Although federal pay raises have been frozen for three years, retirees continue to get inflation catch-ups in the form of cost-of-living adjustments. But that is no longer a sure thing.
Although health insurance premiums are almost certain to go up again next year, there is no guarantee that millions of federal, military and Social Security retirees will get a cost-of-living adjustment in January.
COLAs for this huge group — some sources say it is one in every six Americans — are linked to the rise in inflation as measured by the Consumer Price Index-W. The Bureau of Labor Statistics (BLS) says that in April the cost of living registered a one month decrease of 0.2 percent. That’s not much, and a lot of it is the result of lower gasoline prices that are expected to climb this month because of the upcoming Memorial Day long weekend (even longer for some feds who will be furloughed this Friday).
There are still five months to go in the COLA countdown before the actual amount of the January 2014 COLA (if there is one) is known. The raise is based on the rise in the CPI-W from the current year’s third quarter (July, August, September) over the third quarter for the previous year. Complicated, right? Designed by Congress? Right again!
Bottom line, if living costs don’t rise or don’t rise very much over the next five months, retirees will be looking at a bare-bones (if any) inflation adjustment in January.
Meantime, there is a serious move afoot — endorsed by the Obama administration — to change the yardstick the BLS uses to determine increases for federal, military and Social Security retirees. Under the plan, the government would switch to the so-called “chained CPI.” Backers of the plan say it better reflects the actual increase in inflation. Opponents say it is being proposed because it would produce slightly smaller COLAs each year, saving the government — and costing retirees — billions of dollars over time.
Both agree that the savings-to-taxpayers — cost to federal, military and Social Security retirees — would be about $38 billion (with a B) over the next decade. That is $38 billion in COLAs the retirees would not get.
Before this year, it was a dark cloud on the horizon. Now it is here. The president proposed it in his budget. Republicans in the House love the idea. It would be one of the biggest money-savers to pass Congress in years.
The National Active and Retired Federal Employees has made blocking the change to the chained CPI one of its top legislative objectives. NARFE said this is a “clear and present danger” and one that it and other groups representing the federal family have most feared over the years.
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