Know Your COLA
The cost of living adjustment (COLA) is based on the increase in the Consumer Price Index (CPI-W) and impacts the benefits payments for federal retirees and Social Security recipients.
The 2022 COLA will be the biggest one in 40 years, one potential upside to the rising 2021 inflation rate. The 5.9% COLA for eligible federal retirees will hit their checks beginning in January 2022.
According to the Office of Personnel Management (OPM), the COLA takes effect in December each year to ensure it will be paid to federal retirees starting in January:
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.
If you are a federal retiree, what will your COLA be? Here is how the COLA is calculated for retired federal employees under both FERS and CSRS:
Calculating the COLA for FERS
- For Federal Employees Retirement System (FERS) or FERS Special benefits, if the increase in the 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.
- To get the full COLA, a retiree or survivor annuitant must have been in receipt of payment for a full year.
- If a person has not received the payment for a full year, the increase is prorated under both plans. Prorated accounts receive one-twelfth of the increase for each month they received benefits. Cost-of-Living Adjustments were first prorated in April 1982.
- Adjustments to benefits for children are never prorated.
- 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.
Calculating the COLA for CSRS Employees
For Civil Service Retirement System (CSRS) benefits, the percentage increase is applied to your monthly benefit amount before any deductions are withheld. The payment is rounded down to the next whole dollar.
Of course, there are some exceptions to these calculations. As noted by the Office of Personnel Management (OPM): “A benefit will not be increased if it would cause the annuitant to receive payments in excess of any cap amount specified by law.”
For more information, be sure to see these articles:
- 2022 COLA: 5.9%; Largest in 40 Years
- Your 2022 Federal Pay Raise, COLA, and Why 2021 Inflation Is Important
Know Your 2022 FEHB Plan Premiums
The share of FEHB premiums paid by federal employees and retirees will increase by an average of 3.8% in 2022.
With the cost of health insurance rising steadily every year, it is important for federal retirees on a fixed income to manage their healthcare costs as much as possible. One way to do this is to study the FEHB plan options and choose the right plan that will meet their family’s needs for the coming year during open season. Do you really need a family plan if it’s just you and your spouse? Did you know there are some plans that cost more for the self + 1 option than for the family option? These are examples of why studying the various FEHB plan options is important.
These articles offer more information about 2022 FEHB plans:
- How Much Will Federal Employees’ FEHB Premiums Increase in 2022?
- Significant Changes Coming for Some FEHB Plans in 2022
- Which 2022 FEHB Plans Cost More for Self Plus One Than Family?
- How to Save Money this 2022 FEHB Open Season
Know Your 2022 FEHB Plans
As noted above, choosing the right FEHB plan is important to balance cost with benefits to get health insurance that meets your needs.
The Office of Personnel Management website has a lot of resources to help with researching FEHB plans and choosing the best one for your situation.
In addition to a full listing of all of the 2022 FEHB plan premiums, the OPM website has an FEHB plan comparison tool that lets you compare available plans by zip code.
These articles also have more information on choosing an FEHB plan:
- How To Pick Your FEHB Health Insurance
- Should I Take Medicare or Just Keep FEHB?
- How to Save Money this 2022 FEHB Open Season
- Consider Joining High-Deductible Health Plans this FEHB Open Season