COLA countdown at 1.6 percent

Federal, military and Social Security retirees are looking at a potential 1.6 percent cost-of-living adjustment (COLA) in January 2018. The exact figure won’t be official until the Consumer Price Index for the month of September is made available on Oct. 13. This time last month, the COLA appeared to be 1.51 percent. But an increase of 0.09 percent in the CPI-W (Consumer Price Index-Workers) in June pushed that amount up.

Inflation adjustments, of any amount, are very important to many retirees. There was no COLA in 2010, 2011 and 2016, and most increases were modest (with the exception of a 3.6 percent hike in 2012). The retirees received 1.7 percent in 2013; 1.5 percent in 2014 and 1.7 percent in 2015. Following the zero-COLA of 2016, retirees this year got a 0.3 percent increase in January of this year.

During the time period when COLAs were either flat, or almost microscopic, health insurance premiums jumped dramatically each year. Long-term care insurance premiums also jumped big time last year, forcing many retirees to downsize their benefits to minimize the premium hike, or drop the all-important LTC insurance in some cases.

While hoping for a larger COLA in January, both active and retired federal workers face a major threat to their FERS and CSRS retirement plans.

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Congress and the administration want to increase the amount of money that FERS workers contribute toward their annuity (pension) plan by 1 percent a year for each of the next six years. Congress is also considering a plan that would eliminate — as in wipe out — future cost-of-living adjustments for people already retired under the FERS program, as well as for future FERS retirees who are under the system.

COLAs for the majority of retirees who are under the old CSRS system, plus workers still covered by it, would be reduced by 0.5 percent of the actual inflation rate.

Many FERS employees would also lose a major benefit under a proposal to eliminate the FERS annuity supplement. That benefit can be worth several thousand, if not tens of thousands of dollars each year, and it is now available to employees who retire before age 62, when their Social Security benefit kicks in. It’s an important benefit that’s also fully funded, but frequently on the House Budget Committee’s chopping block.

The administration has also revived the perennial proposal to base the annuity of federal and postal FERS workers on their highest five-year average salary. Currently, it is the highest three years. The change could force some employees to work longer to get the benefit they would have received under the high-three formula.

The federal retirement program has been under attack or proposed for “reform,” depending on who’s talking, for decades. But supporters of working and retired feds have managed to fend off most proposed cuts. This time could be different, since the House, Senate and White House are controlled by Republicans who, with a few notable exceptions, either don’t like or know much about federal workers. But there have been some notable inroads.

Feds hired in 2013 pay more toward their retirement than their previously hired colleagues with no change in benefits. Those hired in 2013 pay 2.3 percent more, while feds hired in 2014 and since pay 3.6 percent more than those hired prior to 2013. The National Active and Retired Federal Employees Association (NARFE) estimates that over the next 10 years, those higher contribution levels “will amount to a $21 billion loss in take-home pay for these federal employees, and much more thereafter, with no added benefit in retirement. The Federal Employee Pension Fairness Act would repeal both increases,” NARFE President Richard G. Thissen told Congress. “Over the past several years, federal employees have contributed more than $120 billion toward deficit reduction. It’s time we compensate them commensurate with their service and sacrifice and repeal these arbitrary retirement contribution increases.”

Retirement changes — what next? Lots of people have lots of questions about the current attacks on the retirement plan. Typical is this question by Brian H., who asks:

“With the uncertainty of the FY2018 budget process, many retirement-eligible employees have misgivings on whether to retire on Sept. 30, 2017, or Jan. 3, 2018. It appears Congress may pass changes to the employees’ benefits and retirement calculation in late October, November or December, which could/would have an effective date of Oct. 1, 2018. They could change the benefits after the fact retroactive to an earlier period. We’re guessing at the risks of staying until 1/3/2018? A bunch of us would love to hear/see your opinion on what feds should do regarding this dilemma.”

To the rescue, NARFE legislative director Jessica Klement. She’s been tracking the proposed changes and will share that with you in her webinar today. It’s free and open to anyone. To sign up, click here.

Nearly Useless Factoid

By Michael O’Connell

Charles Leiper Grigg created the formula for the soft drink 7-Up two weeks before the Great Stock Market Crash of 1929. Sold as “Bib-Label Lithiated Lemon-Lime Soda,” the drink contained lithium citrate, a mood stabilizing drug. The drug was removed from the formula in 1948.

Source: Wikipedia