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Shows & Panels
'Unchained CPI Melody' bums some
Tuesday - 5/28/2013, 2:00am EDT
The proposal, if it becomes law, would reduce the size of future cost-of-living adjustments for federal, military and Social Security retirees. It would use a new yardstick (known as the chained CPI) to measure price increases and determine the size of future adjustments for retirees. People would still get January COLAs to keep pace with inflation. But those increases, using the chained CPI system, would be smaller than under the current system. Smaller by about 0.3 percent each year, according to some experts.
That amount — if accurate — isn't much. But over time it could mean considerably smaller annuities for retirees than they could expect under the current system. So how big a deal is it, and who would it hurt the most?
Most federal retirees are under the old Civil Service Retirement System. Most current federal workers are under the Federal Employees Retirement System. FERS replaced CSRS in the mid-1980s. Most of the people who will retire over the next five years will be FERS.
FERS was designed like the best private-sector retirement plans. A three-legged stool where the employer ( Uncle Sam) offered a reduced lifetime pension, Social Security coverage and a more generous 401(k) option, to encourage employees to save for their own retirement.
Suffice to say many CSRS employees say they wish they'd had the FERS option. Many FERS employees say the CSRS plan is more generous. The grass is always greener...
But who would be the biggest losers if the chained CPI becomes the defining number for COLAs? Can you say FERS?
FERS employees (when they retired) would be hit with a double-whammy. In the first place, they start out with a smaller lifetime government annuity than their CSRS counterparts. Secondly, FERS employees are under a diet-COLA system. That means that in many cases FERS employees get a COLA that is one percentage point lower than their CSRS counterparts. So if the raise for CSRS workers were 4.3 percent, FERS retirees would get 3.3 percent.
The controversy over the chained CPI prompted this email from the wife of a recent FERS retiree. She writes:
"Long time reader here, but I may have missed a few columns recently.Thanks. And the answer is yes. The chained COLA reduction in future adjustments would apply to all retirees, both FERS, CSRS and CSRS Offset.
"As the wife of a new retiree who was covered for his whole career by FERS, I have a question that I have not seen addressed anywhere. Are they proposing to apply the chained CPI to FERS retirees who are already receiving less than the inflation index by design? That's a really painful double whammy. Thank you for your fun and informative column." — Wendy V.
NEARLY USELESS FACTOID
Compiled by Jack Moore
The FBI spent two years investigating the 1963 classic rock song "Louie Louie" by the Kingsmen because of supposedly obscene lyrics. "The lyrics are so filthy that I cannot enclose them in this letter," a high school principal wrote to the FBI. Even after spending two years investigating the song, including playing it at various speeds to see if it contained hidden messages, the FBI never came to a clear conclusion whether the song was, in fact, obscene.
(Source: Smithsonian Magazine)
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