Order Code 94-834
Updated October 16, 2008
Cost-of-Living Adjustments
for Federal Civil Service Annuities
Patrick Purcell
Specialist in Income Security
Domestic Social Policy Division
Service Annuities
Katelin P. Isaacs
Analyst in Income Security
October 15, 2010
Congressional Research Service
7-5700
www.crs.gov
94-834
CRS Report for Congress
Prepared for Members and Committees of Congress
Cost-of-Living Adjustments for Federal Civil Service Annuities
Summary
Cost-of-living adjustments (COLAs) for the Civil Service Retirement System
(CSRS) and the
Federal Employees Retirement System (FERS) are based on the rate of
inflation as measured by
the Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W). COLAs for
both CSRS and FERS are determined by the average
monthly CPI-W during the third quarter
(July to September) of the current calendar year
and the third quarter of the previous year. The “effective date” for COLAs is December,
base year, which is
the last previous year in which a COLA was applied. Because the price level fell between the
third quarter of 2008 and the third quarter of 2009, the average monthly CPI for the third quarter
of 2008 remains the base year for determining the next COLA. The “effective date” for COLAs is
December, but they first appear in the benefit checks issued during the following January.
All CSRS retirees and survivors receive COLAs. Under FERS, however, nondisabled retirees under age non-disabled retirees
under the age of 62 do not receive COLAs. Survivors and disabled retirees
are eligible for
COLAs under FERS regardless of age. CSRS pays a COLA that is equal
to the percentage change
in the CPI-W during the measurement period, but COLAs
under FERS are limited if the rate of
inflation is greater than 2.0%. If the rate of
inflation during the measurement period is between
2.0% and 3.0%, the COLA under
FERS is 2.0%. If inflation is greater than 3.0%, then the COLA
for FERS benefits is
equal to the CPI-W minus one percentage point.
Congress passed the first law requiring automatic COLAs for federal civil service
retirement retirement
benefits in 1962, and it has adjusted either the formula by which they are
calculated or the date on
which they take effect more than a dozen times since then. The
next COLA for civil service retirees will be effective in December 2008 and will appear
in checks issued in January 2009. CSRS retirement benefits will increase by 5.8%.
FERS retirement benefits will increase by 4.8%.
COLA Formulas and Amounts
CSRS applies only to federal employees first hired before 1984. It is closed to new
entrants and the program will expire with the death of the last CSRS annuitant sometime
around the year 2075. All civilian federal employees who were first hired in 1984 or later
are covered by FERS, as are employees who voluntarily switched from CSRS to FERS
CRS-2
during “open seasons” that were held in 1987 and 1998. The FERS program began
operating on January 1, 1987.
COLAs for CSRS annuities are based on the average monthly percentage change in
the CPI-W in the third quarter (July to September) of the current calendar year compared
to the third quarter one year earlier. Adjustments are effective on the first day of the
month preceding the month in which they are first paid. For example, the most recent
CSRS COLA of 2.3% was effective December 1, 2007, and was first applied to benefits
paid in January 2008. It was equal to the average monthly percentage change in the CPIW between the third quarter of calendar year 2006 and the third quarter of 2007.
COLAs for benefits paid under FERS also are based on the percentage change in the
CPI-W from third quarter to third quarter, but payment of COLAs under FERS is limited
according the eligibility category of the beneficiary and the rate of inflation. COLAs are
not paid to non-disabled FERS retirees as long as they are under age 62. COLAs are paid
to survivors and disabled FERS retirees of any age after the first year of disability. All
COLAs paid under FERS are limited if the rate of inflation exceeds 2.0%, according to
the following formula:
Increase in CPI-W
Increase (COLA) in FERS Benefits
Under 2.0%
Same as CPI-W increase
2.0% to 3.0%
2.0%
More than 3.0%
Increase in CPI-W minus 1 percentage point
History of Legislation Affecting COLAs for
Civil Service Annuities
P.L. 87-793 (enacted in 1962) was the first law that provided for automatic
adjustments in civil service retirement and disability benefits whenever the CPI in the
current year exceeded the CPI in the base year (the year in which the last adjustment
occurred) by 3.0% or more. In 1965, this was changed to require an adjustment in
benefits whenever the CPI for a given month was at least 3.0% higher than in the month
when the last adjustment was made, and remained at that level or higher for three
consecutive months.
