Biggest retiree COLA in years on the way
It impacts more people than any other benefit rise in the nation.
The COLA takes effect in December but will first show up in benefit payments in January 2019. It will be the largest COLA since 2012.
Because of the way the law is written a majority of retired federal workers, those under the old Civil Service Retirement System, will get the full 2.8 percent COLA. People who retired under the newer Federal Employees Retirement System get so-called diet COLAs, meaning their January adjustment will be limited to 2 percent.
The increase, not to be confused with a pay raise, is based on the increase in living costs from the current quarter from July to September 2018, over the third quarter of 2017, according to the Consumer Price Index-W. It is one of a number of yardsticks the Bureau of Labor Statistics uses to measure inflation, sometimes deflation, in the nation.
Politicians who think the federal retirement program is too generous advocate using the so-called chained CPI, which over time would dramatically reduce annual COLAs. The National Active and Retired Federal Employees is pushing for the CPI-E (as in elderly), which they say better measures the impact on older people whose medical costs are typically much higher and account for a larger chunk of their budget. In its statement on the 2019 COLA, NARFE said:
"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 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."
Posted by: sarah_oz@yahoo.com
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