Federal retirees will receive a cost-of-living adjustment (COLA) to their civil service annuities beginning in January 2012. Retirees in the Civil Service Retirement System (CSRS) will receive a 3.6 percent increase to their annuities, while retirees in the Federal Employee Retirement System (FERS) will receive a 2.6 percent increase to their annuities.

To trigger a COLA for 2012, the average CPI-W for the months of July, August, and September of 2011 needed to rise above the 2008 average for those same months, the last measurement to trigger a COLA (for 2009). It did, by 3.6 percent. While CSRS retirees receive the full amount of the CPI-W increase as a COLA, current law reduces the FERS COLA by 1 percentage point for increases above 3 percent.

Because the CPI-W showed declining prices from 2008 to 2009, and while it showed prices increasing between 2009 and 2010, it did not show prices increasing back to 2008 levels, there has not been a COLA for the last two years. But finally, we have some good news for 2012!

Under current law, COLAs for federal retirement annuities, as well as for military retiree annuities and Social Security payments, are determined in reference to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is calculated by economists and statisticians with the Bureau of Labor Statistics. The CPI-W is the current index used for measuring increases in the prices of consumer goods throughout the economy. It includes prices on all consumer goods, including food and beverages, housing, clothing, transportation, medical care, recreation, education and communication, and more.

The new CPI-W figure for September 2011 was 223.688. The average CPI-W for the third quarter of 2011 was 223.233. This is the new reference figure for determining the 2013 COLA.

NARFE continues to support strong COLAs based on fair assessments of increases in consumer prices to protect the value of federal annuities from inflation.

source: NARFE