P.L. 91-93 (enacted in 1969) added one percentage to COLAs in addition to the
percentage change in the CPI in order to offset the erosion of benefits that had occurred
as a result of the time lag in the adjustment formula. (P.L. 91-179 did the same for
COLAs paid to military retirees.)
P.L. 94-440 (enacted in October 1976) repealed the one percentage point addition
to COLAs. In addition, this law provided for automatic semi-annual adjustments in
benefits based on the change in the CPI from June to December (effective the following
March 1) and December to June (effective the following September 1).
P.L. 97-35 (Omnibus Budget Reconciliation Act of 1981) replaced semi-annual
COLAs with annual COLAs based on the December-to-December change in the CPI,
payable in March of the following year.
CRS-3
P.L. 97-253 (Omnibus Budget Reconciliation Act of 1982) delayed the
implementation of COLAs by one month in FY1983, FY1984, and FY1985. The FY1983
COLA was effective April 1 rather than March 1. The FY1984 COLA was scheduled for
May 1 and the FY1985 COLA was scheduled for June 1. This law also mandated that
non-disabled retirees under age 62 would receive 50% of the projected CPI plus the full
difference in the actual CPI over these projections. The law specified that the projected
CPI was 6.6% for 1983; 7.2% for 1984; and 6.6% for 1985. This provision was repealed
by the supplemental appropriations law that was passed in August 1984. COLAs for
January 1985 and thereafter were to be the full amount for all retirees.
P.L. 97-253 limited COLAs in certain cases. Under the restriction, an annuity could
not be increased by a COLA to an amount that exceeded the greater of the maximum pay
for a GS-15 federal employee or the final pay of the employee (or high-3 average pay, if
greater), increased by the average annual percentage change (compounded) in rates of pay
of the General Schedule for the period beginning on the retiree’s annuity starting date and
ending on the effective date of the adjustment.
P.L. 98-270 (Omnibus Budget Reconciliation Act of 1983, enacted April 1984)
delayed the COLA scheduled for May 1984 until December (payable in January 1995).
Thereafter, all COLAs were to be effective in December and payable in January and were
to be based on the change in the average monthly CPI-W from third-quarter to thirdquarter. This formula and schedule are the same as those used to calculate COLAs in the
Social Security program, as required by P.L. 98-21 (Social Security Amendments of
1983).
P.L. 98-369 (Deficit Reduction Act of 1984) specified that civilian and military
retirement COLAs are to be paid in checks issued on the first business day of the month
following the month in which they are effective. (COLAs that are effective in December
are to be paid in checks issued in January.)
P.L. 99-177 (Balanced Budget and Emergency Deficit Control Act of 1981 (GrammRudman-Hollings)). This law suspended all civil service retirement COLAs for FY1986
and for all subsequent years in which the specified deficit reduction targets for the year
would not otherwise be met.
P.L. 99-509 (Omnibus Budget Reconciliation Act of 1986). This law reinstated
COLAs for programs in which they were subject to suspension under P.L. 99-177 for
FY1987-FY1991.
P.L. 100-119 (Balanced Budget and Emergency Deficit Control Reaffirmation Act
of 1987). This law permanently exempted the programs subject to suspension of COLAs
under P.L. 99-177 from the suspensions required by that law.
P.L. 103-66 (Omnibus Budget Reconciliation Act of 1993). This law postponed the
effective date of COLAs from December to March for FY1994-FY1996. The CPI
measurement period was not changed.
