Retiree COLAs vs Federal Employee Raises
Differences Between Retiree COLAs And Federal Employee Raises
Soaring gas costs and increased prices on household essentials might have you wondering what that means for your federal pay moving forward. In most cases, currently employed federal workers and federal retirees are treated differently with pay adjustments. Federal Educators share the differences between federal employee pay raises and retiree cost of living adjustments (COLAs) that help to offset the rising cost of goods.
Federal employees can receive several types of pay but the two most popular are regular pay and locality pay. The first is the amount received on a normal pay table while the latter is a geographic adjustment based on where the employee resides. Employees living in expensive metropolitan areas will receive more pay to account for the higher cost of living. These are then added together and displayed on pay tables for each geographic region. Federal pay increases are available through promotions, annual pay raises, and/or step increases defined as a longevity increase based on time spent in a given pay grade. Pay raises for federal employees must be approved through Congress and are usually decided upon at the end of a calendar year and then applied to the first paycheck of the new year.
Federal retirees are excluded from the above because they automatically receive a Cost-of-Living Adjustment (COLA). For retirees that receive a CSRS or FERS pension, this change in pay will fluctuate over time based on specific economic conditions. It is calculated with a formula created by the Bureau of Labor Statistics. A “basket of consumer goods” like gas, food, and other typical goods the average consumer purchases are watched over time to see how much the economy has changed. A percentage is calculated and then adjusted in the federal retiree’s pension check. COLAs are set annually in November and payable in January. The first-year COLA is always determined by the number of months in the prior year a person was retired.
It’s important to note that federal employee raises, and retiree COLAs do not always happen simultaneously. Employees may receive pay raises while retirees’ pay remains the same. Federal Educators can help you prepare for retirement with the perfect combination of educational resources and a knowledgeable team. Give our St. Petersburg office a call at (813) 285-4692 to get started today.