COLAs: Up, Yes. Down, Never!

If you appreciate the benefits of a low rate of inflation you are gonna love the teeny, weenie COLA currently due federal retirees in January. With nearly five and a half months yet to go in the COLA countdown, retired federal, and military folks, people who get Social Security and their survivors are due a 2007 increase of.... (drumroll)... are you ready?

Point eight (0.8) percent. If you are math-challenged that's less than one percentage point.

That amount, tiny as it is, is better than it could have been. There were two months so far in the COLA countdown when the cost of living actually dropped. Fortunately for the folks whose retirement benefits are indexed to inflation, pensions are not reduced when living costs drop.

Although many people confuse a pay raise and a COLA, they are very different things. Pay raises are determined by the President and Congress based on private sector wage gains and political and budgetary considerations. Pay raises have nothing to do with inflation.

Federal retirement benefits, however, have everything to do with living costs. Under the system set by law, the Labor Department comes up with the cost of living based on increases/decreases in the market-basket of goods that determine the Consumer Price Index. If living costs go up 5 percent, for example, feds under the old CSRS plan get the full amount. Those under the FERS retirement system (once they reach age 62) would get 4 percent.

If you get benefits from both CSRS and FERS (which about 30,000 retirees do) you get the full COLA on the CSRS portion of your annuity and the diet-COLA on the FERS portion, once you are 62 or older.

If living costs rise between now and September 30, the 2007 COLA will reflect that increase. Retirees will get a bigger raise. The good news is if living costs go down there is no provision for retirement benefits to be cut to reflect deflation.

Come Back, All Is Forgiven!

Older employees, both retired feds and retired private sector types, are looking good to Uncle Sam. In fact the Office of Personnel Management is seeking legislation that would let it rehire former feds while letting them keep their full annuity plus their government salary. A few agencies have the authority to do that now to lure back experts in languages and intelligence.

But in most cases, the reemployed annuitants have their civil service salaries reduced by the amount of their federal retirement benefit. Under the proposal, which has been made before, the reemployed annuitants' time in a second tour with the government would not count toward their retirement.

Reason for the proposal is two-fold: First to lure experts back into government, and secondly because young people aren't joining the federal service - except at the CIA, State and a few selected agencies - in large numbers. The average federal hire now about age 32.

To reach me: mcausey@federalnewsradio.com