The situation is this: White-collar feds haven’t had a pay raise in two years. If you are one, you probably knew that.
Feds are paying 2012 prices for food, shelter and health insurance. But they are paying them with 2010 salary dollars. Some, thanks to step increases or promotions, have moved up the pay ladder. But many, if not most, are frozen in time. And the pay freeze will continue at least through March 2013 and probably for the rest of the year. Which would make it a three-year pay freeze.
President Barack Obama, who proposed the initial two-year freeze, recommended feds get a 0.5 percent raise next year, but only after Congress passes a complete budget. Federal unions will work to have that raise made retroactive, but it’s a long-shot at best.
For retired feds, it’s a different story. Congress and the White House don’t control their increases. The retiree COLAs (cost-of-living adjustments) are based on the rate of inflation as measured by the Labor Department’s Consumer Price Index.
Because of low inflation and periods of deflation (when living costs actually dropped), retirees didn’t get COLAs in 2007 and 2008. Then, they got a 5.8 percent increase in 2009 and a 3.6 percent increase this January, while federal pay was frozen.
Retirees are likely to get another COLA in January 2013. The exact amount is yet to be determined, but based on COLA-countdown data so far, it will be in the neighborhood of 1.38 percent — more if living costs for September went up, less if they went down. This is the current situation. We will have the final number, the amount of the January 2013 COLA, later this month.
Meantime, a number of workers have contacted us saying, because of the freeze and the grim outlook for 2013, they may retire to get the COLA. A good plan but for one flaw: It won’t work.
David Snell, director of retirement services for NARFE says the COLA countdown process is almost as complex as the mysteries of the Mayan calendar:
The calendar for COLAs is different than what everyone thinks of as normal. For the COLA to apply, the year begins Dec.1 of the previous year and ends Nov. 30 of the current year. COLAs are effective — unless Congress changes it — Dec. 1, so that the first payment reflecting the increase is the first payment in January. Since federal retiree COLAs are prorated, you earn 1/12 of the full COLA for every month you were receiving retirement benefits for the year prior to the effective date of the cola. Retirees whose annuities begin between Jan. 1, 2012 and Nov. 30, 2012, will receive a prorated COLA. Of course FERS retirees aren’t even eligible for a COLA until they reach age 62.
There are other financial factors in the stay vs. go equation. But if you are planning to retire now, or later this year, to get the COLA you have just about run out of time.
Phased retirement, postal buyouts, VA problems
We’ve got a whole lot of topics for today’s Your Turn radio show. Federal News Radio Executive Editor Jason Miller will join me to talk about a new leave-bank proposal, the status of phased retirements and an update on the feds-feed-feds program. Stephen Losey and Sean Reilly, senior writers with the Federal Times will discuss VA’s training conference problems, a new round of buyouts at the Postal Service and the latest sequestration memo.
Listen if you can (1500 AM or online), and if you have questions email them to me at email@example.com or call in during the show at (202) 465-3080. The show will be archived here.
IG report cites failed leadership in wasteful VA conference spending Two Veterans Affairs Department training conferences held last summer in Orlando, Fla., contained as much as $762,000 in wasteful spending and were plagued by poor planning and oversight, according to an inspector general report released Monday. In total, VA spent more than $6 million on the two conferences, the IG found.
USPS agrees to buyout plan with postal workers union The service will offer $15,000 incentives that will be paid out over two installments to retirement-eligible employees. USPS said it’s also offering the same $15,000 incentive to those employees who are not eligible to retire, but who decide to resign from the Postal Service.
Upward TSP trend continues through September For the second month in a row, performance in all 10 of the Thrift Savings Plan funds posted positive returns, with double-digit gains in many of the funds year- to-date. The biggest gains came in the C, S and I funds