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Shows & Panels
Pay raise or retiree COLA: Timing is everything!
Thursday - 3/1/2012, 2:00am EST
Federal pay has been frozen for two years. Workers may or may not get the 0.5 percent pay increase the President has proposed for January 2013.
Federal retirees got a 3.6 percent cost-of-living adjustment last month. But it was the first retiree COLA in two years. It it is too early to tell if retirees will get another COLA in 2013 and, if so, for how much.
The fact that oil prices are climbing (and may go much higher thanks to tensions in the Middle East) has some long-time workers thinking maybe its time to retire. This is especially true for feds in the 11 agencies that are currently offering buyouts and early-outs. If inflation spikes this summer and fall, it could easily produce a 2013 COLA larger than any pay raise feds may get. So what to do?
Based on talks with some long-time feds, many say they are leaning toward retirement. Retirement applications last year jumped 24 percent — an indication that the "tsunami" first predicted in the late 1990s is on the way, if not here already. Retirement applications at OPM are back-logged because of the surge in retirees and the U.S. Postal Service's buyout program.
Some retirement-eligible feds have indicated they will wait until later in the year. They want to see the pace of inflation (which will determine the size of any January COLA) and whether their agencies offer buyouts. But waiting has its price tag.
Every year, some retirement-bound workers say they will wait until the end of the year, then leave for the COLA. But it doesn't work like that. COLA's are prorated. In order to get the full amount of any January 2013 COLA, (assuming there is one) people would have had to retire in December 2011 to get it. Each month they delay retiring reduces their first COLA by one twelfth. So if the COLA was 3.6 percent, as it was this January, somebody retiring this month under the CSRS system would get 3.0 percent (FERS would get 2.2 percent). Those retiring in June would get 1.8 percent under CSRS and 1.3 percent under FERS. Those who waited until November (assuming the COLA was 3.6 percent) would get 0.3 percent under CSRS and 0.2 percent under FERS.
Why the difference between the CSRS and FERS amounts? Thank Congress.
When Congress created FERS, to replace CSRS, it put new FERS hires on a diet-COLA system. The formula works like this, OPM says: If the inflation-triggered COLA is 2 percent or less, the COLA for both FERS and CSRS is the same. But if the COLA ranges between 2 and 3 percent, FERS retirees get a diet-COLA of 2 percent. If the raise is 3 percent or more CSRS retirees get the full amount while FERS retirees get one percent less.
So whether you are hoping for a pay raise or betting on a bigger, better COLA, timing is everything.
NEARLY USELESS FACTOID
By Jack Moore
The vampire bat has a horrible reputation, what with nocturnally sucking the blood from poor little animals. But actually vampire bats are "deeply altruistic," according to an article in The New Yorker (by way of Wired). Without fresh blood, the bats starve quickly, so successful hunters help out their ineffectual bat colleagues by regurgitating their meals.
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