budget process and politics.

Don’t spend the money yet though. Your health insurance premiums will also be going up.

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.