Federal Retirees to See Largest Cost-of-Living Adjustment in Decades in 2022

Federal retirees will see the largest annual increase in benefits payments in 40 years in 2022, as the Social Security Administration announced Wednesday that the annual Social Security cost-of-living adjustment will be 5.9%. The news prompted renewed calls for lawmakers to provide parity across the federal workforce’s retirement systems.

Social Security cost-of-living increases are calculated based on the annual change in the third quarter consumer price index for workers. The federal government’s Civil Service Retirement System also calculates enrollees’ annual annuity increases on that basis, meaning retirees who are enrolled in CSRS will see a 5.9% increase to their annuity payments next year.

But former feds who are enrolled in the newer Federal Employees Retirement System, which came into being along with the inception of the defined contribution Thrift Savings Plan, will only receive a 4.9% increase to their annuities.

Each year, if CSRS sees an increase of under 2%, FERS retirees receive the full COLA. If the adjustment is between 2% and 3%, FERS enrollees only receive a 2% increase. And if the CSRS COLA is 3% or more, as it is next year, FERS retirees receive 1 percentage point less.

The 5.9% figure marks the highest annual increase in federal retirees’ annuities since 1982, when the cost of living adjustment was 8.7%. But the lack of parity between FERS and CSRS retirees has renewed calls from federal employee groups to change the law to ensure all retirees see the same annuity increase.

“Coming after years of low or no adjustments, this 5.9% COLA provides a buffer for seniors against recent inflation,” said Ken Thomas, national president of the National Active and Retired Federal Employees Association. “But for a significant number of federal retirees, the news is not quite as good: the January 2022 COLA will be 4.9% for those who retired under the Federal Employees Retirement System . . . This inequitable policy, enacted in the 1980s with the creation of FERS, fails to fully protect the earned value of FERS annuities, which decrease in value year after year—exactly what COLAs are intended to prevent.”

In January, Rep. Gerry Connolly, D-Va., introduced the Equal COLA Act (H.R. 304), which would simply tie both CSRS and FERS cost-of-living adjustments to the CPI-W. Before his election, President Biden vowed he would push for cost-of-living adjustments to be based on the more generous consumer price index for the elderly, although he has not acted on that promise since assuming office.