Federal Retirees to Receive a 1.7 Percent COLA for 2015

Federal retirees will receive a 1.7 percent cost-of-living adjustment in 2015, according to new figures released Wednesday morning.

The Consumer Price Index for Urban Wage Earners and Clerical Workers went up 0.1 percent in September, the Bureau of Labor Statistics announced. That statistic was the last piece of the puzzle needed to calculate the cost-of-living bump.

The 2015 adjustment will be slightly higher than this year’s boost of 1.5 percent, and equal to the 2013 increase. The COLA applies not only to federal retirees, but also to Social Security recipients at large.

While retirees will likely be happy to receive a bump, the announcement is a reminder that the method of calculating the COLA is “out of sync with the reality faced by millions of federal annuitants, Social Security recipients and military retirees,” said the National Active and Retired Federal Employees Association, in a statement.

Retirees “spend more than twice as much on medical care than the population measured by the current CPI-W” used in the COLA formula, NARFE said. The group recommended switching to the consumer price index for elderly consumers (CPI-E), and asked lawmakers and President Obama to consider that change while drawing up the fiscal 2016 budget.

Obama did not recommend any changes to the COLA formula as part of the fiscal 2015 budget. The previous year, he had suggested moving to what is known as the “chained CPI,” a change opposed by retiree groups because it would result in a lower annual adjustment.

The annual COLA increase is based on the percentage increase in the average CPI-W for the third quarter of the current year over the average CPI-W for the third quarter of the last year in which a COLA became effective.

If the percentage increase is less than 2 percent, then retirees under the Federal Employees Retirement System receive the full COLA (and the same amount as Civil Service Retirement System retirees). If the change is 2 percent to 3 percent, FERS retirees receive 2 percent. And if the increase is 3 percent or higher, FERS retirees receive 1 percentage point less than the full increase.

The American Federation of Government Employees noted that 2015 will be the third consecutive year the COLA has been less than 2 percent. “While any increase is better than no increase, the fact of the matter is that for millions of seniors, retirees and federal employees, these annual increases will be gone before most even receive them,” AFGE President J. David Cox Sr. said in a statement.

Employees still working for the federal government do not receive a COLA; they are slated to receive a 1 percent pay raise in 2015. 

(Image via ArTono / Shutterstock.com)