Legislation to standardize the yearly rise in annuity payments that retired federal employees receive across retirement systems was proposed by a group of five Democratic senators in May.
Sen. Alex Padilla, a Democrat from California, introduced the Equal COLA Act (S. 4221), which would guarantee that federal retirees in the Federal Employee Retirement System and the Civil Service Retirement System both receive the same annual percentage cost of living rise each year.
The CSRS now determines the cost-of-living adjustments based on the yearly change in the third quarter worker consumer price index under regulations that date back to 1986. However, FERS COLAs are calculated by extrapolating from that adjustment; therefore, retirees under FERS will get the full COLA if the CSRS sees a rise of less than 2%. FERS participants will only get a 2% raise if the adjustment is between 2% and 3%. Moreover, FERS retirees would get that increase, minus 1%, if the CSRS COLA is 3% or higher.
For example, as inflation increased this year, CSRS retirees earned a 5.9% increase on their defined benefit annuity payments. However, the rise for FERS members was only 4.9%. That was the situation for the January 2022 COLA, which was 5.9% under the CSRS but 4.9% under the FERS, and it probably will be the case once again unless the legislation is altered, for the January 2023 COLA, which is expected to be even greater.
The bills would not, however, address another distinction between the two systems: whereas FERS retirees are not eligible for COLAs until after turning 62 unless they are disabled or have retired in accordance with a mandatory retirement requirement, CSRS retirees receive full COLAs regardless of age.
Although more than 95% of federal employees now employed are covered by the FERS system, most of those currently retired, or roughly 55%, did so through the CSRS system.
Ken Thomas, national president of the National Active and Retired Federal Employees Association, claims that when consumer prices increase by more than 2%, retirees under the Federal Employee Retirement System (FERS) may not always get the full cost-of-living adjustment (COLA). This is a result of a fundamentally unfair policy. That is not the same as how COLAs are determined for both Social Security beneficiaries and Civil Service Retirement System pensioners (CSRS).
By giving full COLAs to FERS retirees and establishing parity between FERS COLAs and CSRS and Social Security COLAs, the Equal COLA Act would enable federal retirees to keep the value of what they have legitimately earned during years in public service.
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