Why is My 2022 COLA Less Than I Was Expecting?

My FERS annuity with the 2022 COLA is increasing less than 4.9% in January. Why is that?

Q: I’m trying to figure out why my FERS Annuity with the 2022 COLA is increasing less than 4.9% in January 2022. I calculated my new payment to be $3,578 (last year’s payment) x 1.049 = $3,753.32. But, my annuity statement that I just got for January says it will be $3,635. That’s $118 less than what I was expecting.

The only thing I can think of is that I get a smaller increase because I only received an annuity from September through December 2021. I retired at the end of July. I’m really confused. Do you know how this works?

A: The retirement program for federal employees is very complex.

The quick answer is “yes” your annual cost of living adjustment (COLA) increase for 2022 will be less than the full amount if you were not retired for the entire 12 months. You will receive 1/12th of the increase for each month you were retired in 2021. 

For the COLA that will be applicable in January 2023, you will receive the full amount due to employees who retired under FERS. That amount varies depending on the amount of inflation as reported by the Bureau of Labor Statistics.

Here is a quick summary of a complex system from one of my recent articles. Note the sentences that are in bold type.

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.

For complete details, see the article How to Calculate Your 2022 COLA.

Congratulations on your retirement!

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