The federal pay structure is complex, confusing, and the process of setting pay rates never seems to end.
It isn’t surprising that a number of readers are confused by the process. In recent days, readers have sent in questions about their pay for 2009. We certainly can’t answer some of the questions as predicting what Congress or a new president may do is based more on guessing than solid information. But some of the questions we can answer. Here are the answers and a couple of prognostications.
Who Gets A COLA Increase?
First, federal retirees get a cost of living adjustment that is commonly called a COLA. If you have not retired, still working as a federal employee and getting a regular pay check from Uncle Sam, you do not get a COLA. You will get a pay raise beginning in January.
The COLA increase is based on the rate of inflation as calculated by the Department of Labor. The increase is an automatic calculation based on the rate of inflation. It impacts Social Security recipients as well as federal employees. For 2009, the COLA figure is 5.8%. This is the largest increase in 25 years.
While the COLA calculation is straightforward, it gets more complex quickly because not every federal retiree will get the same increase.
First, for those former federal employees who are under the Federal Employees Retirement System (FERS) or FERS Special benefits employees, you will not be getting an increase of 5.8%. If the consumer price index (CPI) increase is more than 3 percent, the adjustment is 1 percent less than the CPI increase. The new amount is rounded down to the next whole dollar.
Second, to get the full COLA, without regard to whether you are in FERS or the CSRS system, you must have been getting paid as a retiree for a full year. Here is another way of making this point: If you are planning on retiring this month or in December, you will not get the full COLA increase. If you were not retired for the entire year, the increase is prorated. You will receive one-twelfth of the increase for each month in which you received retirement benefits.
Third, Federal Employees Retirement System (FERS) and FERS Special Cost-of-Living Adjustments are not provided until age 62, except for disability, survivor benefits, and other special provision retirements. FERS disability retirees get the adjustment, except when they are receiving a disability annuity based on 60 percent of their high-3 average salary. Also, under FERS, if you have a CSRS component, the component is subject to the CSRS COLA calculation.
For more information, check out the OPM website that addresses this topic.
Some readers have asked if FERS employees will get a special supplement this year. The rationale behind the question is that gas prices have increased, TSP values have decreased and health insurance premiums are going up next year. Ergo, FERS employees should get more money.
While we don’t know what Congress will do, my advice is don’t count on getting any more money. With a massive federal deficit, and a federal retirement plan and health benefits plan that is being touted as a model for every American, the chances of getting a special supplement to your FERS retirement benefit next year is almost non-existent.
What About Federal Employees? Don’t They Get a COLA Increase Too?
In a word, “no.” Federal employees get a pay raise. A pay raise is not the same as the COLA. In fact, for 2009, the pay raise for federal employees will be less than the amount of the full COLA increase for federal employees. The average federal pay raise next year will be 3.9%.
If it makes some readers feel better, keep in mind that a federal retiree will not be getting a bonus, a within-grade increase or a promotion–at least not from the federal government retirement program. While some active federal employees do not get these extra pay bumps either, many will and their pay increase will be considerably higher than the 3.9%.
Based on email we have received, there are several misconceptions about the federal pay system.
First, you do not get a COLA of 5.8% plus the pay raise if you are an active federal employee. Forget the 5.8% COLA; it does not apply to you.
Second, the 3.9% pay raise is an average. We have gotten comments from readers complaining that our projected pay rates for 2009 do not show a 3.9% increase for their city or town. An average means that some will get more than 3.9% and some will get less. The base pay rate increase for 2009 is less than 3.9%. The 3.9% average is reached by taking into account locality pay rates. This means that some federal employees in some areas will get less because they are not in a locality pay area.
To see a graphic display of how this works, read this article on the 2008 pay raise. Scroll to the tables near the end of the article. You will see how locality pay makes a difference in the amount of an employee’s raise. The final amount depends on the amount of the locality pay increase (if any) and the amount of the base pay increase.
Here are the definitions for the 2008 locality pay areas. Here is information on the 2009 locality pay areas. As you will see, there are no changes as the decision was made that Austin, Memphis, and Louisville should remain in the “rest of the U.S.” pay area definition. Some readers have commented that the locality pay areas as not fair. The person making the comment usually thinks that he or she should be getting more money because expenses in that person’s geographic area have increased more than in other areas. Perhaps that is true but you will need to get the agreement of the Federal Salary Council before there will be a change made in your area.
Some readers have asked if there will be significant changes to the federal pay system under a new president and with a new Congress. My guess is that there will be changes of some kind to the system during the next several years. Pay based on performance has been an elusive goal in the federal bureaucracy. The federal unions are strongly opposed to it and all indications are that Congress and the Obama administration will be responsive to complaints from unions. Don’t be surprised to see a move to eliminate pay for performance and, perhaps, some overall changes to the system as part of the process but it is unlikely to be in the forefront of new initiatives during the start of the new administration.
FedSmith has a small staff and we cannot answer individual queries that we receive from many readers. I hope that this column will answer the more frequent questions on your 2009 pay that we have received.