As 2019 progresses, some who are recipients of a cost-of-living-adjustment (COLA) are wondering about inflation and its potential impact on their income in January 2020. The COLA impacts federal employee annuities for 2020 and the amount of the COLA is determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The CPI-W increased by 0.22 percent in May 2019. So, while we do not know what the 2020 COLA will be, the trend is that there will be a COLA increase in January, perhaps at 1.5% – 2%, based on economic events over the next several months.
In October 2018, COLA recipients learned there was a 2.8 percent COLA for Civil Service Retirement System (CSRS) annuities and Social Security benefits in 2019. There was a 2 percent COLA for Federal Employees Retirement System (FERS) retirees.
Current Status of the 2020 COLA
We will not know the amount of a COLA for 2020 until mid-October 2019.
For those who like to follow the trend, the CPI-W figure for May 2019 was 1.43 percent higher than the average CPI-W for the third quarter of 2018. The CPI-W for the third quarter of 2018 will be used to determine the
Who Receives a COLA?
Former federal employees who are under the Federal Employees Retirement System (FERS) or FERS Special benefits employees will receive a different amount than other retirees.
First, if you are under FERS or eligible 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
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 a 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.
COLAs and a Federal Employee Raise
Anticipating a common question that we often receive, there is no direct relationship between any 2020 COLA and a federal employee pay increase. The COLA is determined automatically based on the formula outlined above.
If there is a pay raise for federal employees under the General Schedule, this will be determined by the political process depending on decisions made by the president and the Congress.