Legislation has been introduced in the House that could increase cost of living adjustments (COLA) for some retired federal employees.
The Equal COLA Act (H.R. 304) would compute COLAs for federal retirees under both the Federal Employees Retirement System (FERS) and Civil Service Retirement System (CSRS) the same way.
Under current law, FERS retirees sometimes wind up receiving a smaller annual COLA increase than CSRS retirees due to how the law calculates COLAs under the two retirement systems.
- For FERS or FERS Special benefits, if the increase in the Consumer Price Index (CPI) is 2 percent or less, the 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.
The table below illustrates this:
|If the CPI is:||Then the COLA is:|
|<= 2%||COLA = CPI increase|
|> 2% and <= 3%||COLA = 2%|
|> 3%||COLA = CPI – 1%|
Retired federal employees under CSRS get the full COLA.
The bill would ensure that federal retirees under both retirement systems always get the same COLA increase.
Connolly has introduced the legislation in the past. In 2019, for instance, he introduced the bill on the heels of the largest COLA increase federal retirees had received in 7 years.
The COLA that year was 2.8%. It also happened to illustrate the reasoning behind the bill. Per the formula above, CSRS retirees got the full 2.8%, but FERS retirees got a 2% COLA.
The original reasoning as to why the FERS system offered a (potentially) smaller COLA is because employees under that system are also eligible for Social Security in retirement, and they can get a matching contribution from the government when they participate in the Thrift Savings Plan.
This article from The Balance Careers offers more detail on the two retirement systems and explains the rationale for the smaller FERS annuity. It states:
Because FERS has three components, these components each offer retirees less money. The annuity payment for CSRS retirees is designed to be their only income, whereas FERS retirees have the annuity, the thrift savings plan, and Social Security benefits.