2019 to Have Largest COLA Increase in 7 Years

October 11, 2018 9:31 AM , Updated October 20, 2018 1:11 PM
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Shopping cart pictured in the background behind three vertical stacks of coins depicting the annual COLA/cost of living for federal retirees and Social Security recipients


In 2012, the annual COLA increase was 3.6%. It has not come close to that again until the COLA that will be received by Social Security recipients and many federal retirees starting in January 2019. The COLA for 2019 is 2.8% according to the official announcement released by the Social Security Administration this morning.

This figure is based on the results from the October inflation data and calculating the data using the complex COLA calculation formula.

It represents the biggest increase in seven years. The higher benefits will start on January 1st.

Annual increases in Social Security and retirement annuities for many federal employees are determined each year based on changes in a component of the consumer price index. This component is called the CPI-W. There was a 2% cost-of-living adjustment in 2018 and an 0.3% adjustment in 2017. These annual increases are meant to keep up with inflation.

Who Receives a COLA?

First, for those former federal employees who are under the Federal Employees Retirement System (FERS) or FERS Special benefits employees, you may receive a different amount than other employees.

Under FERS or for FERS Special benefits, if the increase in the Consumer Price Index (CPI) is 2 percent or less, the Cost-of-Living Adjustment (COLA) is equal to the CPI increase. If the CPI increase is more than 2 percent but no more than 3 percent, the Cost-of-Living Adjustment is 2 percent. If the 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.

If the CPI is: Then the COLA is:
<= 2% COLA = CPI increase
> 2% and <= 3% COLA = 2%
> 3% COLA = CPI – 1%

Federal retirees under the Civil Service Retirement System (CSRS) receive the full COLA. The COLA increase percentage is applied to their monthly benefit amount before any deductions, and 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.

If you are planning on retiring late in the year, you will not get the full COLA increase in 2019. 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.

When is the COLA Paid?

OPM says this about when to expect to see a COLA increase in your annuity payment:

Cost-of-Living Adjustments are effective each December first. The adjustment appears in your payment on the first business day of January, which is when your benefit for December is paid. 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.

© 2020 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. Follow Ralph on Twitter: @RalphSmith47