Federal retirees in the Civil Service Retirement System will receive a 3.3 percent larger pension check in 2007.
The government unveiled next year's cost-of-living allowance Wednesday. It is based on the change in the Labor Department's Consumer Price Index for urban wage earners from the third quarter of one year to the same quarter of the next.
The 3.3 percent boost is smaller than the 4.1 percent increase for 2006, which was the highest since 1991. But the 2007 rate still is bigger than the several years before 2006. In 2005, the increase was 2.7 percent. In 2004, it was 2.1 percent; in 2003, 1.4 percent and in 2002, 2.6 percent.
The COLA will not be the same for retirees in the newer Federal Employees Retirement System. If the change in the CPI is more than 3 percent, FERS retirees get the COLA minus 1 percent. So FERS members will get a 2.3 percent adjustment next year.
FERS is more dependent on government matching contributions to the Thrift Savings Plan, a 401(k)-style retirement investment vehicle for federal employees. As a result, FERS retirees sometimes get smaller COLAs, and they only receive the cost-of-living allowance if they are 62 or older.
CSRS annuitants must have been retired one full year to receive the full COLA. If they do not meet that threshold, they will receive prorated annuities, encompassing one-twelfth of the applicable increase for each month they've received their pension.
Federal retirees will receive their first checks reflecting the increase in January 2007.
Current employees in the civil service will get a different annual increase altogether -- a pay hike determined by Congress and approved by the president. Lawmakers still are debating between a 2.2 percent raise, which they already approved for the military, and a 2.7 percent raise, which they included in initial drafts of legislation for civilians.
If civilians get a 2.2 percent raise, the Federal Salary Council recommended it be allocated between a 1.7 percent across-the-board boost and a 0.5 percent locality hike. With a 2.7 percent raise, the breakdown would be 1.7 percent and 1 percent.