Pay raise, maybe. Pay cut, probably!

How can you get a pay raise and take a pay cut at the same time? Feds may be about to find out.

Summer 2012 will be anything but a slow news time for federal and postal workers and for retired and about-to-retire civil servants. At issue are how much (if any) of an inflation-catchup federal retirees will get in January, how much (if any) the 2013 federal pay raise will be and how much take-home pay will be cut if workers are forced to pay more for their future pensions. Here’s what’s at play:

  • The rise or fall in the rate of inflation this month — and in August and September — will determine how much the cost-of-living adjustment will be in January 2013 for federal-military and Social Security retirees. For many years, retirees grew accustomed to regular COLAs to help them keep pace with inflation as measured by the Consumer Price Index.

    But low inflation, including months when living costs actually dropped (deflation), left retirees without any COLAs in both 2009 and 2010. The retirees finally got a COLA of 3.6 percent this year. And they are in line for — but not guaranteed — a raise of about 1.51 percent in 2013. The final amount of the 2013 COLA will be determined by the increase in the CPI-W (consumer price index) from the third quarter of this year ( July, August, September) over the CPI-W level for the third quarter of 2011.

  • There is no linkage between federal pay raises and COLAs for retirees. Raises are political decisions made by the President and Congress. The White House proposed and imposed a two year pay freeze ( 2011 and 2012). House Republicans are now pushing for an extension of that pay freeze although the White House had budgeted for a modest 0.5 percent increase. The official amount of the 2013 federal pay raise (if any) won’t be known for some time.
  • Even if there is a pay raise, it could be more than offset by higher 2013 health insurance premiums and plans from both the Obama administration and Congress to make you pay more for your CSRS or FERS retirement benefit. The White House has proposed increasing your share by an additional 1.2 percent. Some congressional plans call for the hike to be as much as 5 percent.

Congress is about to set a record for number of days not worked this year. And with a tough election coming up members are going to be home stumping for votes a lot between now the early November. Some people think they may prevent them from doing anything — good or bad — for feds.


But lots of insiders say that you are likely to wind up paying more for your pensions and the only issue is whether it will be the amount proposed by the President or the tougher level being pushed by some in Congress.


By Jack Moore

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