2014 Federal Retiree COLA 1.5 % (CSRS and FERS)
The 1.5 percent cost-of-living adjustment (COLA) will begin with benefits that more than 57 million Social Security beneficiaries receive in January 2014. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2013.
The COLA increase is one of the smallest since automatic adjustments were adopted in 1975. The announcement was delayed for two weeks due to the partial government shutdown.
COLAs for the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) are based on the percentage increase in the CPI-W for the most recent third quarter (July-September) compared to the most recent quarter upon which an increase was based. If consumer prices as measured by the CPI-W do not increase from the third quarter of one year to the third quarter of the next year, there is no COLA for annuities paid under CSRS or FERS.
Under both CSRS and FERS, the annual COLA increase, if any, is made for annuities effective on December 1, appearing in the payment made the first business day of January. Also, if an individual retires during the year immediately preceding a COLA, the first COLA is prorated.
However, there are a couple of differences regarding COLAs under CSRS and FERS.
CSRS annuitants receive a COLA that is equal to the percentage change in the CPI-W. However, under FERS, the basic retirement annuity is fully indexed if inflation is under 2% per year and partially indexed if inflation exceeds 2%:
- If the CPI-W increases by up to 2%, then the FERS annuity increases by the same percentage.
- If the CPI-W increases by 2% to 3%, the FERS annuity increases by 2%.
- If the CPI-W increases by more than 3%, the FERS annuity increases by the rise in the CPI-W minus one percentage point.
All CSRS retirees and survivors receive COLAs. However, under FERS, COLAs are applied only to annuities of retirees who are age 62 or older, individuals who retired under specified special retirement provisions (such as law enforcement officers and fire fighters), individuals who retired by reason of disability, and to survivor annuitants. Other FERS retirees receive no COLAs while they are under age 62.
The federal retiree COLA adjustment of annuities is discussed in Chapter 2 of the Office of Personnel Management's CSRS and FERS Handbook, found at http://www.opm.gov/retire/pubs/handbook/C002.pdf.