Inflation has risen significantly over the past few years. This produced some of the highest cost of living adjustments (COLAs) that federal retirees have seen in many years.
The 2022 COLA was 5.9% which was the highest in 40 years at the time it was announced. The 2023 COLA put that one to shame, however. It wound up being 8.7% which was the largest since 1981. As inflation has continued to creep up, it led to the 2024 COLA that was just announced coming in at 3.2%.
The question now for federal retirees is when they can expect to see the increase in their monthly annuity payments.
The COLA is announced in October and takes effect in December each year. The increased annuity payments begin in January in any given year, so federal retirees who are eligible for getting the COLA increase can expect to see the higher annuity payments at the first of the year.
Do All Federal Retirees Get the Full 2024 COLA?
It is important to know how the COLA works and who gets it. Spoiler alert: recent federal retirees are going to be disappointed.
To receive the full COLA, you must have been receiving annuity payments for a full year. Federal retirees who have only been getting annuity payments for less than a year will get a prorated COLA. Prorated amounts are 1/12th for each month that a federal retiree has been receiving an annuity payment.
For the 2024 COLA, what this means is that you must have been receiving annuity payments since December 2022 at the latest in order to get the full 2024 COLA added to your annuity payments.
The video below offers more detail on how the prorated COLA works.
How is the COLA Calculated for the Federal Employees Retirement System (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.
For the 2024 COLA, this means that federal retirees under FERS will get a 2.2% COLA added to their annuity payments, assuming they are eligible to receive the full 2024 COLA.
The following caveats also apply to the FERS COLA calculation:
- As noted previously, a retiree or survivor annuitant must have been in receipt of an annuity payment for a full year to get the full COLA.
- 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 have 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.
How is the COLA Calculated for the Civil Service Retirement System (CSRS)?
Federal retirees under CSRS get the full COLA unlike under FERS. 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.”
If you need help with your personal situation, check with your agency’s human resources office and/or a financial advisor who specializes in working with federal employees for assistance. The Office of Personnel Management’s retirement services can also provide assistance with retirement-related matters.
The 2024 COLA and 2024 Federal Pay Raise Aren’t the Same
One last point to remember. The 2024 COLA for federal retirees and the 2024 federal pay raise are not one and the same. The COLA only applies to retired federal employees; the pay raise applies to current federal employees.
The term “COLA” is often used interchangeably to describe the two but they are in fact different as is the process of how they are determined. For more details, see What’s the Difference in the Annual COLA and Pay Raise?.
As of the latest step in the process, the 2024 federal pay raise is on track to be 5.2%, but the final figure will be announced in December. FedSmith will provide extensive coverage of the pay raise as new information becomes available.
