2019 CSRS and Social Security COLA Increase Largest In 7 Years
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.
The 2019 Social Security and federal retiree COLA will begin in January 2019. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2018. (Note: some people receive both Social Security and SSI benefits). 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).
How is the difference between the CSRS COLA and FERS COLA determined?
If the CSRS COLA is…
Then the FERS COLA is…
Up to 2.0%
2.0% to 3.0%
Same as CSRS COLA
CSRS COLA minus 1.0%
- Federal Employee Pay Raises vs. Retiree COLAs
- Guide to Federal Retiree COLAs: What Are They and How Are They Calculated?
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.
NARFE Comments on 2019 Federal Retiree COLA
Richard Thissen, president of the National Active and Retired Federal Employees Association (NARFE), commented today on the 2019 federal retiree COLA:
“CSRS retirees and Social Security recipients will be pleased to see their benefits increase by 2.8 percent in 2019, the largest increase since 2012. Unfortunately, hundreds of thousands of FERS retirees will be wondering why they are only receiving a 2 percent COLA when the relevant measure of consumer prices increased by 2.8 percent. That’s due to the bargain struck in Congress in the 1980s when FERS was created, which limits COLAs to 2 percent when consumer prices increase between 2 and 3 percent. But that was the wrong policy then, as it is now. It prevents FERS annuities from keeping up with inflation, which is the whole point of a COLA. It is past time for Congress to ensure FERS retirees receive a full COLA each year.
“Retirees already receive COLAs that fail to represent how seniors spend their money. COLAs are currently based on the CPI-W, which measures how urban wage earners and clerical workers under the age of 62 spend their money. Yet, since 1982, the Bureau of Labor Statistics (BLS) has been calculating a consumer price index measuring prices experienced by those 62 years of age or older, called the CPI-E. The CPI-E has shown that prices increase for seniors by 0.2 percent more, on average, than for the population measured by the CPI-W. In other words, seniors’ COLAs aren’t keeping up with their rising cost of living, which is what they are designed to do. That’s why I’m also calling on Congress to pass H.R. 1251, the CPI-E Act, which would require the BLS to use the CPI-E to determine COLAs for Social Security recipients, CSRS retirees and FERS retirees alike.
“Without adequate COLAs, FERS retirees, as well as CSRS retirees and Social Security recipients, will see inflation erode the value of their retirement income year after year. Yet that is exactly what they are supposed to prevent. Federal retirees are not asking to be made better off than they were last year. We just want to maintain the value of what we have rightfully earned through careers of service.”
Other 2019 Social Security Adjustments
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $132,900 from $128,400.
Social Security and SSI beneficiaries are normally notified by mail in early December about their new benefit amount. This year, for the first time, most people who receive Social Security payments will be able to view their COLA notice online through their my Social Security account. People may create or access their “my Social Security” account online at www.socialsecurity.gov/myaccount.
2019 Medicare Changes
Information about Medicare changes for 2019, 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 2019 are announced. Final 2019 benefit amounts will be communicated to beneficiaries in December.
September 13, 2018
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.9 percent over the last 12 months to an index level of 246.336 (1982-84=100). For the month of August, the index increased 0.1 percent prior to seasonal adjustment.
The third quarter of 2017 (July, August, September) will be used as the base quarter to determine the 2019 federal retiree (CSRS and FERS) and Social Security COLAs. The August 2018 CPI-W figure was 2.8 percent higher than the average CPI-W for the third quarter of 2017 (which was 239.668). 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 2018, the trend toward a 2019 COLA is:
(246.336 – 239.668) / 239.668 x 100 = 2.78% (adjusted to the nearest 1/10 of 1 percent = 2.8%)
The Consumer Price Index for September 2018 is scheduled to be released on Thursday, October 11, 2018.
Trend Toward 2019 COLA Adjustment (FERS / CSRS / Social Security)
NARFE: “Reinforces Need for a New COLA Formula”
October 13, 2017
“Following two years of no and low cost-of-living adjustments (COLAs), today’s announcement was eagerly awaited by millions of Americans who rely on the increase to keep up with the rising prices for food, housing, gas and medical care,” said Richard Thissen, president of the National Active and Retired Federal Employees Association (NARFE). “Unfortunately, the 2.0 percent COLA provides only partial relief and serves as a reminder that our method for calculating the increasing cost of goods and services is out of sync with the reality faced by federal annuitants, Social Security recipients and military retirees. Our nation’s seniors spend more than twice as much on medical care than the population measured by the current formula to calculate COLAs, the CPI-W. Congress must act to implement a new formula that adequately measures costs incurred by seniors.”
“The COLA is outpaced by the average 6.1 percent increase in health care premiums for federal retirees in 2018,” Thissen continued. On top of this, Medicare premiums increased disproportionately for most federal annuitants during the last two years, and long-term care premiums sharply increased by 83 percent, on average. A new a cost-of-living formula that doesn’t force these Americans to take one step forward, then two steps back is long overdue.”
NARFE’s president also said: “Today’s COLA announcement highlights why Congress should require use of the CPI-E (Consumer Price Index for the elderly) as the measurement for setting COLAs. It is crystal clear that the current formula does not accurately reflect how seniors spend their limited annuities.”
Some members of Congress have proposed legislation that would would require Social Security programs and many federal retirement programs to use the Consumer Price Index for the Elderly, or CPI-E, to calculate cost of living adjustments and thus ensure seniors’ benefits are not diminished over time. The Bureau of Labor Statistics calculates the experimental CPI-E by using households whose reference person or spouse is 62 years of age or older. NARFE supports a switch to the CPI-E believing it would result in higher COLAs, and opposes a switch to the Chained CPI, which would result in lower COLAs.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $128,700 from $127,200. Of the estimated 175 million workers who will pay Social Security taxes in 2018, about 12 million will pay more because of the increase in the taxable maximum.