CRS-4
Table 1. COLAs in Civil Service Retirement Benefits
Effective Datea
December 1965
January 1967
May 1968
March 1969
November 1969
August 1970
June 1971
July 1972
July 1973
January 1974
July 1974
January 1975
August 1975
March 1976
March 1977
September 1977
March 1978
September 1978
March 1979
September 1979
March 1980
September 1980
March 1981
March 1982
April 1983
December 1984
December 1985
December 1986
December 1987
December 1988
December 1989
December 1990
December 1991
December 1992
March 1994
March 1995
March 1996
December 1996
CSRS Benefit
Increase
6.1%
3.9
3.9
3.9
5.0
5.6
4.5
4.8
6.1
5.5
6.3
7.3
5.1
5.4
4.8
4.3
2.4
4.9
3.9
6.9
6.0
7.7
4.4
8.7
3.9
3.5
0.0
1.3
4.2
4.0
4.7
5.4
3.7
3.0
2.6
2.8
2.6
2.9
FERS Benefit
Increase
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3.0
3.7
4.4
2.7
2.0
2.0
2.0
2.0
2.0
CPI Increase During COLA
Measurement Period
4.6%
3.9
3.9
3.9
4.0
4.6
3.5
3.8
5.1
4.5
5.3
6.3
4.1
4.4
4.8
4.3
2.4
4.9
3.9
6.9
6.0
7.7
4.4
8.7
3.9
3.5
3.1
1.3
4.2
4.0
4.7
5.4
3.7
3.0
2.6
2.8
2.6
2.9
CRS-5
Effective Datea
December 1997
December 1998
December 1999
December 2000
December 2001
December 2002
December 2003
December 2004
December 2005
December 2006
December 2007
December 2008
CSRS Benefit
Increase
2.1
1.3
2.4
3.5
2.6
1.4
2.1
2.7
4.1
3.3
2.3
5.8
FERS Benefit
Increase
2.0
1.3
2.0
2.5
2.0
1.4
2.0
2.0
3.1
2.3
2.0
4.8
CPI Increase During COLA
Measurement Period
2.1
1.3
2.4
3.5
2.6
1.4
2.1
2.7
4.1
3.3
2.3
5.8
Source: The Congressional Research Service.
Note: Includes pensions for Members of Congress.
a. Benefit increases are actually paid in checks issued the first of the following month.
If consumer prices as measured by the CPI-W do not increase from the third quarter of the base
year to the third quarter of the current calendar year, there is no COLA for annuities paid under
CSRS or FERS. From the third quarter of 2008 to the third quarter of 2010, the CPI-W fell by
0.6%. Therefore, there will be no COLA under either CSRS or FERS in January 2011.
Congressional Research Service
Cost-of-Living Adjustments for Federal Civil Service Annuities
Contents
COLA Formulas and Amounts ....................................................................................................1
History of Legislation Affecting COLAs for Civil Service Annuities ...........................................2
Tables
Table 1. COLAs in Civil Service Retirement Benefits..................................................................3
Contacts
Author Contact Information ........................................................................................................4
Acknowledgments ......................................................................................................................4
Congressional Research Service
Cost-of-Living Adjustments for Federal Civil Service Annuities
COLA Formulas and Amounts
Only federal employees hired before 1984 participate in the Civil Service Retirement System
(CSRS). The CSRS is closed to new entrants and will expire with the death of the last CSRS
annuitant sometime around the year 2075. Civilian federal employees who were hired in 1984 or
later participate in the Federal Employees Retirement System (FERS), as do employees who
voluntarily switched from CSRS to FERS during “open seasons” that were held in 1987 and
1998. The FERS program began operating on January 1, 1987.
Cost-of-Living Adjustments (COLAs) for CSRS annuities are based on the average monthly
percentage change in the CPI-W in the third quarter (July to September) of the current calendar
year compared to the third quarter of the base year, which is the year in which the last COLA was
applied. Because the price level fell between the third quarter of 2008 and the third quarter of
2009, the average monthly CPI for the third quarter of 2008 remains the base on which the COLA
is determined for 2011.1 Adjustments are effective on the first day of the month preceding the
month in which they are first paid. For example, the most recent CSRS COLA of 5.8% was
effective December 1, 2008, and was first applied to benefits paid in January 2009. It was equal
to the average monthly percentage change in the CPI-W between the third quarter of calendar
year 2007 and the third quarter of 2008.
