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COLA On Track to Be Bigger in 2015

The exact cost-of-living adjustment for next year won’t be revealed until October, but retirees could receive an increase of more than 1.7 percent.

Federal and military retirees are on track to receive the largest cost-of-living adjustment that they’ve seen in a few years.

The exact cost-of-living adjustment for 2015 won’t be known until October when all the numbers are in, but plugging into the formula the latest available data results in a 1.7 percent increase. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which the COLA is based on, rose 0.3 percent in May, and if trends continue, will increase during the next four months. The CPI-W measures price changes in food, housing, gas and other goods and services; it could drop during the third quarter, but it’s unlikely, meaning retirees could receive a COLA bump next year that is more than 1.7 percent.

The Bureau of Labor Statistics released the May CPI numbers on June 17. The agency will release the June numbers on July 22.

The average of the 2014 July, August and September consumer price numbers, along with the average figure from the third quarter of 2013, will be used to calculate the 2015 COLA. The annual COLAs are based on the percentage increase (if any) in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current year over the average for the third quarter of the last year in which a COLA became effective.

Federal and military retirees, as well as Social Security beneficiaries and those receiving veterans’ benefits, received a 1.5 percent COLA bump for 2014, a 1.7 percent increase for 2013, and a 3.6 percent boost for 2012. The 2012 COLA increase was the first since October 2008 (which took effect in 2009).

Federal employees, who do not receive COLAs, are on track to receive a 1 percent pay raise next year, the same as in 2014.

According to the formula, if the full COLA increase is 3 percent or higher, as it was for 2012, then retirees under the Federal Employees Retirement System receive 1 percent less than the full increase. So FERS retirees received a 2.6 percent bump for 2012. If the COLA falls between 2 percent and 3 percent, then FERS retirees would receive 2 percent. If the increase is less than 2 percent, as it was in 2014, FERS retirees receive the same as retirees under the Civil Service Retirement System; this year, it was a 1.5 percent boost.

Check out this explanation from the Social Security Administration on how COLAs are calculated. For a history of COLAs and federal employee pay raises going back to 1970, review this Retirement Planning column from Tammy Flanagan, the senior benefits director for the National Institute of Transition Planning Inc.

VA Bonuses

Another congressional hearing is scheduled for Friday on senior executives at the Veterans Affairs Department. The House Veterans’ Affairs Committee will review the department’s record on awarding bonuses to top career employees at a 9:00 a.m. hearing on Capitol Hill, which also will be webcast. The Arizona Republic reported June 17 that thousands of employees at the Phoenix VA hospital at the center of the VA scandal received about $10 million in bonuses over a three-year period. The House recently passed legislation that would ban bonuses for all VA employees for the next three years. The Senate passed similar legislation that does not include a ban on bonuses, but the two chambers soon will head to conference committee to work out the differences in the two bills. There is a provision in the Senate bill that would limit bonuses for employees in fiscal 2014. The Senate Appropriations Committee also approved the VA spending bill last month, which bans bonuses in 2015 for Veterans Health Administration medical directors, assistant medical directors and Senior Executive Service workers. So, it is likely that Congress will pass a bonus ban at the VA in some way, shape or form. Check out our chart on the various bills circulating that affect the VA.

Funds for Feds

The Federal Employee Education and Assistance Fund raised $56,000 for federal employees during its May fundraising campaign, with $26,000 in individual contributions and $30,000 in matching funds from Blue Cross/Blue Shield and Long Term Care Partners. Since May 1, FEEA has made $88,000 in no-interest loans to 119 civilian federal and postal employees. FEEA is a non-profit organization that provides financial assistance to federal employees, including scholarship money, emergency loans and child care subsidies.

(Image via VERSUSstudio/Shutterstock.com)

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