Diet COLA Likely for Retirees

In last week’s column, I talked about the possibility that a fiscal cliff deal could include switching to a less generous formula for calculating cost-of-living adjustments for retirees. This week, that became a probability.

President Obama and House Speaker John Boehner, R-Ohio, are still trying to agree on a mutually satisfactory combination of tax revenue increases and spending cuts to avoid the looming fiscal cliff. As of 4:04 p.m. on Dec. 19, it remained to be seen whether a) there will be a deal before the New Year, or b) if there is a deal, what it will include and how specific (or not) said deal will be. But both sides reportedly agree on one thing, as I reported Monday: Retirees are going to see lower increases in their future COLAs.

A switch to the chained CPI, as it’s known inside the Beltway, over time would result in lower COLAs for retirees, including federal and military retirees. The change also would affect veterans’ benefits and disability insurance benefits. COLAs currently are determined using a formula that takes into account increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, but some experts argue that a chained CPI, which takes into account modifications in purchasing habits as prices change, provides a clearer understanding of inflation.

Moving to the chained CPI would be “unfair” and would “reduce significantly earned retirement benefits,” according to a Dec. 17 letter from the National Active and Retired Federal Employees Association to members of Congress.

So, what about other possible provisions that could reduce federal pay and benefits? Republicans continue to push initiatives that would extend the civilian pay freeze, shrink the federal workforce and ask feds to contribute more to their pensions (Obama also supports having feds pay more for their retirement benefits). But it’s becoming less likely that any fiscal cliff deal crafted between now and Jan. 1, 2013, will include any of those things. Feds likely will dodge a bullet simply because the clock ran out. For now.

Stay tuned.

Phased Retirement

Keep your eyes peeled for proposed rules on phased retirement. The Office of Personnel Management told Federal News Radio that draft regulations that will enable eligible feds to work part time while they also draw retirement benefits will be out in early 2013.

More federal employees retire in January than at any other time during the year. More than 21,000 feds retired in January 2012, according to OPM, and there’s no doubt there will be thousands of feds who decide to leave government next month. In July, President Obama signed into law legislation allowing federal employees to ease into retirement by working part time and collecting a partial annuity. According to the report from Federal News Radio, OPM Director John Berry said in a recent speech that he wanted to expedite the rule-making on the law to help federal employees navigate the process at time when so many of them plan to retire.

Feds need accurate information on the benefit, apparently. Eighty-six percent of federal supervisors plan to retire within the next 15 years, according to a survey from Government Business Council, Government Executive’s research arm. But 50 percent of respondents said they don’t know if their agency offers partial retirement, the survey found. For more information on the phased retirement benefit, check out this excellent piece from Tammy Flanagan, our Retirement Planning columnist.

’Twas the Night Before Christmas

Still no word on whether Obama will give feds a holiday on Dec. 24. But the public petition on the White House’s We the People website calling for a holiday received enough signatures to warrant a response from the administration. On average, the administration’s response time is more than a month at this point, so that’s not helpful. And now there’s another petition on the site calling for feds to work on Christmas Eve. It asks Obama to “permit us to use our annual leave on Dec. 24 to be with family and friends, being thankful to have a job.” Predictably, this latest petition is a lot less popular than the original. I’m looking forward to Dec. 25.

Happy holidays!