COLAs for benefits paid under FERS also are based on the percentage change in the CPI-W from
third quarter to third quarter, but payment of COLAs under FERS is limited according the
eligibility category of the beneficiary and the rate of inflation. COLAs are not paid to nondisabled FERS retirees as long as they are under the age of 62. COLAs are paid to survivors and
disabled FERS retirees of any age after the first year of disability. All COLAs paid under FERS
are limited if the rate of inflation exceeds 2.0%, according to the following formula:
Increase in CPI-W
Increase (COLA) in FERS Benefits
Under 2.0%
Same as CPI-W increase
2.0% to 3.0%
2.0%
More than 3.0%
Increase in CPI-W minus 1 percentage point
If consumer prices as measured by the CPI-W do not increase between the third quarter of the
base year and the third quarter of the current calendar year, there is no COLA for annuities paid
under CSRS or FERS. From the third quarter of 2008 (the last year in which a COLA was
applied) to the third quarter of 2010, the CPI-W fell by 0.6%. Therefore, there will be no COLA
under either CSRS or FERS in January 2011.
1
Between 1962 (when Congress passed the first law enacting automatic COLAs for federal civil service retirement
benefits) and 2009, this base year—the year in which the last adjustment occurred—was the previous year. Because the
CPI-W decreased from the third quarter of 2008 to the third quarter of 2009, however, the base year for determining the
COLA that would be effective as of December 2010 (and paid out in 2011) remains 2008. See 5 U.S.C. § 8340 and 5
U.S.C. § 8462.
Congressional Research Service
1
Cost-of-Living Adjustments for Federal Civil Service Annuities
History of Legislation Affecting COLAs for Civil
Service Annuities
P.L. 87-793 (enacted in 1962) was the first law that provided for automatic adjustments in civil
service retirement and disability benefits whenever the CPI in the current year exceeded the CPI
in the base year (the year in which the last adjustment occurred) by 3.0% or more. In 1965, this
was changed to require an adjustment in benefits whenever the CPI for a given month was at least
3.0% higher than in the month when the last adjustment was made, and remained at that level or
higher for three consecutive months.
P.L. 91-93 (enacted in 1969) added one percentage to COLAs in addition to the percentage
change in the CPI in order to offset the erosion of benefits that had occurred as a result of the time
lag in the adjustment formula. (P.L. 91-179 did the same for COLAs paid to military retirees.)
P.L. 94-440 (enacted in October 1976) repealed the one percentage point addition to COLAs. In
addition, this law provided for automatic semi-annual adjustments in benefits based on the change
in the CPI from June to December (effective the following March 1) and December to June
(effective the following September 1).
P.L. 97-35 (Omnibus Budget Reconciliation Act of 1981) replaced semi-annual COLAs with
annual COLAs based on the December-to-December change in the CPI, payable in March of the
following year.
P.L. 97-253 (Omnibus Budget Reconciliation Act of 1982) delayed the implementation of COLAs
by one month in FY1983, FY1984, and FY1985. The FY1983 COLA was effective April 1 rather
than March 1. The FY1984 COLA was scheduled for May 1 and the FY1985 COLA was
scheduled for June 1. This law also mandated that non-disabled retirees under the age of 62
would receive 50% of the projected CPI plus the full difference in the actual CPI over these
projections. The law specified that the projected CPI was 6.6% for 1983, 7.2% for 1984, and
6.6% for 1985. This provision was repealed by the supplemental appropriations law that was
passed in August 1984. COLAs for January 1985 and thereafter were to be the full amount for all
retirees.
P.L. 97-253 limited COLAs in certain cases. Under the restriction, an annuity could not be
increased by a COLA to an amount that exceeded the greater of the maximum pay for a GS-15
federal employee or the final pay of the employee (or high-3 average pay, if greater), increased by
the average annual percentage change (compounded) in rates of pay of the General Schedule for
the period beginning on the retiree’s annuity starting date and ending on the effective date of the
adjustment.
P.L. 98-270 (Omnibus Budget Reconciliation Act of 1983, enacted April 1984) delayed the COLA
scheduled for May 1984 until December (payable in January 1985). Thereafter, all COLAs were
to be effective in December and payable in January and were to be based on the change in the
average monthly CPI-W from third-quarter to third-quarter. This formula and schedule are the
same as those used to calculate COLAs in the Social Security program, as required by P.L. 98-21
(Social Security Amendments of 1983).
