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Senator Alex Padilla (D-CA) introduced legislation last week that would standardize cost-of-living adjustments (COLA) to all federal retirees in both the the Civil Service Retirement System (CSRS) and the Federal Employee Retirement System (FERS).
Under current law, CSRS COLAs are calculated based on the annual change in the third quarter consumer price index for workers, which is the same formula for Social Security retirement benefits. However, for FERS retireees, the COLA is adjusted as follows:
SEE ALSO: How Federal Retiree COLAs Are Calculated
In October, the Social Security Administration announced a 3.2 percent COLA increase for 2024. While federal employees who retired under CSRS will receive the full 3.2 percent adjustment, retirees under FERS will receive a 2.2 percent increase.
If passed, the Equal COLA Act (S 3194) would end the disparity between the two federal retirement systems and ensure all federal retirees receive full COLAs on their annuities.
“Federal retirees who have worked in service to our country should receive the full adjustment in benefits each year that is consistent with national economic trends,” said Padilla. “The Equal COLA Act will ensure the nearly 800,000 federal retirees living on fixed incomes receive the full benefits they deserve to keep up with the cost of living.”
Civilian federal employees who were hired in 1984 or later participate in FERS, as do employees who have voluntarily switched from the CSRS, which was only available to those hired before 1984.
The COLA for CSRS annuities is based on the rate of inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in the third quarter of the current calendar year compared with the third quarter of the prior year.
While the annual COLA for FERS annuities is also based on the percentage change in the CPI-W, they are limited if the rate of inflation exceeds 2 percent.
The Equal COLA Act is endorsed by the American Federation of Government Employees (AFGE), the National Active and Retired Employees (NARFE), and the National Treasury Employees Union (NTEU).
The full text of the bill is available here.