Millions of Retirees Will See a 3.3 % Benefit Hike in New Year
Tuesday, December 5, 2006
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The new year will bring an increase of 3.3 percent in the federal retirement or disability payments of approximately one out of every six Americans. Among those receiving this cost-of-living adjustment (COLA) will be most federal civil service, foreign service, and military retirees and survivors, as well as all social security recipients. The latest increase mirrors the percentage change in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) between the 2005 and 2006 third quarter months of July, August and September.
The COLA is an inflation- based adjustment in the earned federally-administered entitlement benefits of persons no longer in the work force because of retirement or disability. COLAs should not be confused with, nor compared to, the annual pay raises appropriated for current federal employees. The retirement COLA becomes effective December 1st and is reflected in the first annuity payment received in January of the new year. In January 2006, most annuitants received a 4.1 percent COLA..
On October 18th, the Labor Department’s Bureau of Labor Statistics announced the September 2006 CPI-W was 198.4, a drop of 0.6 percent from the August index of 199.6. Adding the July index of 199.2 to those of August and September resulted in a third quarter average index of 199.1, an increase of 3.3 percent over last year’s third quarter average index of 192.7.
Former civilian employees retired under the Federal Employees Retirement System (FERS), who are not yet age 62, do not receive a COLA. However, FERS disability retirees and survivor annuitants, as well as retirees age 62 or older, will see a 2.3 percent COLA reflected in their annuity checks in January, along with the 3.3 percent adjustment in their Social Security checks.
This latest COLA will raise the average CSRS annuity from $2452 to $2532. The 2.2 percent hike for the average FERS annuitant who is eligible to receive a COLAs will increase the defined benefit portion of their retirement income from $896 to $916 per month. Remember that the amounts cited are “averages” and therefore will differ considerably among the affected population of annuitants.
Federal retirees whose annuities began in 2006 will receive lesser annuity adjustments to cover only the months of the year during which they were actually on the retirement rolls. The retirement law prorates this first COLA and provides one-twelfth of the year’s COLA for each month from January through November that the annuitant was actually on the retirement rolls. However, FERS retirees who have been on the retirement rolls for at least one year prior to becoming age 62 are not subjected to the pro-rating and will receive the full 2.3 percent FERS adjustment in their January payments.
Below are the lesser percentage amounts which will apply to recent retirees or their survivors according to the month in which the retired worker’s annuity began:
| Annuity Began |
COLA Percentage |
CSRS |
FERS |
| 12/05 or Earlier |
full COLA |
3.3% |
2.3% |
| January 2006 |
11/12th |
3.1% |
2.1% |
| February 2006 |
10/12th |
2.8% |
1.9% |
| March 2006 | 9/12th | 2.5% | 1.7% |
| April 2006 | 8/12th | 2.2% | 1.5% |
| May 2006 | 7/12th | 2.0% | 1.3% |
| June 2006 | 6/12th | 1.7% | 1.1% |
| July 2006 | 5/12th | 1.4% | 1.0% |
| August 2006 | 4/12th | 1.1% | 0.8% |
| September 2006 | 3/12th | 0.8% | 0.6% |
| October 2006 | 2/12th | 0.6% | 0.4% |
| November 2006 | 1/12th | 0.3% | 0.2% |
FECA Benefits on Different Schedule
Annual COLAs in benefits paid under provisions of the Federal Employees Compensation Act (FECA), to former workers forced out of the labor market by work-related injuries or illnesses, are computed and paid on a different formula and time schedule than the other federal retirement systems. Instead, their COLAs reflect the percentage change in the CPI-W during each calendar year. As of September 2006, the index of 198.4 is 3.1 percent higher than the December 2005 index of 192.5.
The effective date for the inflation adjustments in FECA checks is March l, with the COLA reflected in April benefit payments.
© 2010 by the National Active and Retired Federal Employees Association
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