- The Washington Times - Monday, September 18, 2006

Thanks to an automatic cost-of-living trigger, the incomes of one in six Americans — people who get Social Security or a federal or military retirement benefit — will jump at least 3.6 percent next year.

That figure is solid, but it may be on the low side.

Many analysts predict that when inflation data for this month are collected and calculated, the raise for retired federal workers, military retirees and Social Security recipients will be even higher.

Retirement benefits of former federal workers are indexed to inflation. That means they go up each January, automatically, based on the rise in living costs as measured by the Labor Department’s Consumer Price Index.

The vast majority of federal retirees are under the old Civil Service Retirement System. CSRS covered everyone hired before the mid-1980s, when it was replaced by the Federal Employees Retirement System (FERS). The systems use different formulas to determine pension — CSRS is more generous — and different measures for inflation protection.

CSRS employees get a full cost-of-living adjustment when they retire, even if they leave early. Those under the FERS system, including the majority of working feds, get a raise of one percentage point below inflation when they retire, and only after they reach age 62.

In either case, the compounding effect of each inflation adjustment is a big deal over time. The vast majority of American retirees — if they even get a pension from their former employer — do not have any inflation-adjustment protection.

The final amount of the January cost-of-living adjustment will be announced in mid-October.

CSRS retirees, military retirees and those collecting Social Security will get the full cost-of-living adjustment (COLA). FERS retirees will get the so-called diet COLA, if they are 62 or older.

The more than 40,000 people who belonged to CSRS but switched to FERS will get the full COLA on the CSRS portion of their annuity and the diet COLA, if they are old enough, on the FERS portion.

Military retirees and people who receive monthly Social Security checks will get the full January COLA. Once again, the raise will be worth at least 3.6 percent and could go higher, depending on the September numbers from the Bureau of Labor Statistics.

Active-duty pay

Whatever federal military retirees get in January, the minimum 3.6 percent increase they have already banked is better than the two pay alternatives facing active-duty civil servants and uniformed military personnel.

Depending on who wins the annual tussle over pay between Congress and the White House, the active-duty folks will get either the 2.7 percent adjustment favored by Congress or the 2.2 percent proposed by the White House.

Congress has won 13 of the past 13 annual pay fights, but this year could be different.

Although the higher 2.7 percent pay raise is built into the appropriations process, Congress has yet to pass the bill that would guarantee the higher raise.

Because members have their eye on an early recess for the November elections, the government may be run by a series of continuing resolutions. These stopgap measures give federal agencies authority to keep the lights on, absent a regular appropriations authorization, past the Oct. 1 budget deadline.

So while a pay raise is guaranteed, the final amount — including locality pay adjustments — could be one of the last things the lame-duck Congress does before it leaves town this session.

• Mike Causey, senior editor at Federal News Radio AM 1050, can be reached at 202/895-5132 or [email protected]

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