P.L. 98-369 (Deficit Reduction Act of 1984) specified that civilian and military retirement
COLAs are to be paid in checks issued on the first business day of the month following the month
Congressional Research Service
2
Cost-of-Living Adjustments for Federal Civil Service Annuities
in which they are effective. (COLAs that are effective in December are to be paid in checks
issued in January.)
P.L. 99-177 (Balanced Budget and Emergency Deficit Control Act of 1981 [Gramm-RudmanHollings]). This law suspended all civil service retirement COLAs for FY1986 and for all
subsequent years in which the specified deficit reduction targets for the year would not otherwise
be met.
P.L. 99-509 (Omnibus Budget Reconciliation Act of 1986). This law reinstated COLAs for
programs in which they were subject to suspension under P.L. 99-177 for FY1987-FY1991.
P.L. 100-119 (Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987). This
law permanently exempted the programs subject to suspension of COLAs under P.L. 99-177 from
the suspensions required by that law.
P.L. 103-66 (Omnibus Budget Reconciliation Act of 1993). This law postponed the effective date
of COLAs from December to March for FY1994-FY1996. The CPI measurement period was not
changed.
Table 1. COLAs in Civil Service Retirement Benefits
Effective Datea
CSRS Benefit
Increase
FERS Benefit
Increase
CPI Increase During COLA
Measurement Period
December 1965
January 1967
May 1968
March 1969
November 1969
August 1970
June 1971
July 1972
July 1973
January 1974
July 1974
January 1975
August 1975
March 1976
March 1977
September 1977
March 1978
September 1978
March 1979
September 1979
March 1980
September 1980
March 1981
March 1982
April 1983
December 1984
6.1%
3.9
3.9
3.9
5.0
5.6
4.5
4.8
6.1
5.5
6.3
7.3
5.1
5.4
4.8
4.3
2.4
4.9
3.9
6.9
6.0
7.7
4.4
8.7
3.9
3.5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4.6%
3.9
3.9
3.9
4.0
4.6
3.5
3.8
5.1
4.5
5.3
6.3
4.1
4.4
4.8
4.3
2.4
4.9
3.9
6.9
6.0
7.7
4.4
8.7
3.9
3.5
Congressional Research Service
3
Cost-of-Living Adjustments for Federal Civil Service Annuities
Effective Datea
CSRS Benefit
Increase
FERS Benefit
Increase
CPI Increase During COLA
Measurement Period
0.0
1.3
4.2
4.0
4.7
5.4
3.7
3.0
2.6
2.8
2.6
2.9
2.1
1.3
2.4
3.5
2.6
1.4
2.1
2.7
4.1
3.3
2.3
5.8
0.0
0.0
—
—
—
3.0
3.7
4.4
2.7
2.0
2.0
2.0
2.0
2.0
2.0
1.3
2.0
2.5
2.0
1.4
2.0
2.0
3.1
2.3
2.0
4.8
0.0
0.0
3.1
1.3
4.2
4.0
4.7
5.4
3.7
3.0
2.6
2.8
2.6
2.9
2.1
1.3
2.4
3.5
2.6
1.4
2.1
2.7
4.1
3.3
2.3
5.8
-2.1
-0.6
December 1985
December 1986
December 1987
December 1988
December 1989
December 1990
December 1991
December 1992
March 1994
March 1995
March 1996
December 1996
December 1997
December 1998
December 1999
December 2000
December 2001
December 2002
December 2003
December 2004
December 2005
December 2006
December 2007
December 2008
December 2009
December 2010
Source: The Congressional Research Service.
Note: Includes pensions for Members of Congress.
a.
Benefit increases are actually paid in checks issued the first of the following month.
Author Contact Information
Katelin P. Isaacs
Analyst in Income Security
kisaacs@crs.loc.gov, 7-7355
Acknowledgments
This report was originally prepared by former CRS Specialist Patrick Purcell. Please direct any inquiries to
the listed author.
Congressional Research Service
4