No pay raise but maybe a COLA?

With one month left in the cost-of-living countdown, federal and military retirees and people who get Social Security payments are due an inflation-catchup raise of 1.38 percent in January.

The tentative 2013 COLA of 1.38 percent isn’t much. On the other hand, it is 1.38 percent more than active-duty federal workers will get as they enter their third year of a pay freeze imposed both by the White House and Congress.

Some people, either by mistake or design, still refer to pay raises as COLAs. Or call COLAs a pay raise. But they are very different critters.

Pay raises, when and if they ever return, are based on several things. They are supposed to reflect wage changes in the private sector. But that system — FEPCA which stands for Federal Employees Pay Comparability Act — set up by a Democratic Congress and a Republican President, has been ignored since the law went into effect with the Clinton administration. He, as well as Presidents Bush and Obama, failed to recommend, endorse or implement the full raises called for by the FEPCA formula. So, in those years when feds got pay raises (prior to 2011) the increase was a combination of various things including private pay data but more often based on political and budgetary considerations.


COLAs are totally different. Retirees don’t get pay raises (because they aren’t working). But they do get statutory catch-ups with inflation based on government data. There is no easy way to explain it. Bottom line, federal-military-Social Security retirees get a raise each January if the cost of living (as measured by one of the Consumer Price Index components) for the months of July, August and September, rises above the level of that CPI for the previous year’s third quarter. If you want to get down in the weeds for a more accurate description consider what David Snell, director of federal benefits services, for NARFE says:

With the second of three months of relevant CPI reported …it appears likely there will be a modest COLA to federal retirement annuities in January 2013.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) figure for August 2012 was 227.056. The average CPI-W for the third-quarter of 2011 was 223.233. This is the reference figure for determining the 2013 COLA.

To trigger a COLA for 2013, the average CPI-W for the months of July, August and September of 2012 needs to rise above the 2011 average for those same months (223.233). The August CPI-W figure is 1.7 percent higher than that figure, and the average of the July and August CPI-W figures is 1.38 percent higher than that 2011 figure, which would result in a 1.4 percent COLA. However, the September figure will need to average with July and August to determine the actual COLA.

The exact amount of any January increase will depend on the CPI for this month, September. That data will be released Oct. 16th.


By Jack Moore

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