2019 COLA? Yes but pay raise? Not likely

With three months left to go in the cost-of-living adjustment countdown clock, federal/military/Social Security retirees are looking at a January inflation-catch up of 2.7 percent. Maybe even more, if oil prices continue to rise driving up prices for many other goods?

Any increase in benefits for millions of American retirees would be a huge boost to communities from Mexico and the Philippines, to the Sun Belt and National Capital regions. It would impact where they live, buy food, pay taxes and spend hundreds on doctors or other services. By contrast, few if any private sector pension plans have provisions for keeping pace with inflation.

COLAs for this large group of retirees are based on the rise in inflation, as measured by the Consumer Price Index, from the third quarter of 2018 over the third quarter of 2017. Although COLAs are often confused with pay raises the two are very different.

The fed/military/Social Security COLAs are guaranteed by a formula setup by law.  The fact that the raises go to the huge number of Americans who get Social Security benefits, many of whom rely solely on them, make them politically untouchable.

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Pay raises are set by a formula that was ignored by the Clinton, Bush and Obama administrations.  Federal workers went through three years without a January pay raise during the fed-friendly Obama administration.  During that pay freeze period, retirees got two COLAs, one for 3.6 percent and the other for 1.7 percent.

President Donald Trump approved a January pay raise this year, but he wants to skip the 2019 adjustment. It’s part of his plan to trim federal personnel costs by eliminating any future COLAs for the vast majority of feds who are under the Federal Employees Retirement System.

The FERS plan has a more generous 401(k) benefit than the Civil Service Retirement System it replaced. The FERS plan also provides so-called diet COLAs that can be as much as one percentage point less than those who got to CSRS retirees.

Under the White House plan, there would be no future inflation-catch ups for current and future FERS retirees. This means that over time, even slight increases in inflation, such as the 2.7 percent that is pending, would quickly eat into the spendable income of retirees. CSRS retirees would take a much smaller hit under the Trump plan, as their COLAs in the future would be 0.5 percent less than the actual rise in inflation as measured by the CPI-W.

The exact amount of the January 2019 COLA won’t be set until September data is available. That will happen sometime in mid-October.

Nearly Useless Factoid

By Amelia Brust

Today’s traffic lights originated from railroads, which used red lights to signal “stop.” Red can be seen from a farther distance than any other color on the visible spectrum because it has the longest wavelength. At first, green, which has a shorter wavelength than red or yellow, meant “caution,” and a white light meant “all-clear.” But trains took too long to slow down and at night, stars could be mistaken for “all clear” signals. Eventually, green was used for “go.” Yellow was long employed on other signage and first used in traffic signals in Detroit in the 1910s.

Source: Thrillist