The cost of living adjustment (COLA) for most federal retirees in 2020 will be 1.6% according to the latest inflation data from the Bureau of Labor Statistics.
The 2020 COLA may look small after last year’s increase, however, 2019 saw the largest increase in the COLA in 7 years, so it would be unusual to have another increase of that size for two years in a row.
When is the COLA Paid?
The Office of Personnel Management 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.
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.
What About Current Federal Employees?
Note that a COLA only applies to retired federal employees. Current federal employees get a pay raise based on the actions of Congress and the president whereas the COLA is determined by an automatic formula as described above. For details, see How is the Annual COLA Different from an Annual Pay Raise?.
