Retirees to get 3.5 percent cost-of-living increase

Retirees in the Federal Employees Retirement System and their survivors will get a 2.5 percent cost-of-living adjustment (COLA) in their benefits next year.

The COLAs do not affect active-duty civilian or military personnel, who are slated for a 3.7 percent average pay increase in January.

The Office of Personnel Management announced the increase Wednesday. COLAs are determined by computing the percentage increase in the Consumer Price Index (CPI) for urban wage earners and clerical workers. The CPI is measured from the third quarter average of the previous year to the third quarter average of the current year; it's calculated by the Bureau of Labor Statistics.

Retirees under CSRS get the full CPI increase. COLA increases under FERS are reduced by 1 percent when the increase to the CPI is more than 3 percent.

In January 1999, the COLA increase was 2.4 percent. In 1998, retirees received a 1.3 percent COLA, the smallest increase in 12 years.

Individuals whose annuities began to pay in December 1999 or before will get the full COLA, while those whose annuities began paying in 2000 will receive a prorated COLA.