Retiree/Social Security COLAs Next Target?

Wednesday - 6/8/2011, 4:00am EDT

If inflation holds steady or goes up this summer, federal, military and Social Security retirees (that is one in every six Americans) will get a cost of living adjustment in January. It would be their first COLA in two years.

Currently the retirees, whose last COLA of 5.8 percent was in 2009, are on target to get an automatic increase of at least 2.9 percent next year. But two things could block, diminish or delay any catchup-with-inflation COLA.

A 2012 COLA, if any, would be based on the level of the Consumer Price Index-W in July, August and September of this year. Because living costs actually dropped from 2008 to 2009, and because retirees didn't get a raise in 2010 or 2011 the countdown clock is different. Here's how the National Active and Retired Federal Employees explains it:

  • "Whether there will be an automatic COLA for 2012 depends on whether the average CPI-W for the third quarter (July, August, and September) of 2011 is higher than the highest previous third quarter average, which is the third quarter average from 2008. (Prices declined from 2008 to 2009, and while they rose from 2009 to 2010, they did not return to the 2008 level). If the CPI-W for 2011 is higher than the CPI-W for 2008, that would indicate an increase in the cost of living from what it was in 2008, which determined the previous COLA increase to fixed retirement payments." For more details, click here.

Bottom line, if the CPI remains at its current level or goes up, retirees will be due a raise in 2012. Period. Unless...

Somebody in Congress, with a political death wish, proposes freezing benefits for another year. With a Congress where some pols are living out of their offices or tweeting mug shots of their undies to constituents, all things are possible! To some, going after federal retirees might be attractive. And it has been done before.

In the 1990s Congress and the White House delayed retiree COLAs for three months. That produced multi-billion dollar savings.

A long-time lobbyist who tracks legislation relating to the federal family said she hadn't seen or heard any plan to freeze or delay the COLA but, she added, that given what's on the table now "nothing would surprise me." Another legislative expert said he hadn't heard of any plan to tamper with the COLA but he said "everything that has been thought before is being thunk again" by politicians who believe the way to cut spending is to cut federal/retiree pay and benefits.

So like the lookout on the Titanic, don't panic but stay loose!

What's Next/Executive Viewpoint: Carol Bonosaro, president of the Senior Executive Association is our guest today (10 a.m.) on our Your Turn radio program. She'll talk about how career executives are getting on with their political bosses, what happens when Cabinet officers start to leave, and what's in the works for feds.

Retirement Backlog: Have a lot of money saved up before you retire! Many recent retirees say it has (or is) taking months before their first full annuity payment is received. Today at 10:30 a.m. on Your Turn, Federal Times senior writer Steve Losey will give us an update on how OPM is clearing that logjam, and talk about a new Partnership for Public Service report on succession planning.

That's 10 a.m. today on your computer here or on regular radio in the DC area at WFED 1500 AM.

To reach me: mcausey@federalnewsradio.com


Nearly Useless Factoid
by Suzanne Kubota

"Are restaurants which get good reviews more likely to raise their prices? That's the question I tried to answer in my latest Gastronomics column," writes Felix Salmon, the finance blogger at Reuters. "And I think the answer is no." Probably. Maybe. Could be. That's why this is a NUF!


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