From the third quarter of 2023 (current base year) to the third quarter of 2024, the CPI-W increased by 2.5%. Therefore, starting in January 2024, the CSRS COLA payable will be 2.5% and the FERS COLA will be 2.0%. Image: Rosie Apples/Shutterstock.com Posted by: FEDweek Staff
Below is the latest update to the Congressional Research Service’s periodic report on current policies for cost-of-living adjustments to federal retirement benefits and how those policies have changed over time.
The cost of living adjustment (COLA) for the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) is adjusted for inflation as measured by the Consumer Price Index (CPI) for urban wage earners and clerical workers. Based on. -W). COLA for both CSRS and FERS is determined by the change in average monthly CPI-W between the third quarter of the current calendar year (July to September) and the third quarter of the base year (last quarter of the previous year) . COLA has been applied. The COLA’s “effective date” is December, but will first appear on benefits issued in January of the following year.
All CSRS retirees and survivors receive a COLA. However, under FERS, non-disabled retirees under age 62 do not receive a COLA. Survivors and disabled retirees are eligible to receive COLA under FERS, regardless of age. CSRS pays a COLA equal to the percentage change in CPI-W during the measurement period, but COLA under FERS is limited if the inflation rate exceeds 2.0%. If the inflation rate during the measurement period is between 2.0% and 3.0%, the COLA under FERS is 2.0%. If the inflation rate is greater than 3.0%, the COLA for FERS benefits is equal to CPI-W minus 1 percentage point.
Congress passed the first law requiring an automatic COLA for federal public employee retirement benefits in 1962 and has adjusted the COLA formula and effective date more than a dozen times since then. If consumer prices, as measured by CPI-W, do not increase from the third quarter of the base year to the third quarter of the current calendar year, there is no COLA for pensions paid under CSRS or FERS. For example, from the third quarter of 2014 to the third quarter of 2015, the CPI W decreased by 0.4%. Therefore, no COLA was paid under CSRS or FERS after January 2016. From the third quarter of 2023 to the third quarter of 2024, the CPI-W increased by 2.5%. Therefore, starting in January 2025, the CSRS COLA will be 2.5% and the FERS COLA will be 2.0%.
COLA formulation and amount
Only federal employees hired before 1984 participate in the Civil Service Retirement System (CSRS). The CSRS is not accepting new participants and will expire on the death of the last CSRS pensioner around 2075. Federal civilian employees hired after 1984 participate in the Federal Employees Retirement System (FERS). Employees who voluntarily retire also participate in the Federal Employees Retirement System (FERS). Transition from CSRS to FERS during “open seasons” held in 1987 and 1998. The FERS program became operational on January 1, 1987.
The CSRS pension cost of living adjustment (COLA) is based on the average monthly increase in CPI-W for the third quarter (July through September) of the current calendar year compared to the third quarter of the base year. The year the COLA was last applied. If there is no increase, or if the percentage change in CPI-W between the two periods is negative (i.e., if it occurred in 2009, 2010, or 2015), then the COLA does not apply. The base year for determining the COLA effective December 2024 (payable in 2025) is 2023. Adjustments become effective on the 1st of the month prior to the month in which they are first paid.
COLA for benefits paid under FERS is also calculated based on the increase in CPI-W from quarter to quarter, but COLA payments under FERS are based on the beneficiary’s eligibility category and the rate of inflation. limited accordingly. 4 COLA COLA is paid to non-disabled FERS retirees as long as the disabled FERS retiree is under age 62. COLA is paid to survivors of FERS retirees and disabled FERS retirees at any age one year after becoming disabled. All COLAs paid under FERS will be limited according to the following formula if the inflation rate exceeds 2.0%:
Increase in CPI-W Increase in FERS benefits (COLA)
Less than 2.0% Same as CPI-W increase
2.0%～3.0% 2.0%
CPI-W increase of 3.0% or more – 1 percentage point
From the third quarter of 2023 (current base year) to the third quarter of 2024, the CPI-W increased by 2.5%. Therefore, starting in January 2024, the CSRS COLA payable will be 2.5% and the FERS COLA will be 2.0%.
PL 87-793 (enacted in 1962) provides for automatic adjustment of civil service retirement and disability benefits whenever the current year’s CPI exceeds the base year (year in which the last adjustment was made) CPI. It was the first law to do so. 3.0% or more. In 1965, this provision required a benefit adjustment if the CPI for a particular month was at least 3.0% higher than the month in which the last adjustment was made and remained at or above that level for three consecutive months. has been changed to.
PL 91-93 (enacted in 1969) added 1 percentage point to the COLA in addition to the percentage change in CPI to offset the reduction in benefits resulting from the time lag in the adjustment formula. (PL 91-179 was similar for COLAs paid to veterans.)
PL 94-440 (enacted October 1976) eliminated the 1 percentage point addition to the COLA. Additionally, the law would automatically adjust benefits semiannually based on changes in CPI from June to December (effective March 1 of the following year) and from December to June (effective September 1 of the following year). stipulated.
PL 97-35 (Omnibus Budget Reconciliation Act of 1981) replaced the semiannual COLA with an annual COLA payable in March of the following year based on December-to-December changes in the CPI.
PL 97-253 (Omnibus Budget Reconciliation Act of 1982) delayed implementation of the COLA for fiscal years 1983, 1984, and 1985 by one month. The 1983 COLA took effect on April 1, not March 1. The 1984 COLA was scheduled for May 1st, and the 1985 COLA was scheduled for June 1st. The law also mandated that non-disabled retirees under age 62 receive 50% of the expected increase. CPI plus the full amount of the difference between these forecasts and the actual CPI increase, if greater. The law specified that the expected rate of increase in the CPI would be 6.6% in 1983, 7.2% in 1984, and 6.6% in 1985. This provision was repealed by the Supplemental Appropriations Act passed in August 1984. After January 1985, the COLA is the full amount for all retirees.
PL 97-253 limited the COLA in certain cases. Under this restriction, a COLA cannot increase your pension by the greater of the GS-15 federal employee’s highest salary or the employee’s final salary (or the average salary of the high 3, if higher). I couldn’t. Increases by the average annual rate of change (compounded) in the General Schedule pay rate for the period beginning on the retiree’s pension start date and ending on the effective date of the adjustment.
PL 98-270 (Omnibus Budget Reconciliation Act of 1983, enacted April 1984) postponed the COLA scheduled for May 1984 until December (with payment in January 1985). All COLAs were then effective in December, payable in January, and based on the change in average monthly CPI-W from Q3 to Q3. This formula and schedule are the same as those used to calculate COLAs for Social Security programs as required by PL 98-21 (Social Security Amendments of 1983).
PL 98-369 (Deficit Reduction Act of 1984) provides that civilian and military retirement COLAs are paid by check issued on the first business day of the month following the effective month. (COLAs effective in December will be paid with checks issued in January.)
PL 99-177 (Balanced Budget and Emergency Deficit Control Act of 1981 (Gramm-Rudman-Hollings)) provides that all public employees for fiscal year 1986 and all subsequent years in which the specified deficit reduction goals for that year are not met. Retirement COLA suspended.
PL 99-509 (Omnibus Budget Reconciliation Act of 1986) reinstated the COLA for programs that were subject to suspension from FY 1987 through FY 1991 under PL 99-177.
PL 100-119 (Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987) permanently removes programs that are subject to COLA suspension under PL 99-177 from the suspension required by that law. Exempted.
PL 103-66 (Omnibus Budget Reconciliation Act of 1993) postponed the effective date of the COLA for fiscal years 1994 through 1996 from December to March. The CPI measurement period was not changed.
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