Federal retirees' cost-of-living increases set

Retired federal employees will receive a 1.4 percent cost-of-living increase in their pensions this winter.

The cost-of-living adjustment (COLA) will be the same for retirees covered by the Federal Employees Retirement System and the Civil Service Retirement System. The COLA is also 1.4 percent for Social Security beneficiaries and for many veterans who receive benefits through the Veterans Affairs Department.

Federal retirees will see the increases in the checks they receive in January 2003, which cover the month of December.

The formula for determining COLAs, which is set in law, is based on the change in the Consumer Price Index for urban wage earners from the third quarter of one year to the third quarter of the next year. If the change is less than 2 percent, then FERS enrollees get the same COLA as CSRS. When it's more than 2 percent, FERS enrollees get a smaller COLA. Last year, for example, CSRS retirees received a 2.6 percent COLA, while FERS retirees received 2 percent.

Retirees who left the government during 2002 do not receive the full COLA. Their increases are pro-rated based on the month they retired. Someone who retired in June 2002, for example, would receive half of the COLA.

This year's COLA is the lowest since 1998, when it was 1.3 percent. Current federal employees do not receive the COLA in their pay checks. Instead, they will receive raises in January based on labor costs across the country. The amount of those raises has yet to be set.

President Bush originally called for a 2.6 percent average raise for federal workers, but members of Congress have pushed a 4.1 percent increase. Congress and the Bush administration are expected to work out the raise amount for active federal workers this fall.