2020 COLA Announced
The 2020 cost-of-living adjustment (COLA) will be 1.6 percent for Civil Service Retirement System (CSRS) annuities, Federal Employees Retirement System (FERS) annuities and Social Security benefits.
This is a lower federal retiree COLA than last year when CSRS annuitants received 2.8 percent and FERS annuitants received 2 percent. (See also: COLA history)
The Social Security Act ties the annual COLA to the increase in the Consumer Price Index (CPI-W) as determined by the Department of Labor’s Bureau of Labor Statistics (BLS).
When is the federal retiree COLA paid?
According to the Office of Personnel Management (OPM):
“Cost-of-Living Adjustments are effective each December first. The adjustment appears in your payment on the first business day of January, which is when your benefit for December is paid. 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 difference between the CSRS COLA and FERS COLA determined?
The following table summarizes the FERS COLA in relation to the CSRS COLA:
|
If the CSRS COLA is… |
Then the FERS COLA is… |
|
Up to 2.0% 2.0% to 3.0% Above 3.0% |
Same as CSRS COLA 2.0% CSRS COLA minus 1.0% |
How is a COLA calculated?
The Social Security Act specifies a formula for determining each COLA. According to the formula, COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics.
A COLA effective for December of the current year is equal to the percentage increase (if any) in the average CPI-W for the third quarter of the current year over the average for the third quarter of the last year in which a COLA became effective. If there is an increase, it must be rounded to the nearest tenth of one percent. If there is no increase, or if the rounded increase is zero, there is no COLA.
SEE ALSO:
- Federal Employee Pay Raises vs. Retiree COLAs
- Guide to Federal Retiree COLAs: What Are They and How Are They Calculated?
NARFE Urges Use of CPI-E to Calculate Federal Retiree COLA
In response to the 2020 cost-of-living adjustment (COLA) for federal retirement annuities and Social Security benefits announced today by the Bureau of Labor Statistics, National Active and Retired Federal Employees Association (NARFE) National President Ken Thomas issued the following statement:
“The 2020 COLA of 1.6 percent will do little, if anything, to help the millions of federal retirees who spent their working years serving the public. The same people face a 5.6 percent average increase next year to health care insurance premiums in the Federal Employees Health Benefits (FEHB) program, alone. Add to that the fact that retirees disproportionately incur greater medical costs than any other segment of the population. For years, NARFE has urged Congress to address this problem by passing legislation requiring the Bureau of Labor Statistic (BLS) to calculate COLAs based on the consumer price index for the elderly (CPI-E) instead of the consumer price index for workers (CPI-W). Looking beyond calculations, it’s imperative to remember that these are real people – not numbers on a sheet of paper – who are already financially struggling, and yet, year after year, they watch their retirement incomes fade away because Congress has done nothing.
“I urge Congress to pass legislation requiring COLAs for federal retirement annuities, Social Security recipients and veterans to be based on the more accurate CPI-E measurement. That’s not just common sense; it makes smart financial sense, too.”
2020 Medicare
Information about Medicare changes for 2020, when announced, will be available at www.medicare.gov. For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2020 are announced. Final 2020 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and my Social Security’s Message Center.
(For information on the 2019 COLA, click here.)
September 24, 2019
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 1.5 percent over the last 12 months to an index level of 250.112 (1982-84=100).
For the month of August, the index was unchanged prior to seasonal adjustment.
The third quarter of 2018 (July, August, September) will be used as the base quarter to determine the 2020 federal retiree (CSRS and FERS) and Social Security COLAs. The August 2019 CPI-W figure was 1.5 percent higher than the average CPI-W for the third quarter of 2018 (which was 246.352). Please see table below.
How was this calculated?
The amount of a COLA is determined by the percent change in the base quarter price index from the previous year to the year in which the COLA is to become effective (the final number is adjusted to nearest 1/10 of 1 percent).
For August 2019, the trend toward a 2020 COLA is:
(250.112 – 246.352) / 246.352 x 100 = 1.53 (adjusted to the nearest 1/10 of 1 percent = 1.5%)
Trend Toward 2020 COLA Adjustment (FERS / CSRS / Social Security)
2019 CSRS and Social Security COLA Increase Largest In 7 Years
October 11, 2018
The 2019 cost-of-living adjustment (COLA) to Civil Service Retirement System (CSRS) annuitants and Social Security benefits will be 2.8 percent. The 2019 COLA for those covered in the Federal Employees Retirement System (FERS) will be 2 percent. This is the largest COLA increase for CSRS annuitants and Social Security recipients since 2012.