COLA checkup

If you worked for the federal government in Alaska, Hawaii, Puerto Rico, Guam, the Northern Mariana Islands or the Virgin Islands between October 1990 and September 2000, start checking your mailbox. By Sept. 30, you should get a notice saying whether you're eligible for back pay under a $232.5 million settlement with federal employees that the government agreed to last year. Federal workers in Alaska, Hawaii, Puerto Rico, the Virgin Islands and Guam had sued the government, saying the annual process of establishing COLA rates had not adequately taken into account special factors related to their remote locations, such as higher travel costs. Under the settlement, the government reconfigured the formula used to figure out cost-of-living adjustments, or COLAs, for 44,000 federal workers in the noncontiguous United States. COLAs are paid to those workers because of the higher costs of living in remote locations. The COLAs range from 10 percent to 25 percent of basic pay. The settlement administrator is scheduled to send claims verification forms to current and former workers outside the Lower 48 before the end of September (that date has slipped a couple of times). Once workers get their forms, they should check the math to see whether the government provided the administrator with the right payroll information. If the information checks out, workers should sign the forms and mail them back. If not, they should let the settlement administrator know what's wrong. The settlement administrator is planning to start mailing back-pay checks in November. If you don't receive a claims verification form by Sept. 30 and think you should have, you can call the administrator at (877) 480-2652. You can find more information on the COLA settlement at www.colasettlement.com. Retiree COLAs The end of September is also important for federal retirees. That's because their pensions will be adjusted in January 2002 based on the change in the Consumer Price Index for urban wage earners from September 2000 to September 2001. From September 2000 to July 2001, the CPI rose 2 percent. But what will matter for federal retirees is the change in the CPI at the end of next month. The official cost-of-living adjustment for retirees for 2002 will then be announced in October. Retirees under the Civil Service Retirement System receive a COLA that matches the change in the Consumer Price Index. The Federal Employees Retirement System has a more complicated formula. If the change in the index is more than 3 percent, then the COLAS of FERS retirees are reduced by 1 percent. Last year, for example, CSRS retirees got a 3.5 percent adjustment while FERS retirees got a 2.5 percent adjustment. If the change in the index is between 2 percent and 3 percent, then FERS retirees get a 2 percent adjustment. If the change is less than 2 percent, then FERS retirees get the same pension adjustment as CSRS retirees. But remember that FERS retirees get Social Security, and their Social Security COLAs always match the actual change in the CPI. A Different Kind of COLA Most federal workers don't get cost-of-living adjustments each year. While raises for workers outside the continental United States are based on the cost of living--measured by the cost of goods and services in a specific area--annual across-the-board raises for federal workers in the Lower 48 are based on the cost of labor, as measured by the Bureau of Labor Statistics' Employment Cost Index. That means annual raises for U.S.-based federal workers are aimed at keeping federal salaries competitive with salaries in the private sector. The raises are not meant to keep federal salaries in step with cost-of-living inflation. For more on how federal pay raises are set, see the Aug. 9 Pay and Benefits Watch column, Pay raise fray.